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Government Policy the main barrier to housing supply

Mandatory standards, regulations and policy introduced since 2014 have negatively affected the feasibility of many residential projects, increased costs and contributed to the skills shortage in the construction sector. This has led to continued sluggish residential output and increasing rents.

Despite Ireland’s vacancy rate of twice the ‘normal’ – with 200,000 vacant homes, Government policies have focused on new-build homes. Residential land values have increased dramatically as a result of policy interventions.

There are three main areas of concern: (1) Building Control, (2) Planning Regulations and (3) Housing Policy.

1: Building Control

Following introduction by the Department of Housing of S.I.9 of the Building Control (Amendment) Regulations (BCAR), in 2014, a 60% fall-off in one-off housing commencements was observed in the first year of operation. No estimated Impact Assessment of the Regulations (Regulatory Impact Assessment) was undertaken in advance of their implementation.

BCAR direct and indirect costs of up to €50,000 per house for self-builders and up to €25,000 per apartment were confirmed by industry commentators Karl Deeter and Dr Ronan Lyons (Trinity College, Dublin). A Ministerial review (April-September 2015) resulted in an ‘opt-out”, SI.369, which permitted one-off houses and extensions to be exempted from BCAR. ‘One-off’ house commencements have recovered as a result. However, no Government review of BCAR is planned for the multi-unit residential sector.

As an example from my own practice, a modest change-of-use project in suburban Dublin with a construction budget of €25,000 required three separate statutory appointments which cost over €10,000, and permissions which took six months to obtain. Of this, Building Control procedures cost €7,600 and took one hundred days to complete. In contrast, in the UK similar Building Control permits cost £695 and take ten days.

Planning is not the problem.

Reliance by Government on privatised Building Control ‘self-certification’ compliance procedures rather than simplified inspections is placing unnecessary cost burdens on the sector, and increasing skills shortages – with little improvement in either consumer protection or quality.

2: Planning Standards

The Department’s proposed ‘fast-track’ Bord Pleanála process for schemes of one hundred dwellings or more will not address timescales; rather it allows developers to bypass development plan ‘inconsistencies’ e.g. the requirement for passive house standards in Dun Laoghaire Rathdown, or ‘leave the door open’ for suburban housing applications in ‘green belts’, e.g. around Cork City.

The Department’s Minimum Apartment Standards were issued in December 2015. The stated intention was that reduced space standards would yield considerable cost savings, and improve feasibility and supply. The purported savings are not seen in the weak accompanying Department research which underpins it and which suggested a profit margin of just 0.7% would result from application of the standards in its own worked example.

No Regulatory Impact Assessment was undertaken in advance. The assumed saving from lower standards is not borne out by detailed analysis, and mandatory standards have little effect on feasibility. Three out of five Local Authorities have seen costs increase as a result. The current availability for sale of affordable Passive Standard homes contradicts the Department’s assumption that increased performance comes at a premium.

In 2006 the Society of Chartered Surveyors estimated that a typical County Dublin house cost €330,000.
When a Local Authority assumes the developer’s role, significant savings can be passed on to end-users. Last November, Minister Coveney confirmed on the Dáil record that Local Authority housing costs ranging from €141,445 (two-bed outside Dublin) to €205,250 (three-bed in Dublin) including vat.

3: Housing Policy

The Government’s recent ‘Rebuilding Ireland’ plan relies heavily on the private sector for the provision of ‘affordable rentals’ and for social housing. The majority of the plan’s 47,000 new social homes are rented or leased units. The balance of 15,000 units will be a mixture of Public Private Partnerships, ‘Rapid’ builds, Approved Housing Body projects and Local Authority housing.

The Department of Housing uses new ESB connections as a proxy for new-build ‘completions’. This flawed methodology effectively means that the plan’s actual new-build five-year social-housing target is just over 8,000. Recent analysis by Dr Rory Hearne (Maynooth University) concludes that at current rates it will take at least thirty years to house those on current housing waiting lists.

To put ‘Rebuilding Ireland’ in context, there were 8,794 Local Authority homes completed in 1975.
Dr Declan Redmond (UCD) has confirmed out of 567,585 new dwellings completed in a ten-year period, the equivalent of 19,539 Part V homes (2.6%) were delivered. Part V (under which local authorities can now obtain up to 10% of land zoned for housing development at “existing use value” rather than “development value” for the delivery of social and affordable housing) was revised down last year to less than half the previous requirement and units can be leased instead of purchased.

Over a thirty-year period a typical rental house costs €270,000 more than a Local Authority-built passive house (PH) standard home. A simple cost-benefit analysis suggests the ‘Rebuilding Ireland’ private rental model will cost €291m more per annum than state-built PH homes – that is €8.74bn more expensive over thirty years.

Conclusion

In the way

There is little evidence to support the Government’s reliance on the private sector for delivery of social and affordable housing, or affordable rentals. Ambitious five-year plans have come and gone – Housing 2020 was launched in May 2014 with a budget of €3.8bn and promised 25,000 new social homes in five years. However in fact, in 2015 and 2016 less than 300 local authority homes were built.

Building Control Procedures introduced in 2014 continue to negatively affect the residential sector. Reform of our ‘reinforced self-certification’ system along the lines of Northern Ireland’s self-funded version could reduce costs, improve standards and safety, increase consumer protection, ease the industry skills shortage and significantly improve supply.

Local Authority directly-procured housing can deliver affordable rentals and social and affordable housing at significant discounts.

The private sector will wait for asset prices to rise to a level where a reasonable profit margin can be achieved, and it is naive to expect new homes to be provided at or below cost. Inappropriate pro-cyclical measures such as first-time-buyer incentives, VAT and planning levy reductions will feed into development-land inflation with little guarantee that any discount will be passed on to the end user.

Solutions

A recent study carried out by Planning students from University College Cork demonstrated that population increases of 260% are possible in city-centre locations when vacant upper floors and sites are targeted for redevelopment. Practical proposals aimed at existing building re-use such as those made at the Oireachtas Committee on Housing last month should be examined by policy-makers.

Three measures would help the current policy impasse:

  1. A new independent statutory body – a ‘Housing Advisory Council’ should be set-up to monitor policies and audit performance of the Department, along the lines of the effective ‘Fiscal Advisory Council’.
  2. The Department should look to ‘other voices’ – industry experts, and avail of expertise already at the disposal of the Government – the Department of Public Expenditure and Reform, the National Economic and Social Council and An Bord Pleanála amongst others.
  3. Finally the Building Regulations Advisory Board should be re-established to allow broader input into what is a very complex area – Building Control. This body has provided invaluable assistance to successive governments over the years and should be re-convened as a matter of urgency.

Continued inappropriate intervention by the State based on flawed ideology, and on poorly researched standards, procedures and policies will have little effect on making rents or house prices affordable.

Maoilíosa Reynolds is a Registered Architect and Certified Passive House Designer.