Builders acted on just 40% of planning permissions granted for new homes

Construction Industry Federation conference hears that building costs are threatening viability of projects

Builders began work on just four out of 10 new homes for which Dublin councils gave planning permission as soaring costs threatened projects’ viability, construction industry figures heard on Thursday.

Planning expert John Downey told this year’s Construction Industry Federation (CIF) conference that the number of planning permissions given by councils in the capital was up to what the city needed.

“Between 2017 and 2021, there were 64,000 grants of planning permission in Dublin, of which only 26,000 were activated,” he said. “So the activation rate was only 41 per cent.”

Mr Downey, director of well-known firm Downey Planning, said building costs were the key problem facing developers who had received planning permission for projects.

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He pointed out that this forced companies to sell apartments at €550,000. “That is not a first-time buyer’s price unless there is huge subvention in the market,” Mr Downey added.

Michael Kelleher, operations director with builders O’Flynn Group, warned that the surge in construction materials’ prices since last year had further squeezed new residential projects’ viability.

He noted that the prices of key products such as timber and steel rose 60 per cent since then. “That’s not going to come off very soon,” Mr Kelleher said. “We’re seeing some stabilisation, but at very high levels.”

The construction company executive said that the problem, allied to the already high cost of land, meant residential builders were operating on very tight margins.

A shake-up of Irish planning laws is due before the Government in weeks, according to Michael McGrath, the Minister for Public Expenditure and Reform.

The Minister told the conference that the Republic was one of the few European countries that allowed third-party legal challenges to planning decisions.

Recently the Government asked the Attorney General, Paul Gallagher, to simplify the Republic’s planning laws. “He will have the consolidated planning Bill completed and brought before Government in the next number of weeks,” said the Minister.

Mr McGrath also explained that the proposed 10 per cent levy on defective concrete was meant to contribute to mica and apartment redress schemes, which will total about €5 billion.

The Minister said the Government was keeping public building contracts under review and pledged that, in the meantime, the State would continue to operate the “70/30″ burden-sharing system agreed upon for tenders agreed before inflation hit construction.

Under that system, the State takes on 70 per cent of the cost added by inflation of key materials and energy, while the contractor shoulders 30 per cent.

The CIF has long warned that the public contract system, which favours the lowest price, was deterring companies from working for the State, as it means that contractors take on virtually all of the risk.

Simon Harris, the Minister for Further and Higher Education, confirmed that €30 million extra earmarked in the budget for apprenticeships would fund the 4,500 extra places for students seeking careers as craftspeople.

“It will also include a new bursary for people from disadvantaged areas to access apprenticeships and will expand an access apprenticeship programme also,” Mr Harris added.

A shortage of skilled and qualified people threatens the National Development Plan, according to Gus McCarthy, director of MKO Planning and Environmental Consultants.

“We do have a serious shortage at the moment of qualified people,” he said. Mr McCarthy added that the Republic was importing skills from elsewhere, but noted that this was difficult where workers were from outside the EU.

He warned that the Republic risked repeating mistakes made during a building boom earlier this century, where the education system only began meeting demand for qualified and skilled when it had effectively ended.

Barry O'Halloran

Barry O'Halloran

Barry O’Halloran covers energy, construction, insolvency, and gaming and betting, among other areas