The Irish Fiscal Advisory Council (IFAC) does not depart in any significant way from the consensus about how to fix the housing crisis in its report on Ireland’s infrastructure deficit published this week.
What IFAC’s report does contribute is an analysis of how to address low productivity in the construction sector. which is impeding progress on housing and other areas of infrastructure where Ireland lags behind other high-income European countries. Productivity in the construction sector here is less than 70 per cent of the average in these other countries. It is half that of our most productive peers.
IFAC points to a low level of investment by construction firms as a significant factor. It argues that a reluctance to invest is understandable given the boom and bust nature of the sector and the lasting effect of the financial crash. The consequences of this are being felt, particularly in the slow adoption of modern methods such as modular construction. These techniques require fewer workers and can be up to 40 per cent cheaper.
The small size of Irish construction firms – particularly most specialist house builders – is also a factor in chronic levels of under-investment.
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In the absence of significant productivity gains , IFAC estimates that 78,500 extra workers will be needed to address infrastructure deficits in housing, transport and energy. This could fall to 21,500 if construction productivity rises to the average level in high-income European countries.
Leaving aside the practical issues involved in sourcing and housing workers on this scale, addressing this is politically difficult in the current atmosphere of heightened concern about immigration.
Improving the productivity of the construction sector should be central to any realistic housing strategy which the parties put forward to the electorate. It is one of a number of factors which need to be addressed if the manifesto promises of building many thousands of new homes are to have any credibility, in addition to finding the skilled employees to do the work.