The Republic will not be able to hit increasingly ambitious housing targets without support from international investment and pension funds, according to construction cost specialists Mitchell McDermott.
In its annual review of costs in the sector, the consultancy notes the increasingly important role of Government supports for the housing sector, initially through purchasing and now advance funding thousands of units.
“Last year, we saw lots of projects stall as private foreign investment exited the market,” said Paul Mitchell, one of the authors of the report. “We estimate that between 10,000 to 15,000 units would not have gone ahead if they had not been taken on by the Land Development Agency, local authorities and various approved housing bodies.”
[ We won’t fix the housing shortage without solving the skills shortageOpens in new window ]
[ Government faces struggle to hit housing target, say expertsOpens in new window ]
However, he warned that this level of support was not sustainable in the long term.
Are you entitled to go on maternity leave a second time straight after your first ends?
I’m an expert in headlines that start with ‘I’m an expert’. Here’s why they’re everywhere
How many new homes are needed to meet demand: 33,000 or 85,000 a year?
Chambers turns a blind eye to fibbing over local property tax
Total Government budget for capital expenditure on housing this year is about €5 billion, he noted, with some plans such as the Croí Cónaithe towns scheme, which funds the bringing back into use of vacant buildings, only getting a funding allocation of €50 million this year.
“If we assume that the total development cost of building around 32,000 units last year was in the region of €12.5 billion, it’s clear a plan will need to be put in place for the next two to three years to plug the finance gap left by the international funds which have departed,” Mr Mitchell said.
He argues that without the support of foreign investment funds and pension funds, Ireland will not be able to finance the estimated 50,000 housing units most commentators agree need to be built every year to service the State’s growing population.
Mitchell McDermott believes it will take until the end of the decade before Ireland reaches that 50,000 target anyway. Alongside planning logjams and the plugging of the finance gap, Mr Mitchell says there is a need to address is the lack of capacity in the market.
[ Varadkar hails ‘positive momentum’ as home-building hits 15-year high of 33,000Opens in new window ]
“There are currently 168,000 people working in construction. To go from 30,000 residential units to 50,000 annually, we will need 50,000 more workers,” he said. “We need to train more people – including young migrants coming into the country and we need to incentivise those with the required skills who are working abroad to return home.
“Housing them will be an issue and will require imaginative solutions such as an Airbnb for Builders, construction hubs, the wider promotion of the rent-a-room scheme and perhaps even dedicated construction-worker hotels or hostels. But until we make a start, the problem is only going to get worse.
“We believe increasing the number of construction workers by 5,000 annually is a realistic target” Mr Mitchell concluded.
- Sign up for Business push alerts and have the best news, analysis and comment delivered directly to your phone
- Find The Irish Times on WhatsApp and stay up to date
- Our Inside Business podcast is published weekly – Find the latest episode here