Tuesday 20 August 2019

State involved in over half of new residential builds

Building sector output being distorted by Nama, councils and housing bodies, writes Michael Cogley

Ireland's construction output is being substantially inflated by State intervention, a report has disclosed. Stock Image: Bloomberg
Ireland's construction output is being substantially inflated by State intervention, a report has disclosed. Stock Image: Bloomberg

Ireland's construction output is being substantially inflated by State intervention with more than half of all new estate and scheme homes built last year subvented by the Government in some way, new analysis has found.

Over the course of 2018, 18,072 new homes were built, of which 4,699 were one-off homes built by private parties. The remaining 13,373 homes were on estates or schemes.

According to research by Dublin-based architect and housing commentator Mel Reynolds, 4,594 homes were either bought or built by local authorities and approved housing bodies. In addition, the construction of a further 2,500 homes were funded by the National Asset Management Agency (Nama).

In his presentation to the Oireachtas housing committee last week, Reynolds said more than half of all new homes built last year had been subvented by the State.

"In 2018, Nama funded the construction of 2,500 new homes, 40pc of which have been sold for more than €400,000 or what is described as 'severely unaffordable'," Reynolds said.

"Similarly, local authorities and approved housing bodies are buying up thousands of new homes from the private sector. The average price paid by local authorities for turnkey dwelling was €235,411. The State is competing with ordinary buyers in the affordable housing market while simultaneously using State funds to build severely unaffordable schemes."

Reynolds's research found that more than 90pc of additional social housing was sourced from the private sector through means such as Part V, which obliges developers to sell some of their sites to local councils.

As well as the State's capital spend, another 18,000 housing assistance payment (HAP) leases were created in 2018. Under HAP, local authorities pay private landlords while tenants make a rental contribution to their council. The Government's target is to reach 87,560 by 2021.

"The Department of Finance estimates that if these targets are reached, spending on rent assistance will increase from €1.1bn in 2019 to €1.7bn per annum by 2022. The price of the new children's hospital will be paid by the State to private landlords every year," Reynolds said.

A spokesman for the Department of Housing said that local authorities and approved housing bodies were tasked with "securing the maximum amount of social housing, and a price that represents value for money and within a timeline that works".

"Acquisitions are critical to the delivery of new social housing stock," he said.

"In some areas, acquisitions are both faster and cheaper to deliver. Local authorities and approved housing bodies are mindful of local markets and ensuring value for money when purchasing in this way. Market conditions in many cases mean that acquisitions or turnkey arrangements are highly appropriate in terms of delivery timescale and cost."

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