How to get to the root of the problem

18 Aug 2021

Ahead of Budget 2022, CIF Director Housing, Planning and Development, James Benson, puts forward a solution-based plan to help address some of the issues facing Ireland’s homebuilding sector.

The provision of more affordable housing has a profound benefit both socially and economically, and a private housing supply will continue to play an important part in addressing challenges in this sector, including viability and access to finance. Both of these are recognised in the Programme for Government.

Budget 2022 will provide government with an opportunity to bring forward policy measures that will advance the ambitions for housing in Ireland. The current problems with supply and affordability mean the delivery of new homes is running well behind the need.
Middle-income earners cannot afford homes, with CBI lending rules locking a cohort of potential buyers out of the market. Covid-19 has only made these problems worse.

There are key questions that we need to find the answers to:

Is there enough zoned and serviced land to build houses for our growing population?
Is the infrastructure in place to meet current needs and the needs of the county over the next number of decades?

We need greater certainty and efficiency in our planning system to bring developments to a point where they can commence. Key to this is introducing economic viability assessment within the planning process. While it may not be the final requirement for grant or refusal of a project, it does need to happen early in the process. IHBA members want to build the type of homes people and families want. To do this we need to go back to the start of the process.

How do we improve affordability?

First-time buyers and new home purchasers need the state to fully support the buyer as part of their housing strategy. A shared equity scheme, in conjunction with the Help-to-Buy, will enable the average couple to secure a mortgage and remove the ever-growing cohort of society locked out of the market and further adding pressure to the rental market.

The Help-To-Buy incentive scheme for first-time buyers has had a profound impact on the rate of commencement of new residential scheme units, with the resultant impact of a substantial increase in the rate of new housing completions since the introduction of the scheme.
Stamp duty is charged on transfer of property and applies to residential property such as houses, apartments, or sites with agreement to build.

Review the regulatory impact to allow an exemption of stamp duty for the first 10 years for owner-occupier of new homes.
This successful scheme has the potential to support substantial numbers of new first-time buyers who cannot source housing loans from private funding institutions. Government should commit to providing further funding to enable a continuation of this much-needed scheme and confirm an extension of the scheme. Offset the contributions charged for new developments where a new home is purchased by an owner-occupier. Section 48 Contribution Relief for certain categories of buyers and imposing super levies S49 on new homes – the cost of public infrastructure needs to be socialised.

Review levies nationally as huge costs to new homes. Currently, 37 per cent of the price of a new home goes directly or indirectly to the state in the form of VAT, taxes, contributions and levies.

Removing barriers to the supply of homes

Before Covid-19 the construction industry was on an upward trajectory with substantial investment planned. IHBA members continue to report strong demand, however, because activity has been delayed by the pandemic and planning blockages, this delay could result in projects that were previously marginally viable prior to the pandemic, now being rendered unviable.

Forecasts from the ESRI predict residential completions for 2021 to be around 15,000 units while the BPFI are more optimistic with a projection of 21,000 for 2021. Either is substantially lower than the required 36,000 units needed annually.
Already hampered supply has contributed to increased house prices by 7.6 per cent nationally in Q1 2021 compared to Q1 2020.
The number of residential units submitted for planning in Q1, 2021 is down 29 per cent compared to the same period in 2020. (*Deloitte Planning Q1 2021).

This reduction is a knock-on from the delay in current completions and underlines the financing and viability challenges facing the residential sector. It also illustrates how dependent builders are on completions to fund other developments.
IHBA members are reporting a concentration of efforts on delivery and predict somewhere in the region of 16,000-18,000 completions this year and potentially to deliver approximately 30,000 homes by 2024.
But, the continued concern is that this number is not going to be enough to meet demand as we have seen delivery falling short over the last number of years, even before the pandemic – almost 80,000 in the last five years.

Meeting future housing needs

It is well-documented that Ireland’s population is continuing to grow coupled with the average household size falling. Ireland has some 1.75m residential units, with an additional one million more required to 2050.

The planning report ‘Planning Reform Necessary to Expedite the Delivery of Housing’ prepared for the Irish Home Builders Association by Tom Phillips + Associates provides a high-level review and series of short to medium-term recommendations for some of the key elements of planning amendment required to expedite the delivery of residential development.

The report is provided against the backdrop of the debate concerning the root causes of delays in the delivery of housing. There are encouraging signs of redressing this challenge – such as the recent invitation to industry and stakeholders to form part of the wider Strategic Housing Development Review. It is such consultation and collaboration that will ultimately improve delivery.

IHBA members are seeing concerning slowdown in planning permissions. The number of planning applications submitted during the period Q1 2021 in terms of units is down 29 per cent. While some of this significant decline is likely a direct implication from the restrictions imposed over the first quarter of 2021, additionally the uncertainty and cost of planning mean many members taking the undesired decision to hold back applications. Granted schemes are down 26 per cent and commencement notices lodged are down 44 per cent.

Well-documented broader factors impacting the planning system particularly the ongoing issues with the Strategic Housing Development (SHD) system and the substantial rise in the number of Judicial Reviews has resulted in many schemes being substantially delayed or quashed entirely in the courts. An Bord Pleanála has stated that some 29,000 apartments, 11,000 houses (approximately 4,000 social houses) and a further 10,100 student bed spaces have been permitted under Strategic Housing Development (SHD) provisions. However, the delivery of planning permissions through the SHD process has been severely curtailed in recent times with an explosion in the number of SHD planning approvals being quashed or stalled through Judicial Review.

There has been a tenfold increase in the number of residential units in SHDs in Dublin quashed or held up due to judicial reviews (508 affected by judicial reviews in 2019, 5,802 in 2020). On top of the delay caused by actions, most Judicial Reviews resulted in the permission being quashed.

The applicant must then start the SHD process again, with the likelihood that objectors and community groups are waiting
in the wings to launch another Judicial Review of any new decision. This slowdown in residential planning permissions will inevitably have an impact on housing supply.

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