Local authorities can deliver housing at more affordable rates

Local authorities can deliver housing at significantly cheaper rates than the private sector, according to the Department of Housing’s own figures.

When developed directly by the local council, the figures show the average construction cost of a two-bed apartment last year was €230,300, while the average cost of a three-bed house was €214,076.

The figures include VAT and what the department refers to as “abnormals”, such as costs associated with preparing difficult sites for construction.

The figures roughly mirror the cost of construction in the private sector. The Society of Chartered Surveyors Ireland (SCSI) recently put the cost of constructing a two-bed apartment in a medium-rise development in Dublin at €219,000-€262,000.

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However, local authorities do not have to fork out as much for the so-called “soft costs” of development such as land, finance and the developer’s margin, which typically account for more than 50 per cent of the all-in delivery costs in the private sector.

In many cases, councils are developing on their own land and they are also not required to make a profit. Hence the all-in cost is significantly cheaper.

The figures were provided by Minister for Housing Darragh O'Brien in response to a parliamentary question from Sinn Féin's Eoin Ó Broin and refer to the cost of new social housing units delivered through the Government's Social Housing Investment Programme (SHIP).

Under the scheme, the local authority essentially acts as the developer, getting its own planning permission and overseeing its own development with a private building contractor.

Housing types

The figures show the average construction costs involved in delivering a range of different housing types, from one-bed and two-bed apartments to three and four-bed houses, across all 31 local authority areas.

Even within the same housing type, there was a wide variance in costs.

So while the average cost of a three-bed house in 2019 was €226,455, these units ranged in cost from €131,000 in some areas to €346,000 in others.

“The range of costs recorded vary, depending on design, location and on the level of abnormal requirements for each scheme, for instance existing site conditions, demolitions, service diversions and site access requirements,” Mr O’Brien said.

The figures also show that the cost of construction across several housing types actually fell between 2019 and 2020.

In 2019, the cost of a typical two-bed apartment was €290,902, while a three-bed house cost €226,455. This fell to €230,300 and €214,076 the following year.

“The figures show that the public sector, with soft and hard costs, can deliver homes at prices way below what the SCSI indicated for the private sector,” Mr Ó Broin said.

“This is because the soft costs are different; it’s not that the public sector is more efficient, they just don’t have the soft costs that the private sector does.

"So therefore the public sector is better placed, working with private contractors, to deliver homes to rent or buy at more amenable prices. Obviously this might change when Dublin City Council or other authorities run out of land, but we're not there yet," he said.