New analysis highlights the root causes of Ireland’s housing affordability and supply problems
Suite of new initiatives identified to reduce cost and improve supply
26 August 2020: The Irish Home Builders Association (IHBA) has today launched a comprehensive report providing detailed new analysis on the issues related to housing affordability and supply in Ireland.
The report, Putting Affordability at the Heart of the Housing System, was prepared for IHBA by the leading consultancy firm EY-DKM Economic Advisory Services.
James Benson, Director with the IHBA, said
“With a new political landscape after the election, we felt it was time to get an in-depth analysis of housing affordability and supply. This report comprehensively examines the root causes of our current shortfalls in supply and affordability and identifies a range of solutions to tackle the issues in the short to medium-term.”
Speaking on the launch of the report Annette Hughes Director with EY-DKM and report author, said
“The residential development process is complex. There are many steps which are time consuming and lead to unnecessary delays. All of these increase the final cost of delivery which is ultimately borne by the buyer. Housing supply since 2008 has significantly lagged behind the long term average supply. In 2019 private housing supply was at levels last seen 50 years ago in the 1970s. Based on current estimates, around one third of new units are available to purchase for owner occupation.”
The report shows that based on population projections for the State, up to 36,000 new homes on average are required to meet demand from all tenures over the next 21 years. These will need to be delivered in the right locations to ensure sustainable development and an improved quality of life for all citizens. Hence an assessment should be undertaken to ascertain the potential contribution from brownfield and infill sites.
Annette Hughes added that
“Housing affordability is also a key issue. While it will vary for each potential buyer, first-time buyers are significant drivers of the market and actions now to address the challenges for this market segment must be focused on reducing their financial burden. There is something structurally wrong in a market when rented accommodation costs more per month than a mortgage. The affordability analysis shows that there is a significant affordability gap for first-time buyers as their income is insufficient to purchase the median FTB property in 13 mostly urban areas out of 34 areas examined. Secondly, the deposit required is a significant barrier to home ownership. Measures are required to reduce the sales price of new dwellings if housing is to be affordable for first-time buyers, who are fundamental to a properly functioning housing market.”
Additional highlights of the report’s analysis include:
- Density levels are not always appropriate, resulting in viability challenges;
- Planning delays/blockages in the planning system impact commencement and/or viability of development;
- The total delivery cost of a new home, including typical costs of design / planning, construction, profit and risk, is not always sufficient to provide feasible returns; yet the price is above what the first-time buyer can afford in many urban locations;
- The average deposit paid by first time buyers is 14% of the property price, with many getting support from parents;
- The time it takes to save for the average deposit ranges from 1.7 years in Kilkenny to in excess of 15 years in Galway City, Wicklow, Waterford City, Cork City and Dublin City;
- Ireland’s population will require up to 36,000 new homes on average each year over the next 21 years
James Benson said that
”Ireland needs to be building up to 36,000 homes every year. We need to see delivery of homes across all tenure types from private, rental and social. Aspiration for home ownership in Ireland is as strong now as ever. In addition to identifying the causes of the afforability and supply failures, a priority for us was that this report would set out a suite of practical solutions for immediate action and over the short and medium term. A number of initiatives are identified under the following headings:
- Supporting affordability and increasing housing supply by a new Shared Equity Scheme, extending and expanding the Help to Buy scheme, a programme to restore vacant properties and a reassessment of Central Bank guidelines to take rental history into account for mortgage applicants;
- Reassessing current density requirements under planning guidelines and reducing the cost of construction by reviewing the onus on new developments to fund infrastructural and servicing costs;
- Streamlining the planning process (first promised for 2017) to create certainty and speed, provide outline permission early in the process and expedite an online planning service;
- Improve land management and boost delivery on state owned lands;
- Provide greater access to funding at competitive rates for small home builders, a cost benefit analysis of all new regulation and taxation measures to support sustainable development, First Time Buyers and small scale landlords.
Mr Benson concluded
“IHBA members deliver in the region of 85% of all new homes in Ireland annually. The Programme for Government recognises the important role the private sector has to play in tackling the supply of housing in the years ahead. We will be presenting this report to Government and to all the stakeholders in the sector. Successful expansion in supply would have wide reaching economic benefits from additional expenditure in local areas to maintaining and creating jobs. We are looking for support for the early adaption of policies that put housing affordability and home ownership at the heart of the housing system.”