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State warned it must intervene to help developers hit targets


(stock photo)

(stock photo)

(stock photo)

Ireland needs 47,000 new homes a year, close to double the Government's current target for construction, according to a new report from economist Ronan Lyons, commissioned for a property industry body.

It said State intervention is needed to underwrite developers to hit that level of activity.

The Government's construction target is to deliver around 25,000 new homes a year but even that level has not been met since the global financial crisis.

Mr Lyons said his higher figure for anticipated housing demand is based on factors including population growth and immigration, but also a longer-term trend towards smaller households that will mean demand for more but smaller homes to cater for couples and single people, he said.

The mix of housing is too heavily skewed to the traditional three-bedroom house when demand is shifting to smaller and more densely sited apartments.

However, the gap between the cost of delivering new homes - in particular the €460,000 price his report puts on the cost of delivering an apartment in Dublin - means many of the homes needed will be unaffordable for buyers relying on mortgage that meet Central Bank lending rules.

Without a market developers will not build, he said. The report was commission by property industry body Irish Institutional Property (IIP), whose members include building firms and institutional landlords - so-called cuckoo funds.

It said a mix of tenure types including owner occupier, private rented and social housing are all needed.

But they warn the €460,000 cost to deliver apartments includes around €225,000 of so-called hard costs with the rest made up of land, Vat, professional fees and financing costs.

That has put housing in Dublin beyond the reach of a couple or individual with a household income below €90,000, according to Michael Stanley, the CEO of housebuilder Cairn Homes which is a member of IIP.

His firm cannot build for the market of around 500,000 people who are aspiring house buyers with incomes of €40,000 to €60,000 at a viable price, he said.

While costs may be brought down it will not happen quickly, Mr Lyons said.

He said Government should consider a shared equity scheme for home-buyers that would see the State own a share of an apartment or house alongside the owner occupier.

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The Government share could be bought out later or paid for when the home is sold, he said.

Taking a stake in houses would be better value for taxpayers than the current Help-to-Buy scheme which gifts a deposit to buyers for no return, he said.

Shared ownership could also involve housing associations taking a stake in homes alongside the owner occupier who would rent the portion they don't own.

In social housing, the report backs cost-rental schemes for households with low incomes.

Cost-rental is where rents charged cover the cost of delivering and maintaining a home. Under cost-rental schemes, the rent is made up of what an occupier can afford with Government making up any shortfall.

Mr Lyons said the mix of new housing supply in recent years has been inadequate.

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