About the only thing anyone can agree on in relation to how many houses Ireland needs to build is that the current Government target of 33,000 a year is outdated.
Senior Ministers have said that this will be revised shortly – a figure of around 50,000 a year has been suggested – but this has not yet happened. It will form part of a long-awaited revision of what is called the National Planning Framework, a kind of master plan for development across the State and where it should happen.
On Monday, Sherry FitzGerald, Ireland’s biggest estate agent, said it believed Ireland needs to build 62,000 houses per annum in the short term.
Meanwhile, a report from MyHome.ie, a subsidiary of The Irish Times, pointed out that if Ireland was to have the same supply of housing per head of population as the UK, it would need more than 200,000 new homes. These are not comparable figures, as the MyHome.ie analysis is designed to underline the large shortfall in housing which has opened up. So let’s look at the detail.
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To decide how many houses Ireland needs, two things have to be counted in. The first is the likely increase in the population. The second is what allowance is made for the tens of thousands who want to buy a house, but currently cannot due to high prices and lack of supply. This has created a backlog of demand which needs to built into the figures and could only start to be closed over a period of years.
Neither of these calculations is straightforward. Looking first at the likely increase in the population, the size of the so-called “natural increase” – the amount by which births exceed deaths – can be forecast with reasonable accuracy over a short few years.
However, the scale of migration flows is another matter. The population has expanded significantly faster than expected in recent years due largely to the strong economy and the excess of inward migration over those emigrating. The inflow of migrants from Ukraine over the past couple of years has also been a factor.
Based purely on the likely growth in population, the Economic and Social Research Institute estimated recently that between 35,000 and 53,000 houses would be needed each year – giving a midpoint estimate of 44,000. Its researchers emphasised how unpredictable migration trends could lead to large variations in housing demand. As the MyHome.ie report pointed out, making more houses available to buy or rent is likely in itself to increase inward migration.
To come up with a final housing target, it is necessary to then add in the backlog which has emerged over recent years – including many people living at home who want to move out – and then calculate how many years it would take to deal with this through increased supply.
One way of estimating this backlog is to look at the average number of people living in each house here, which – at 2.74 according to the 2022 census – is above the international norm.
This is what MyHome.ie did in comparing the UK and Ireland and pointing out that some 206,000 new houses would be needed to close the average housing size gap between the two countries. Using a variety of metrics, the Commission on Housing, which reported to the Government over the summer, put the “backlog” figure at between 212,5000 and 256,000.
A credible policy target would aim to provide enough houses to match the size of the population and to work down the backlog over a period of years. The Sherry FitzGerald report said that an average of 56,200 new homes would be needed each year up to 2036, on the basis that Irish household size will fall to the EU average of 2.3 by 2036.
Given high current demand, it said a short-term target of 62,000 per annum would be appropriate. Using bullish assumptions on growth and inward migration, Davy stockbrokers recently came up with a figure of up to 85,000 new houses per annum.
In an article in the MyHome.ie report, Bank of Ireland chief economist Conall MacCoille made the point that given the possible swings in migration, it is a mistake to try to be overly precise in estimating how many homes Ireland needs, with a flexible approach required.
The Government parties, meanwhile, have promised to set out their stall in the weeks ahead.
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