Business

Time to move from promise to delivery on housing and infrastructure

Opinion: Government strategies changing little on the front line of delivery

Tom Parlon: as we enter 2022, systemic inertia, not the pandemic, is now the greatest challenge to the delivery of housing, infrastructure, and climate change measures. Photograph: Bryan O’Brien

Tom Parlon
Mon Jan 3 2022 - 05:40

Not many people will look back fondly on 2021. In construction, there is some small hope that the year just gone will be the start of a "decade of delivery" where our industry delivers on Ireland's housing, infrastructure and climate change needs.

Three Government strategies – Housing for All, the National Development Plan and the National Retrofit Scheme – involving hundreds of billions of euro set out at least a generation's worth of work for our industry and could end the volatile boom and bust cycle that has beset the industry in the past.

The Government has moved mountains at national level to put these strategies in place. But, as Albert Reynolds said, "it's the little things . . ." that will ultimately prove telling. If the Government cannot make the relatively small changes to the system at local, state agency and utilities level, their housing, infrastructure and climate change strategies will falter.

The message from construction companies, at the front line of the delivery of these strategies, is that this isn’t happening.

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Throughout this pandemic, the construction industry has proven itself hugely adaptable. Tens of thousands of workers and hundreds of companies adopted new procedures to keep sites open safely for the pandemic’s duration.

The Taoiseach has recently acknowledged that shutting down the industry was one of his biggest regrets during his tenure because it reduced housing supply. That this shutdown delivered minimal pay-off in terms of preventing Covid due to measures taken on sites makes it doubly regretful.

It’s heartening to hear Minister Darragh O’Brien vow that the construction industry will not be shut down even if further restrictions are required; each week of shutdown took about 800 houses off 2021’s output.

What was remarkable about 2021 was how quickly our industry made up lost ground so that housing output will probably hit around 21,000. Euroconstruct, an EU consultancy, estimates that output in 2021 is 2.7 per cent up on 2020 in volume terms.

As we enter 2022, systemic inertia, not the pandemic, is now the greatest challenge to the delivery of housing, infrastructure, and climate change measures.

In 2021, the Government launched the Housing for All, National Development Plan and National Retrofit Strategies. All are significant for the future of Irish society and its economy and indeed every citizen. Relevant Ministers correctly identified the capacity of the construction industry as a critical success factor as they launched these ambitious strategies.

Biggest challenges

Despite this, labour and input costs are regularly cited as the biggest challenges facing the delivery of housing and infrastructure in Ireland.

On labour, the Irish Fiscal Advisory Committee has estimated that the construction industry would need to increase employee numbers in the sector to 180,000 to deliver the required housing and national retrofit programme.

The Expert Group on Future Skills Group estimates the industry would need to recruit an additional 11,000 people per annum out to 2030 to deliver on Government commitments in housing and infrastructure. Recruiting labour will be easier with the certainty these strategies provide over the next decade.

The other challenge facing the industry last year was rapidly increasing input costs and, in some cases, significant shortages.

Cost increases have the potential to erode the significant investments committed to by Government up to 2030. These increases are expected to continue strongly throughout 2022 and already the Minister for Public Expenditure and Reform has instructed Departments to prioritise infrastructure projects – meaning some “less important” projects will be shelved indefinitely.

To offset cost increases, the industry continues its journey towards digitalisation with significant steps being taken to improve productivity. The Government has recently announced the establishment of its first (and long overdue) construction technology centre with a view to increasing innovation in the industry.

In our view, these problems of labour and costs are surmountable as the activity increases over the coming decade. However, our view from the frontline of delivery is that the delays and costs generated by inefficiencies are a greater threat to solving housing and building large scale projects.

Irish homebuilders can build a home in approximately 16 weeks on larger sites. In the past year, this timeframe has drifted out past 22 weeks due to inefficiencies in how the state utilities engage with the sector.

Irish Water’s new operating protocols means homebuilders must cover €5,000 per planned home before they even begin construction.

The need for finance to rebuild Ireland’s crumbling water infrastructure is evident every year and housing connections are a valid source of revenue. However, frontloading this charge on the homebuilder adds huge finance costs and, in some cases, renders business cases unviable for projects on the margins. The impact means fewer homes over the medium term.

Same delays

Generally, while central Government and the political system are cognizant of the urgent need for housing and infrastructure, their agencies, utilities, and local government counterparts do not share that sense of urgency. Construction companies are reporting the same delays and frustrations that were manifest before the launch of Housing for All, the National Development Plan and the Climate Strategy continue.

Nowhere is this more evident than in the planning system. There are several reviews underway into the planning system including a critical one on judicial reviews. This has the potential to protect individual rights whilst allowing a sustainable level of essential construction for the public good to progress.

Procurement is another system that has long been inadequate and antiquated. In the face of the opportunity that Covid provides, it should now be reformed.

In 2004, Charlie McCreevy introduced the fixed price/lump sum contract, meaning that all risk and costs would be placed on the contractors in public sector projects. This combined with a legal requirement to select the lowest price tender are at the core of issues with public sector projects.

Covid has necessitated huge changes and forced all of us to work in new ways. Unfortunately, deeper changes are required across the State apparatus to streamline the delivery of housing and infrastructure.

Unless this happens promptly, strategies such as Housing for All and the National Retrofit Scheme will simply gather dust on shelves in the offices of future ministers still struggling to fix housing and address climate change.

Tom Parlon is director general of the Construction Industry Federation

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