Housing crisis set to deepen with output predicted to stall for 18 months

Another €125m is being allocated to establish a land acquisition fund under the Housing Agency, which aims to streamline the process of acquiring land for social housing. Picture Denis Minihane.

The housing crisis is set to deepen even further next year with new-home starts already in decline and experts predicting that housing output will stall for at least the next 18 months.

While the Government's Housing for All plan has a target of 33,000 units annually, Housing Minister Darragh O'Brien has now admitted that even reaching 28,000 home completions next year will be challenging.

In its latest analysis, brokers Goodbodys points to a collapse in new housing commencements, with the number of new houses and apartments starting construction work dropping by almost a third last month.

It comes as Mr O'Brien will today bring proposals to Cabinet to allocate €100m to pay down land loans which can then deliver social housing projects.

To ensure an accelerated delivery, funding would be allocated to sites which could be immediately activated, commencing construction in 2023, or 2024 at the latest, and use quick delivery models such as modular homes.

Another €125m is being allocated to establish a land acquisition fund under the Housing Agency, which aims to streamline the process of acquiring land for social housing.

Lack of housing supply

Goodbody economist Dermot O'Leary said that in the three months to the end of October, apartment commencements fell by 29% year-on-year, with housing scheme commencements down 23%. 

Housing Minister Darragh O'Brien has admitted that even reaching 28,000 of his Housing For All plan's target of 33,000 home completions next year will be challenging. Picture: PA

"Viability of apartment construction has been compromised by increased construction costs and yields recently," he said. 

Viability may also be an issue in terms of housing construction, but other factors, such as land availability, is also playing a role."

A lack of housing supply has repeatedly been linked to spiralling rents and the latest report from Daft.ie shows that the problem has only become worse.

Report author Ronan Lyons said the "extraordinary collapse” in the supply of rental homes has driven rents to record highs, up 14.1% compared to the same time last year. That increase is the highest Daft has recorded since it began the reports in 2005.

To put the spike in context, average market rents were €1,688 per month between July and September of this year. That compares to just €765 in 2011.

The restricted supply which has led to the hikes is evidenced by the Daft.ie Rental Report for Quarter 3. It shows there are now 75% fewer rental homes available than in 2019 and almost 60% fewer homes available for rent compared to last year.

Uncharted territory

Mr Lyons, an associate professor of economics at Trinity College Dublin, said the report contains "more grim reading for those hoping for an end to Ireland’s rental woes any time soon".

Ronan Lyons of Daft.ie

"What has happened over the last 18 months has been an extraordinary collapse in the stock available to rent ... Dublin, and the country, has gone into uncharted territory."

Mr Lyons said that over the past 20 years, the best predictor of future changes in rents has been the number of homes available at any particular point in time.

"As that has collapsed over the past 18 months, it was apparent that there would be significant upward pressure on rents all across the country," he said.

This has been confirmed in these latest figures, which show record quarterly and annual increases in market rents, despite rents already being at very high levels."

He also referenced signs the Government plans to scrap the build-to-rent planning classification.

"The BTR system had helped generate a pipeline of tens of thousands of new rental homes that are now coming on stream and represent the best hope for alleviating the chronic shortages in the rental market," he said. 

"If the BTR system is to go, policymakers must have a clear plan on how tens of thousands of new rental homes will be delivered this decade in all major towns and cities."

Reacting to the latest Daft report, Sinn Féin housing spokesperson Eoin Ó Broin demanded that Darragh O'Brien take emergency action to tackle runaway rents, including a three-year ban on rent increases and a properly designed refundable tax credit to put a month's rent back into every private renter's pocket.

“It also means increasing and accelerating the delivery of genuinely affordable cost-rental homes," said Mr Ó Broin.