Planning, land and labour inefficiencies need to be addressed to satisfy housing demand

Commencement data shows up to 75,000 homes could be completed by the end of 2026

The latest data from the Department of Housing shows that there were 1,017 homes commenced during February of which 61% were apartments, 18% were one-off units, and 21% were scheme dwellings. File picture

Up to 75,000 homes could be delivered over the next two years, based on commencement data, but inefficiencies relating to land and labour need to be addressed, a new housing market report by the Banking and Payments Federation, Ireland (BPFI) has said.

There were just over 69,000 housing commencements during 2024 but at least half of these were started due to uncertainty over an extension of development levy waiver or water connection charge refund.

The BPFI believes that due to some housing commencements beginning in late 2023 which have yet to be completed, it is forecasting a total housing output of around 75,000 units in the next two years.

The latest data from the Department of Housing shows that there were 1,017 homes commenced during February of which 61% were apartments, 18% were one-off units, and 21% were scheme dwellings. During February last year, there were 3,715 commencements.

However, while the BPFI expects a significant increase in output - particularly in the first half of this year - to reach the output levels required to meet demand, key labour, land and capital issues will need to be addressed.

Brian Hayes, chief executive of BPFI, said there are “various factors” affecting housing output such as the “inefficiencies in the planning system, the availability of zoned and serviced land, labour capacity and productivity of the construction sector, as well as the availability of capital investment”.

“While creating the environment to plan for increased housing output in the medium to long term, we need to find solutions to inefficiencies in the system in order to provide significantly more homes in the short term.” 

One of those inefficiencies he points out is Irish Water stating that under current capacity they can only connect 35,000 new homes a year to the network with further investment required to increase capacity.

On the issue of labour in the construction sector, Mr Hayes said there has been “some growth in employment” but this may have been a “re-allocation of labour from commercial construction projects to residential units”.

“Unless productivity increases significantly in the sector, we will not be able to increase output to the required levels with current employment levels.” 

Despite what Mr Hayes has said, both of the country’s largest home developers - Cairn Homes and Glenveagh - have previously said that labour is not a constraining factor for them.

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On the capital front, the report points out that Department of Finance estimates show that to increase the level of housing output would require around €20bn in funding of which nearly €17bn would need to come from private capital.

“The funding challenge to deliver the increased levels of housing output required is substantial,” Mr Hayes said.

Data from the Central Statistics Office shows that 30,330 homes were completed last year - a 6.7% decrease compared to 2023. The fall was largely driven by a 24.1% drop in apartment completions.

The report pointed out that the deterioration in apartment completions has been a long-running trend. About 95,000 apartments were given planning permission between 2018 and 2022, but only 44,000 apartments were completed between 2018 and 2024.