Rising costs of building materials are the main concern and challenge facing builders, an Oireachtas committee has been told.
James Benson, director of housing, planning and development services at the Construction Industry Federation (CIF), warned that the housing affordability gap is widening and making it more difficult for people to access mortgages.
He told the Oireachtas Committee on Housing that there are rising developmental costs, regardless of whether it is private or public housing.
The committee met to discuss how the rise in inflation has affected the construction sector.
Mr Benson said the CIF travelled around the country and held a series of workshops with builders, and discussed ongoing issues in the sector.
“Without doubt, material inflation is probably at the top of the list of concerns of the challenges being imposed on those builders,” he said.
“Last year in May of 2021, we completed a survey of all our members which looked at the material inflation for each cost component within a typical three-bedroom semi-detached house.
“At the time of May 2021, it added something in the region of 17,000 (euro) per unit. The impact of that meant that your pre-tax profit margin dropped almost half from 10 to 5%. Builders, if they didn’t add on the cost, wouldn’t meet the funding criteria, it wouldn’t get the finance and could never have commenced the projects.
“Where they did add it on to the price of the house, the affordability gap was made even worse than what it was and people couldn’t access mortgages.”
Mr Benson called for a full review of all housing development costs.
“So not just input costs, not construction costs, all development costs. Regardless of the delivery model, regardless of who is building the houses, whether it be state, private or such, there is development costs in every development,” he added.
“Unfortunately we can’t give you a figure for the last 12 months because every time we go to conduct that same survey again, our members are informed on a weekly basis from the suppliers that costs are going up.
“Not only can they not guarantee that the cost will be held, they can’t guarantee availability of those materials.
“So it’s putting the industry in a very difficult position unfortunately, and that unfortunately disadvantages the consumer because they do not know what house price is going to be coming to the market.”
Eddie Taaffe, programme co-ordinator of the Housing Delivery and Co-ordination Office, said he has seen inflation rates of around 5% to 15% within new developments.
He told the committee there is an opportunity to reduce costs by using more modern methods of construction and greater off-site fabrication.
Reacting to the increase in inflation rates, Sinn Féin’s Eoin Ó Broin said: “That’s obviously going to place a huge pressure because, unlike the private sector, if you have a 10 or 15% increase in construction costs, that has a much bigger impact in terms of public spending.
“So that’s obviously going to have a huge impact on meeting social affordable housing targets, if that filters in by the end of the year.”