Family home for couple on 'average' income of €92,000 now out of reach
Affordable family homes cannot be delivered for couples earning a combined income of almost €92,000 a year, the Government has admitted.
Land hoarding, a refusal by bailed-out banks to lend for housing and a shortage of construction skills mean delivery of houses and apartments at prices between €240,000 and €320,000 is not viable in many areas of high demand, the Department of Housing says.
A series of reports published today state that while residential building costs are broadly similar to those in the UK, France and Germany, new policies are needed to drive down the cost of starter homes.
It says the "scarcity" of affordable homes is of "significant concern" and that land hoarding is an impediment to delivering units.
"Market reports and industry forecasts of significant growth in residential land values, particularly in Dublin and Leinster... potentially signals land becoming more of an investment commodity," the Review of Delivery Costs and Viability for Affordable Residential Developments report says.
It adds that this is "creating a significant issue" for the delivery of affordable homes.
"More targeted interventions are required to achieve housing delivery that is affordable from a purchase or rental perspective to the average household," it says.
The review analysed the main costs of new home delivery including land, construction, professional fees, levies, builders' profit, VAT and financing costs. It then looked at issues with delivering a home costing up to €320,000 which a couple earning a combined 'average' income of almost €92,000 could afford, based on Central Bank lending rules.
It found that building urban apartment schemes at affordable prices was "extremely challenging", and that providing more one or two-bed units would help address this "viability challenge". Suburban developments were "marginally viable", it added.
Among the key issues was land prices. Where high costs are paid, developers expect to achieve high house prices.
If these are not readily available, development is postponed which results in land becoming a "long-term investment", a scenario which has "gained momentum in recent years".
It finds that while the availability of finance is improving, access to and the cost of funding is a "significant challenge".
It says the main pillar banks favour "bankable" builders which limits the number of housing providers with the ability to deliver at scale, and that a builders' margin or profit of at least 10pc to 12.5pc is required to secure a loan.
There is "limited appetite" to fund sites without planning permission, and banks tend to only lend in Dublin, Cork and Galway, with limited lending outside these markets.
While alternative funding is available, it is generally more expensive, which adds to costs.
Housing Minister Eoghan Murphy said reducing a limit on building height and removing the need to provide car parking in urban areas well-served by public transport would reduce construction costs by up to 15pc.
Among the measures proposed to reduce costs include pre-fabricating more components off-site, reducing development levies on infill urban sites where infrastructure is already provided, speeding up aspects of the planning system and utilising State-owned lands, of which 700 sites totalling 1,700 hectares have been identified and are available.
Schemes of six storeys are "optimum" in relation to delivering affordable units, because more onerous and expensive fire safety and structural costs do not arise, the report adds.