How do we provide affordable apartments for first-time buyers?

Croí Cónaithe shows public and private sector can work together to bridge apartment viability gap

Apartments under construction in Palmerstown, Dublin. Many developments are being sold to investors for rental. Photograph: Alan Betson

The financial viability of apartment construction is at the heart of our current housing crisis. That was the overwhelming message from the Urban Land Institute’s recent annual conference, where one of the starkest statistics presented was that there were just 315 apartments built in our regional cities of Cork, Galway, Limerick and Waterford in 2021. In a country where regionalisation and densification of housing are the core policy priorities of our National Planning Framework you could hardly get clearer evidence that things aren’t working.

One of the conference presentations was given by the ULI’s Young Leaders Group, who told delegates that Ireland isn’t in the midst of a housing crisis, but a housing emergency. Bear in mind that this was the conclusion of a group of young and reasonably well-off property professionals and it gives you some sense of the scale of the challenge the country faces.

Their concerns sounded radical, but their conclusions as to the solution were pragmatic: bridge the financial viability gap.

City centre apartments are expensive and complex to build, with a medium-rise two-bed costing about €400,000 to €450,000, according to the Society of Chartered Surveyors Ireland. The maximum that can be afforded by potential buyers is about €300,000 to €350,000 when Central Bank rules are factored in. So somewhere we need to find €100,000 to €150,000 of support to assist the buyer, otherwise the inevitable purchaser of any city centre apartment developments will be PRS investors offering them for rent at monthly levels that are typically higher than what it might cost an owner-occupier to service the (unobtainable) mortgage required to buy them at full price.


So how could this €100,000 bridge be built? One option would be for the Central Bank’s lending rules on mortgages to be eased to allow buyers to afford higher prices. Notwithstanding the obvious concerns about what loose mortgage lending did to our economy in the not-too-distant past, it’s also quite clear the Central Bank isn’t minded to be swayed on this point.

A second option would be to lower the cost of construction. This could be achieved by reducing VAT on construction inputs and development levies. It’s an idea that is certainly worth considering given that 35 per cent of the cost of all new homes goes to the exchequer. But for some there are concerns about whether cost reductions would be passed through in full to buyers, and thus far this approach has proved politically unpalatable.

A third option is some form of subsidy that directly reduces the cost to the buyer. Now I fully realise subsidy is a dirty word when it comes to property development, but any evidence-based review of the situation indicates that this would provide the most streamlined help to those the policy is aimed at — namely struggling first-time buyers. That’s why the Government’s Croí Cónaithe is worthy of support, as an important policy recognition that the viability gap is real and needs a solution.

Croí Cónaithe was set up to facilitate access for owner-occupiers to schemes which otherwise would not get built or would be sold in bulk to PRS investors. Critics of the scheme have been many and varied, even from people within the developer community who think the scheme is too complicated to access. Some critics will never support a pragmatic solution that addresses the financial realities, whilst to those who criticise its complexity, I say let’s not let the perfect be the enemy of the good. With apartment construction in regional cities virtually stalled, and in Dublin largely focused on PRS schemes, Croí Cónaithe is surely an important step in the right direction.

Another insightful contribution to the conference was a review of the National Planning Framework (NPF) by Henk van der Kamp, a former president of the Irish Planning Institute. The research — based on the views of leaders across industry sectors — found that they expect Ireland to fail to achieve the core NPF goals of balanced and compact regional growth that avoids urban sprawl. High on the list of recommended policy issues was recognition of the viability issue and that we need incentives to support apartment building as envisaged in Croí Cónaithe.

But it’s not just about viability. We also need to dramatically improve the experience of city living to help overcome some of the negative perceptions that exist. High levels of investment in infrastructure are required in order to deliver the kind of amenities and transport networks that are the norm in the Continental European cities that we often aspire to match.

A ULI Young Leaders survey of their peers found that a three-bedroom house in the suburbs remained the most favoured option. But there are more positive signs that attitudes to housing typologies are shifting, with more than half the respondents saying that they would consider a city centre apartment or duplex option if obtainable at a similar price to a suburban house. Our vision of what is a home is slowly evolving but will only work with schemes like Croí Cónaithe that can help make city centre living affordable for aspiring owner-occupiers.

The challenges of the housing crisis will only be overcome if all stakeholders, public and private sector, work together to meet the housing needs of all. Croí Cónaithe won’t solve everything, but it’s a welcome step in the right direction.

Kevin Nowlan is chairman of the Urban Land Institute in Ireland and senior adviser at Hibernia Reit