ESRI: State should 'regulate land' prices to drive down the cost of housing

The Economic and Social Research Institute, or ESRI, suggested that policymakers use a body, such as the Land Development Agency, to acquire and regulate the use of land for the building of homes.

The Government has been warned by an economic think tank to introduce a land management strategy to drive down the cost of housing and prevent “hoarding”.

The Economic and Social Research Institute, or ESRI, suggested that policymakers use a body, such as the Land Development Agency, to acquire and regulate the use of land for the building of homes.

“We think a more active land management strategy by the government should help to reduce the cost of land which is one of the crucial ingredients in the overall cost of the house,” said Professor Kieran McQuinn of the ESRI.

The ESRI also said that this body should have the capacity to buy both public and private land for the development of residential properties. “There is anecdotal evidence to suggest there is a degree of land hoarding going on,” said Mr McQuinn.

“If you think of it from a practical point of view, if you own land and the value of that land is going up every year and there’s no cost to you holding that land, then to a certain extent why would you go to the bother of building on it when the value is going up anyway,” he added.

Mr McQuinn made these comments in relation the ESRI’s latest report identifying difficulties the economy faces in increasing housing supply.

“Land prices have escalated hugely over the years and many people, including ourselves, have commented that the high price of land is one of the big reasons why the cost of housing generally is so high in this country,” said Mr McQuinn.

Ireland’s housing crisis has been growing for years, before the construction industry had to battle new headwinds such as raw material inflation and supply chain issues exacerbated by the war in Ukraine.

The demand for housing in the Irish economy is approximately 35,000 units per annum. The ESRI said that if the State increased housing output by 10,000, construction wages would rise by approximately 1% in the long run. This suggests that increasing housing output to 35,000 units per annum would not lead to significant wage inflation in the sector.

The ESRI also suggested that the State add construction workers to its critical skills occupation list to boost house building activity. It said policymakers should make it easier for migrants, that are from outside of the EU and who have experience in construction, to gain a Critical Skills Employment Permit (CSEP).

The permit has been successful in attracting ICT, health and engineering professionals. The influx of construction workers into Ireland is minor compared to these sectors despite a housing crisis, according to the ESRI’s report.

Some construction workers, such as project managers and architects, are included on the State’s critical skills list but roles needed to build homes, including brickies, are not.

Ireland’s high cost of existing housing supply is also creating challenges in attracting skilled workers to build more homes, said the ESRI. This is putting further pressure on maintaining the overall competitiveness of the domestic economy.