Housing can lay foundations for growth and is key to retaining staff

Housing can lay foundations for growth and is key to retaining staff

Despite attendees coming from various different sectors, including hospitality, professional services, construction, real estate and early years development, similar issues such as housing and staff recruitment emerged as a common challenge for business leaders at the Irish Examiner’s Business Lunch which took place in Cork’s Hayfield Manor.

In attendance at the Irish Examiner event was Adrienne Harrington, CEO of Ludgate Hub in Skibbereen; Mike Ryan, owner of the Cornstore and Coqbull restaurants in Limerick and Cork; and Ernest Cantillon, the man behind the Electric and Sober Lane pubs.

Sheila O’Flynn, managing director of Sherry FitzGerald in Cork, also attended, along with developer Brian O’Callaghan of O’Callaghan Properties, Wendy Oke of TeachKloud, and Michael Lynch of KPMG’s Private Enterprise team.

Sheila O’Flynn, Sherry FitzGerald, at the Munster Business Hub lunch. Picture: Larry Cummins
Sheila O’Flynn, Sherry FitzGerald, at the Munster Business Hub lunch. Picture: Larry Cummins

Housing was a key issue for all sectors, with everyone in attendance commenting that attracting talent to their companies was being hindered by the lack of secure accommodation.

“The key issues with housing is affordable and viability,” Sheila O’Flynn of SherryFitzgerald said. “It’s land for the person selling it… and the guy building it has to have a profit. They have to stay in business.”

“We are in a situation now where developers aren’t going to be able to build us apartments in the city. They’re not viable.

“And we have a situation where the people who want to buy [property] can’t get the money.”

Brian O’Callaghan of O’Callaghan Properties says the cost of construction is a barrier to solving the supply issue.

His company is building apartments on Lancaster Quay, which is currently the only residential apartment development in Cork.

Brian O’Callaghan, O’Callaghan Properties OCP; Ernest Cantillon, Electric Bar and Kinsale Spirit Company, and Michael Ryan, The Cornstore, at the Munster Business Hub lunch at Hayfield Manor.
Brian O’Callaghan, O’Callaghan Properties OCP; Ernest Cantillon, Electric Bar and Kinsale Spirit Company, and Michael Ryan, The Cornstore, at the Munster Business Hub lunch at Hayfield Manor.

“That apartment block is 88 apartments and it’s only viable because the basement was already constructed.

“The key issues are affordability above all else, and the viability... because apartments don’t make money.

“[Another issue is] affordability, from a purchaser’s point of view… and our rents are too high. We have one of the highest rents in Europe. That is not positive for attracting Foreign Direct Investment.”

However, Mr O’Callaghan says the fundamental issue is the amount of Vat developers have to pay on constructed properties and the cost of the product.

“If [we are] selling a three-bed house for €320,000, about a third of the cost of us producing that house is taxed, or controlled by the state, between Vat and planning contributions.

“The state, by far, is the biggest stakeholder in the product we are producing. It controls a third of the cost. And that’s the fundamental problem with our product; is that it’s too expensive.”

Ms O’Flynn said the housing issue means the days of people deciding to build, rent or buy are gone.

“There’s no choice anymore. Our children should be able to decide to do what they want.

“Central bank lending is bananas. First-time buyers, [having to save] three and half times their earnings. It’s ridiculous.

Michael Lynch, KPMG speaking with Munster business hub Editor Alan Healy.	Picture: Larry Cummins
Michael Lynch, KPMG speaking with Munster business hub Editor Alan Healy. Picture: Larry Cummins

“When you are going back to the stage where you’re saying a nurse and a guard can’t buy, that’s serious.

She adds that we need social housing for those who cannot buy.

“The economy is doing well. We only have 4% unemployment. We have fantastic new office accommodation in the city, like what Brian (O’Callaghan) and others are doing in the city.

“I believe they are 90% nearly taken up. How will they find a house? How will we be able to keep workers to support our restaurants and pubs?

Wendy Oke of TeachKloud says as a young woman starting out in her business career, rent is a serious issue among her peers.

“I got an Irish guy to move [back from] New Zealand to work for TeachKloud. Last week he said he would have to go back [to New Zealand] because he couldn’t find a house.”

“At one stage he went to Ovens and the house hadn’t even been finished and he was tempted to take it, that’s how bad it is. Luckily he found a house.”

Wendy Oke at the lunch in Hayfield Manor.	Picture: Larry Cummins
Wendy Oke at the lunch in Hayfield Manor. Picture: Larry Cummins

The availability of infrastructure is another issue affecting housing, according to Mr Callaghan. “There’s a huge availability of land that is zoned. But you can’t build on it because it doesn’t have the required infrastructure, like water, roads.”

