Housing/Planning – Covid-19 Is Adding Another Layer To Already Strained Resources
– James Benson, Director, Development, Planning and Housing, CIF, writes that the country needs 36,000 homes each year for the next two decades to keep up with population growth, but current supply isn’t matching either the demand or realisable output.
James Benson, Director, Development, Planning and Housing, CIF.
At the end of 2020, the industry hopes to have built 20,000 units, a positive outcome considering that at one point, experts believed numbers could be as low as 14,000. It’s difficult to see how we would go beyond 23,000 in 2021, given the uncertainties that continue to hamper the residential market. We need 36,000 homes on average every year for the next two decades to keep up with population growth and demand, but current supply isn’t matching either demand or realisable demand.
We saw a very positive introduction of new and the extension of existing schemes in Budget 2021, and we hope that will translate into a positive output for 2021. The extension of the Help-to-Buy scheme was welcomed. I’m slightly disappointed that it wasn’t extended for a longer period, up to 2025. That would have provided a bit of extra certainty for the sector. All of that being said, they extended it to the higher threshold of €30,000, which will help consumers.
We have been calling for a shared equity scheme for several years, and I am delighted that has been included in the budget. We don’t know the mechanics or detail of how the scheme will operate at this point, the departments involved are still working through that, and we should have greater insight in the next number of months. That will have the biggest positive impact on the housing sector next year. It will aid the issue of affordability, which is a key challenge for consumers currently ‘locked out’ of the market. Many couples struggle to save for a deposit and, in some cases, it’s taking up to 15 years to save the 10% required for first-time buyers. We see many consumers, who despite rental repayments being more than what they’d be paying for a mortgage, still can’t get mortgage approval. The shared equity scheme will help that locked-out group.
There is going to be a period of uncertainty in the new year with Brexit. Already, there are reports that a lot of nervous suppliers have increased price lists on insulation, timber, cement aggregates, and this will increase residential delivery costs.
The residential development process is very complex, including planning policy guidelines and density requirements that needlessly contribute to this complexity. There are many steps that are time-consuming and lead to unnecessary delays, increasing the final costs that are ultimately borne by the buyer. Covid-19 hasn’t helped this, and these already slow steps take longer due to remote working. Covid-19 is adding another layer to already strained resources. We’re hoping the Minister will be looking at these issues in the next 12 months and positive steps will be taken.
Where water and wastewater connections and infrastructure upgrades are required, this is driving up costs, and reducing affordability and supply. The Commission for Regulation of Utilities (CIU) places the onus on the home builder to replace the entire network in that area to allow for additional supply if it is lacking. The first-time buyer will ultimately pay for the water connection and upgrade for their own homes, and additional homes in the community.
An increase in delivery costs for design, planning and construction often means that a feasible return for the development is not possible. In these cases, the homes simply will not be built. We welcome enhanced standards, but these come at a cost.
Home builders, like the entire industry, are dealing with labour shortages, so increased wages, coupled with a shortage of skilled labour, such as plasterers and bricklayers, are affecting costs.
In terms of supply, we need to see a mix of everything – public sector on State lands or private industry on private lands. We need more social, rental, private homes. It’s going to take an increase in supply across the board. It is the private industry who deliver these homes regardless of the delivery model. Whether it’s public- or private-led delivery, the myth that the State can deliver homes at a more economical rate – half the price quoted in the private sector – is not true. All-in costs quoted for public delivery only account for the hard costs, ie, bricks and mortar. Private-led costs include the true cost of delivery, the development costs.