The price to be paid for construction failure – not increasing the supply of houses to meet future demand – will be a national housing shortage, and a potential housing crisis. That is the stark warning from John FitzGerald of the Economic and Social Research Institute (ESRI). Unless national housing supply is greatly increased – trebled in his view to 25,000 houses annually – then, as he suggests, young people could be living with parents until they are 35. A prospect neither parents nor offspring would welcome.
At the peak of the boom in 2006 almost 100,000 houses were built annually. But last year fewer than 10,000 homes were completed. However, as recovery gathers pace the need for new housing has greatly increased, just as the surplus stock of vacant dwellings, the residue from the boom period, declines.
As Dublin outpaces the country's other regions in leading the economic recovery, the housing supply problem in the capital has become acute. Over the last three years a mere 2,000 new dwellings were started in the city. On some estimates Dublin requires that number of new homes every four months, not every three years. Prof FitzGerald has repeatedly highlighted the need to address the housing shortage by boosting supply. And while his views have been broadly endorsed by Minister for Transport, Leo Varadkar, they have yet to be reflected in significant action from Government beyond the token offering of a reduced VAT rate for homeowners who carry out €5,000 worth of renovations.
The headline economic benefits of greater investment in housing are clear: recovery in the labour-intensive construction industry would reduce unemployment, and help those out of work – particularly those with limited skills and only basic educational qualifications – to regain employment. Savings would also be made on welfare payments as unemployment falls, with tax revenues boosted by higher income tax, stamp duty and VAT receipts.
But clearly, given tight fiscal constraints the Government cannot – and should not – provide a major stimulus to the construction sector. That would be to repeat past mistakes, and to risk similar adverse economic consequences.
Nevertheless, the case for a Government initiative on housing – private and public – is well established. Social housing is one area, where the supply shortage is most apparent. Some 90,000 households are on local authority waiting lists, and last year (in the nine months to September) just 253 social housing units were built – compared with 5,000 in 2007. And as Mr Varadkar has pointed out, a continued shortage of supply in the private housing market could, given rising demand, produce another price bubble. The Government needs to face up to the challenge that the depressed private and public housing market now presents.
