Developer Michael O’Flynn: Housing policy has to change

The Government needs to undertake an extensive analysis of the cost of the construction of houses and apartments, according to a leading developer.

Michael O’Flynn said the housing crisis is “going nowhere fast” without an overhaul of the issues facing buyers and builders alike.

He raised a concern about Central Bank limits and the restrictions facing buyers, many of whom are locked stuck in a long-term cycle of renting.

He also pointed to the problems facing developers, namely the cost of construction and land, as well as issues like Vat and social housing contributions.

He said the current Central Bank lending rules are hindering the prospect of many people earning average incomes from entering the housing market.

He has previously spoken of his fear that this could lead to the creation of a “welfare state”, where long-term renters struggle in the market post-retirement.

In Ireland, Central Bank rules cap lending limits at 3.5 times income — less than the UK and New Zealand, which allow 4.5 and five times, respectively.

“There is an agenda now to influence house prices to an unhealthy level,” he said.

“I am not for a moment suggesting that we should have a free-for-all on housing, but the agenda to control prices is counterproductive.

We have a situation where people are paying multiples in rent than they would in a mortgage, and it is staggering.

The Cork developer said “a proper strategic analysis of affordability” is required to inform an overhaul of Government policy.

“The mere fact that there was a consideration about removing the Help-to-Buy scheme shows just how off-pitch the powers that be are in relation to the current state of the market,” he said.

“And I’m not saying it’s all about the macro potential rules. I’m saying it’s a factor.

“I think the availability of land is a factor, the servicing of land is a factor. The taxes are a factor. But I think it’s it’s an extraordinary situation that people think somehow that gap in viability for us and affordability for the client of the consumer is going to bridge itself, because it won’t.”

In recent months, there has been a flood of planning permissions in Irish cities for apartments and housing developments. However, Mr O’Flynn said the reality is that many of these will never see the light of day.

“A lot of the planning applications, even in Cork, have no prospect of being built if you do a financial analysis. People somehow confuse a planning application with an expectation of commencement,” he said.

“I can tell you, a lot of the plannings that have been sought in recent times are just not viable.”

This week, representatives from Property Industry Ireland told the Dáil housing committee that planning permissions are the main issue in development. They warned red tape could lead to delays of up to two years for construction to commence.

Mr O’Flynn said this is the reality undermining the market all over Ireland.

“The actual demand at the moment is probably 40,000 units in the country,” he said.

“The capable demand, what people can afford ... is probably 20,000 units. I’ve never seen a situation where there’s such a gap between the demand and capable demand.”