House builders must wait for our legislators to get a grip

The Government has achieved a turnaround in the economy. However, there is a major blot on its copybook in the form of a continuing failure to put in place a strategy aimed at reviving the country’s house-building sector.

While the Environment Minister, Alan Kelly, buzzes around energetically, the place where he really needs to camp out over the next few weeks is not in one of many TV or radio studios but rather on the corridor outside the offices of Michael Noonan and Brendan Howlin ahead of Budget Day.

The Minister needs to tug their lapels and press urgent reminders into their distracted ears.

The harsh fact is that Government policy in this area remains a bit of a dogs dinner and a continuation of the mess poses a real threat to sustained economic recovery. Housing costs account for close to one quarter of net income in the capital city and surrounding counties.

Rental costs are soaring, up nine per cent in the first three months of 2015 compared to early 2014.

The issue is going viral with almost one quarter of people citing housing costs as their primary concern compared to just nine per cent, a year ago.

The Housing Agency recently estimated that a minimum of 63,000 houses will be required in the Greater Dublin area over the next three years but providers are way off the pace.

DKM Economic Consultants has estimated that barely one quarter of the required houses were built in 2013 and the picture has barely improved since then.

At a time when Ireland was a far poorer country than it is today, local Government was out there actively producing accommodation for the people; much of it surprisingly decent as is evident in the prices being paid for 60-year-old dwellings in areas such as Crumlin and Kimmage in Dublin’s south inner city.

Similar projects altered the appearance of Cork city during those austere times.

In the ’80s, that task was largely abandoned and we are all dealing with the resulting mess.

Numbers on housing waiting lists have soared past the ninety thousand mark, with over 42,000 in Dublin alone.

It will take years if not decades to reverse this situation.

House builders must wait for our legislators to get a grip

<i>Hubert Fitzpatrick<i>

Local authorities will need to secure a restoration of Department of Environment cutbacks, but they and the citizenry will need to re-examine spending priorities.

Management capacity in local authority housing departments will have to be rebuilt.

Officials and councillors must seriously question whether elaborate transport projects continue to be accorded priority over the provision of basic shelter, or should this task be left in large part to be discharged by the private sector?

If strained public finances dictate reliance on house builder firms, then there will have to be a fundamental re-examination of the incentives and of the obstacles in the path of those otherwise equipped to provide the necessary housing.

The cost of funding for house developers remains too high, further threatening the viability of projects.

The Department of Finance needs to provide a good dollop of kickstart funds to Mr Kelly’s Department which, in turn, should temporarily suspend the system of developer contributions which came into being during the period of the building boom.

The Finance Minister duet of Messrs Noonan and Howlin need to step in by reducing the VAT rate on housebuilding from 13.5% to 9%, the same as that available in the hospitality industry.

The key is to get building going.

Once the houses are completed, they will be generating income for the State and for local Government in property tax, not to mention the extra revenues and reduced welfare outlay due to the resulting increase in the numbers of builders back at work.

An increase in available accommodation will reduce the pressure on the Department of Social and Family Affairs and on the local authorities to provide emergency accommodation, often in B&Bs to homeless people.

This constitutes another important saving to the Exchequer.

Such savings could then be recycled back into providing further accommodation.

The frustrating thing about all of this is that the building of houses comes naturally to Irish people.

It all got crazily out of kilter during the boom and we ended up with disasters such as Priory Hall.

Some argue that we have ended up with an overkill in building controls in reaction to the shoddy workmanship of the bubble years.

Hubert FitzPatrick, director of the Construction Industry Federation, accepts the new system of building controls is needed.

“The industry has bought into it,” he says. However, it has come at a cost, with inspections alone costing €3,000 to €4,000 per house.

FitzPatrick is pressing for abolition of the development levy which can range from €6,000 to €13,000 per standard dwelling depending on location.

The improvement in standards must be maintained, but at times, aspiring for the best can turnout to be the enemy of the good.

A possible example is the demand from Dun Laoghaire local authority that all residences built in its area be built to ‘passive energy’ standard.

Scandinavian style energy efficiency is a laudable aim, but if it renders some projects uneconomic, is it perhaps a goal too far?

Tony Reddy, a leading architect and former President of the architects’ body, the RIAI, points to the requirement that apartments be “dual aspect”, with windows on two sides as a particular source of frustration, adding greatly to the cost of developments.

Planning standards are adding 25 to 30% to the cost of development, he believes.

He agrees the lag in housebuilding activity compared with the revving up in office construction is an anomaly, but he is not optimistic about a quick pick up in the absence of a serious intervention.

While in favour in principle of the Central Bank’s mortgage cap, he warns that it has acted to deter banks from funding house building.

In truth, what we have are failures in housing planning at both macro/national and micro/local level.

If these failures are allowed to persist, they will serve to undermine national cohesion in a number of ways as the cost of one of the basic necessities, shelter, becomes one fewer wage earners, let alone the unemployed, or underemployed can meet.

There is now evidence that high housing costs and poor supply are discouraging skilled migrants from moving to, or returning back to this country while encouraging others to head abroad.

At the same time, discontent among those who remain worsens.

If unchecked, this problem could turn out to be the Irish Water saga on steroids.

Kyran Fitzgerald says there is a continuing failure by Government to put in place a strategy aimed at reviving the country’s house-building sector

A minimum of 63,000 houses will be required in the Greater Dublin area over next three years


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