Tuesday 25 October 2016

Why developers will not build apartments

Builders claim 'no profits' because of councils' new guidelines

Published 01/11/2015 | 02:30

CRISIS: Housing Minister Paudie Coffey
CRISIS: Housing Minister Paudie Coffey

New rules that force builders to construct mandatory balconies, bigger rooms and windows on both sides of new apartments built since 2008 add an average of €1.9m to the cost of a 100-bed units in the greater Dublin region, and the extra cost is a major "tipping point" for the shortage of new apartments.

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Local authorities impose their own guidelines of new apartments in their areas - on top of the standard Department of Environment residential standards. But a new cost analysis by the building industry shows that in and around the capital, tough council guidelines have made apartment construction unviable in many cases.

Ironically, the building standards rules, which demand extras like higher ceilings and "dual aspect windows", came in 2008 - the same year that the economy and construction industry collapsed.

Despite seven years of recession, the mandatory guidelines are still in place and are stopping builders developing apartments, simply because they can see no profit.

Environment Minister Alan Kelly and Housing Minister Paudie Coffey appealed to the four Dublin local authorities in June to rethink the need for "unreasonable or excessive requirements in relation to the standard of housing or ancillary services", noting that the "viability of new development and therefore supply" would otherwise be "placed at risk".

The ministers' joint letter to the chief executives of Dublin City, Dun Laoghaire-Rathdown, South Dublin and Fingal county councils urged them to make "viability and early delivery" of housing the "top priority" in their development plans, which are currently up for renewal or will be renewed in 2016, 2017 and beyond.

But Dun Laoghaire-Rathdown councillors flatly rejected their request by voting a fortnight ago in favour of a requirement that all new homes and businesses be built to what is known as "passive house standards" starting next year.

The standards require high levels of insulation and other costly energy-saving initiatives, which both Nama and the Construction Industry Federation (CIF) claim would add additional cost and complexity and further slow the snail's pace of residential construction.

Dun Laoghaire-Rathdown County Council (DLRCC) refused to comment on the ministers' request, as did Fingal County Council.

However, the cost analysis of the residential guidelines by quantity surveyor Paul Mitchell of Mitchell McDermott construction consultants, that was also published in June, reveals that compliance with the new guidelines - including an increase in minimum overall floor space and floor-to-ceiling space, dual aspect windows and balconies on a sample 100 one-bed complex - would cost builders in DLRCC 14pc more, or €2.54m, compared to €18.5m to comply with Department of Environment (DOE) standards only.

Compliance with guidelines imposed by Dublin City Council would cost 20pc more, or €3.62m, compared to DOE standards, while builders in north county Dublin would pay 4pc more, or €800,000, to comply with Fingal County Council's new standards. Builders in South County Dublin County Council would pay 3pc more, or €500,000, to comply with its new standards.

Mr Mitchell claims that the onerous conditions are a luxury that neither builders nor desperate home hunters can afford in the current climate.

"No one can say that it's not better to have a bigger apartment, but it's a question of viability," he told the Sunday Independent. "If all of that brings it to a cost issue, then we have a problem.

"It just tips the scales in terms of viability," he said.

For example, the requirement for a dual aspect apartment, in which there are windows on both sides of a unit, means you can only have two apartments instead of four on each floor, so you have to build twice the number of lifts, he said.

This not only adds to the builders' costs, but to the overall cost for apartment owners and managers in maintenance fees.

Sunday Independent

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