Inadequate housing supply 'costly' to Ireland's economy, Dáil committee to hear

Shortage of zoned land, particularly in Dublin and the other urban centres, 'a critical bottleneck to housing delivery'. Picture: Getty

Ireland’s economy faces unprecedented risks in the coming years, with the current geopolitical situation leading to uncertainty “twice as high” as it was during the early days of covid-19, according to the Central Bank of Ireland.

The banking regulator will, together with the Economic and Social Research Institute, address the Oireachtas housing committee on Tuesday regarding the challenges facing the Irish housing market.

Robert Kelly, the Central Bank's director of economics and statistics, is to tell the committee that Ireland’s significant ties with the US via trade and investment places the country at significant risk of heightened impact due to the tariff and isolationist policies of President Donald Trump.

“In the short term, the main challenge is heightened uncertainty, now estimated to be nearly twice as high as it was during the early pandemic, which risks reducing consumer spending and delaying investment decisions,” Mr Kelly will say.

Regarding the immediate future of housing in Ireland, Mr Kelly will strike a downbeat note, reiterating that housing completions here across 2025 are projected to be 35,000 at a maximum, itself a more optimistic outlook than that of most developers.

He will note commencements in 2024 “surged”, but this may have been a result of the temporary waiver of levies on development and water connections.

The ongoing stasis seen within Ireland’s housing market is a “costly” one, Mr Kelly will tell the committee, noting “inadequate housing supply will lead to rising rents and house prices”, a fact which will only serve to further undermine “our competitiveness as a small open economy”.

Both Mr Kelly and the ESRI’s associate research professor Dr Conor O’Toole are set to outline similar opinions on the primary blockages to increasing housing supply — with the planning system, low productivity in the construction sector, and infrastructural deficits all cited as being factors which are holding the country back.

Mr Kelly will describe the fragmented nature of Ireland’s construction sector — which sees 175,000 workers employed predominantly in small firms — as hindering “scalability and efficiency”, to the extent output per hour in Ireland is “25% below the euro area average”.

Dr O’Toole is expected to reiterate the same point, that in Ireland there is “lower productivity for small and domestic-owned construction firms relative to foreign-owned construction firms”, an issue which is “likely to be inhibiting activity in the sector”.

Central Bank director Mr Kelly will estimate an additional €7bn in investment will be required each year in order for the country to scale up to the 54,000 dwellings required each year to match the growing Irish population’s demand for housing.

Of the three factors the Central Bank believes need to be maximised in order to deal with the crisis —  “prepared land, efficient planning, and productive building” — Mr Kelly will emphasise the shortage of zoned land, particularly in Dublin and the other urban centres, is “a critical bottleneck to housing delivery”.

He will criticise the domination of short-term thinking with regard to overhauling Ireland’s dated water, transport and energy infrastructure.

“Without these, development cannot proceed,” Mr Kelly will say. “Our analysis shows that delays in infrastructure planning or execution lead to long wait times, causing a permanent reduction in private sector participation and resulting in poor value for money.”

Dr O’Toole will note, meanwhile, the challenges in the housing market are “complicated” and “interlinked”, and structural reforms on the supply side in planning, zoning and regulation “are likely to yield the best return in terms of fostering the long-term production of housing”.