He believes that speeding up the planning system may help alleviate the situation. “It’s too slow... the Government has brought in fast track planning, which has helped.”

He also said the election promises of freezing rents will not address the cost of building. “It’s going to cap the revenue but it’s not going to do anything about the cost. All that’s going to do is make apartments unviable, which means no one will build.

“I appreciate rent is too high. But none of that is driven by the tax take that’s in it because 30% of the rent is also taxed.”

All agree there is an urgent need to build more city-centre apartments, to combat urban sprawl and commuting times.

Sheila O’Flynn says that in her line of work, they have noticed a huge trend of people wanting to move back into the city, even those with partners and small children.

“They are tired and exhausted, they want to spend the maximum time with their children, and they don’t want to commute.”

Michael Lynch of KPMG says it’s an international trend. “It’s not even just a young professional who is in her 20s or 30s. It’s people in their 50s and 60s who want to be close to services as they are going to be less mobile. It’s the right thing for climate change too.”

Ernest Cantillon of Electric Bar and Kinsale Spirit Company with Mike Ryan of The Cornstore.
Ernest Cantillon of Electric Bar and Kinsale Spirit Company with Mike Ryan of The Cornstore.

However, Brian O’Callaghan says the cost of construction and the tax on building needs to change first.

“In the UK there’s no Vat [on construction]. They had the same problem in the 70s, where they were taxing a necessary good. They reduced Vat to 0%.”

He believes the solution is a tiered system. “The Vat on an apartment less than €350,000 would be 0%. From €350-€400,000 the Vat would be 5%. €400,0000 above the Vat is 13%.”

He says he doesn’t think a change in the Vat rate would increase property prices again, and KPMG’s Michael Lynch agrees.

“There is a perception that if we do this, we are putting money into the back pockets of property developers… but if there was a profit in it [currently] they’d be getting built at the moment,” says Mr Lynch.

“There is a counterbalance of affordability from a Central Bank perspective. That’s keeping a tap on it anyway. So the price has to come down.”

The hospitality sector is also seeing labour shortages due to this housing crisis, as well as being affected by their Vat rate.

Michael Lynch, KPMG, at the lunch in The Hayfield Manor
Michael Lynch, KPMG, at the lunch in The Hayfield Manor

Ernest Cantillon says the change in Vat rate can affect hospitality businesses greatly. Previously, Vat for the hospitality sector was at a reduced 9% rate but was restored to 13.5% last year.

“It’s very tricky to pass it on. If you are operating early bird menus, at €25 or €30, you’re not going to make it €31.20… it doesn’t have the same ring to it,” says Mr Cantillon.

“So it ends up with just being €30 and you end up with profit erosion. I am talking about a difference of a euro or two, there really is no price elasticity.

“People have in their heads chicken has to be €22, I’m not willing to pay over €30 for a steak... but something has to give somewhere and what’s giving is profit.”

Mike Ryan of Coqbull and the Cornstore restaurants said his sector has been talking about staffing issues for years and were accused of scaremongering, but now the reality has “hit hard”.

“There was a requirement for 5,000 chefs per year, but we were only churning out 1,500.

“We have rental accommodation around the city. We have someone interested in coming from Portugal.

“He’s a good chef, but he wouldn’t come unless we could get accommodation. That’s been a case for us for the last two and a half years.

“That’s a major cost to businesses and a lot of employers are having to do that at the moment.”

Mr Ryan says he has found there is also a reluctance in the Irish rental market to rent to non-indigenous people. “Sometimes you need to make a phone call [as a sort of sponsor]. They think it’s a short-term let, or that they will be gone.”

Ernest Cantillon has had to invest heavily in retention and increasing employee perks. Childcare is also an issue for his workers, and he himself is experiencing the cost of it.

He says people aren’t making any money because their wages are being spent on childcare and rent.

Adrienne Harrington, CEO of the Ludgate Hub.
Adrienne Harrington, CEO of the Ludgate Hub.

Childcare is Wendy Oke’s area of expertise and she says the cost is a serious barrier for women and men re-entering the workforce after maternity and paternity leave.

“We are one of the most expensive countries for child care. It can be like a second mortgage. In Dublin, it can go up to €1,200 per month per child.

“If you have three children, they are basically not going to creche.

“Governments come and go and say they will reduce the unemployment rate, but if you want women back in the workforce you have to give them viable options to take care of their children.”

Ms Oke says Ireland has good quality education, especially when it comes to primary and secondary schools, and access to grants at third level.

However, she says early years education needs more investment because a big indicator of a child’s success is how much access they have to education early on in life.

“Research has shown that people with good quality early years education are less likely to be incarcerated. But we are not investing in that part.

“We will invest when they go to CIT or UCC, but by that time, you have lost so many people that could have gone there because they didn’t have a good start.”

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