Agreement between the Coalition parties on an average housing target of 50,500 homes per year to 2030, with annual numbers rising in steps from 41,000 in 2025 to 60,000 in 2030, appears to promise greater certainty and stability for housing policy. This may be extended to 2040, if, as reported, the revised National Planning Framework provides for an average target of 54,000 to 2040.
These targets follow fairly similar expert projections of housing need to 2040 or 2050 from the Central Bank of Ireland, the ESRI and the Housing Commission, all published in the past six months. The subliminal message conveyed by year-specific targets to 2030, and average ones for the 2030s and 2040s, is that if we actually build at that rate, the housing supply problem will be largely resolved.
This interpretation may play well with the electorate but is not realistic. The one certainty in a highly uncertain situation is that demand – as measured by household formation rates – is not going to rise in a smooth curve to a stable medium-term plateau. In four intercensal periods from 1979 on, household growth was on average 83 per cent higher than in the immediately preceding one, and in the other five, 32 per cent below it. Employment growth and migration in Ireland remain highly cyclical, and household formation rates continue to follow suit.
Ideally, growth in households should be 85-90 per cent of growth in the housing stock, with the difference between them allowing for various forms of vacancy, and second homes. The statistics show that this is rarely the case in Ireland.
It has happened once a decade or so, in the early 1980s, 1990s, 2000s, and 2010s. At each of these points, demand was being overtaken by supply, or supply by demand, and once this happened, they stayed overtaken for a decade or so.
These mismatches caused successive crises of under- and oversupply in Ireland, including the current one. In the 1970s and early 1980s, when government policy had some success in stabilising output rates, this led to massive oversupply, leaving the public housing system a sitting duck for government cutbacks from which it never really recovered. In the 1990s, undersupply led to house prices becoming a far higher multiple of incomes; in the 2000s, oversupply bankrupted the builders, the banks and the State; after 2011, an initially very modest recovery in demand was undersupplied, and boosted prices and rents instead.
Another turning point is likely to become evident in some future census. In so far as the suppressed household formation highlighted by the Housing Commission report becomes actual, this will lead to a longer than normal interval between turning points, so the next one is more likely to occur in the 2030s than in 2027. If a target-based approach seems to be working when it occurs, we are likely to ignore it. Past experience suggests this may be disastrous.
We may do better if we focus more on key under- or oversupplied market segments, and less on overall numbers. In the 2002-2006 period, for example, there was a large overall increase in demand, and government policy correctly sought a large increase in supply. But it focused more on overall supply than on specific market segments, such as the “buy to hold” one. Houses were bought by investors and held vacant, the Bacon report controls which discouraged this had been dismantled, banks were eager to finance it, and overall oversupply resulted.
If the government had discouraged buying houses other than for occupation by the purchasers or their tenants effectively, unsold houses would have prevented output getting too far out of line with household growth, and slowed price rises.
A focus on overall numbers has led to a blind spot, in relation to small low-cost units for first-time buyers. The house types being provided by the private sector are medium- to high-cost ones – apartments, semis, large detached or terrace houses – but not many small terrace houses. This is partly because density policies favour apartments, which are much more expensive than terrace houses with the same floorspace. Also, builders prefer semis to terrace houses, as they are more reliable sellers and provide better profit margins.
The extra units that could be built for one- or two-person households who could afford a terrace house, but not an apartment or a semi, are not built, while unimplemented permissions for apartments accumulate. Targets for small terrace houses might be at least as useful as those for overall output.
Nicholas Mansergh was a senior planner with Cork County Council until his retirement in 2015 and lectures on planning at UCC. He is the author of The Irish Construction Cycle 1970-2023 – policies and escape routes, published in April by Eastwood Books.
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