Viability challenges threaten vitally needed housing supply in 2023  and beyond

Refugee crisis putting additional strain on both the housing system, public system and hospitality.

We are living through uncertain times and things are changing rapidly. Three major matters affecting us all right now and into the future are climate, technology and monetary policy. The housing system must adapt to these changes and all tenure of homes need to be three things: viable, sustainable, and affordable.

So, what can aid housing delivery in Ireland during this unprecedented crisis. Planning reform with achievable targets, and a collaborative spirit between the public and private sectors to combine, complement and figure out solutions. Many local authorities and State bodies such as An Bord Pleanála (or whatever it may be known as into the future) and the LDA are crying out for investment and talent. The system needs to be resourced and rebooted, the sooner the better.

The new normal is here, with hyper-inflation, ‘normalised’ interest rates and higher capital return requirements.

Housing for All is over a year old and the actions by the politicians in the first quarter of 2023 will be incredibly important for our expanding society.

The timing and sequence of the next general election should, we hope, focus the minds and ensure delivery before going to the polls. A few political careers are at stake.

A new Planning Bill is imminent, and we understand there will be significant change to the Development Plan cycle extending out to eight to 10 years. Medium term improvements already flagged for debate are likely to include removing uncertainty around statutory timeframes, judicial reviews and vexatious appeals. As with any of these reviews the devil will be in the detail. Unfortunately, the short-term challenges, particularly with the current backlog within An Bord Pleanála will remain.

Shortfall needs to be addressed with higher density, but apartment construction is challenging to fund

At this stage, it is acknowledged that there is a far greater housing need than targeted within the year-old Housing for All and the National Planning Framework. This is even before the humanitarian crisis in Ukraine and beyond which is clearly exacerbating that need and is putting additional strain on both the housing system, public system and hospitality.

We need to be much more ambitious and ensure a fit for purpose National Planning Framework targeting an average of 50,000-60,000 homes per annum of all tenures and types. The Minister recently spoke about the ongoing review of the NPF to be concluded in early 2023. In my opinion, this should include stretched targets and some upside risk on population flows.

If we can get the combination of proper targets and a streamlined planning system right, it will give rise for some degree of optimism.

There also appears to be progress on Compact Settlement Guidance with the Housing Department acknowledging the potential benefit to all if some tweaks are made. In simple terms, this relates to a change in approach to allow for medium density, low rise own-door housing ranging from 40 to 70 per hectare. In a Cork context think Albert Road, Evergreen road, Tower Street and Friars Walk. Density does not relate to height and to visualise a hectare, it’s just under 2.5 acres, roughly the size between a rugby pitch and a GAA pitch!

Taking a glass half full approach to the medium term, what about the short-term horizon for the next couple of years? Strangely, industry does have a small amount of ‘pent-up’ delayed supply. Over the past three years, we have witnessed a ‘Pandemic Pause’ followed by a ‘Putin Pause’ which delayed delivery in the period. 

There are large schemes with existing planning permission located around the Cork city suburbs and metropolitan area which could deliver quality new homes. While there are challenges to viability, there is a moderate amount of legacy housing pipeline which will hopefully come to the market over the next few years. As a result, and pending the systemic changes, we anticipate flat to decreasing gross commencements and completions with the tenure composition of those completions changing with the LDA being a far larger participant.

The owner-occupier market has shown good resilience in the Q3/Q4 period, and the supports such as the First-Time Buyers rebate and First Home Shared Equity are increasingly important to aspiring buyers. There is a greater awareness of the First Home scheme but there are issues with price caps below replacement/viable cost levels for larger parts of the country. This is evident in the substantial difference in the price caps for Cork City (€450,000) and Cork County (€350,000).

New homes development is ongoing or imminent in Cork Metropolitan areas such as Carrigaline, Kinsale, Passage West, Glounthaune, Carrigtwohill, Midleton and Ovens. All these locations have price caps of €350,000 for qualifying buyers seeking to avail of the First Home Scheme. This price cap needs to be increased especially in the Metropolitan commuter towns. We welcome the bi-annual reviews and are hopeful that some tweaks will result in both greater viability and affordability, as you can’t have one without the other.

Project Croí Cónaithe (cities), the subvention for apartment delivery is still under consideration and should be extended beyond owner-occupier only developments to deliver mixed tenure homes. Under Project Tosaigh it was good to see private affordable purchase homes in Mallow coming to market recently.

While it may be obvious that increasing supply will require more money, what is not always appreciated is that this requires not alone Government finance, but funding from all other possible stakeholders: banks, local and international investors, developers, and homeowners.

New homes opening on Cork's Blarney Street as social and affordable delivery steps up markedly.

The Minister recently acknowledged the need for €12bn + capital in the form of development and investment capital to assist delivery. With a couple of billion euros from the pillar banks and €4bn from Housing for All, we need to attract and co-invest at least €6bn per annum of private investment into the sector.

The question is do we require even more substantial investment funding to deal with the ‘Housing Emergency’ we face?

As is widely reported the rental sector is especially difficult particularly if one attempts to rent a house. Two changes to reform the penal stamp duty rates on investment in housing and a review of the rent caps could aid rental supply.

While there are very real challenges and some pessimism, we remain hopeful that the next few months will see a significant step up in the pace of systemic change, long term targeted planning and greater delivery into the future.

Paul Hannon, is Director & Head of Sherry FitzGerald New Homes Munster and Council Member of the SCSI.