In the postwar years, a rapidly urbanising Soviet Union embarked on a mass construction programme. It built standardised, mass-produced, cheap, drab blocks of apartments intended as temporary for 20-25 years. Typically floor areas were just 30-40sq m (equivalent to three standard parking spaces). Led by Nikita Khrushchev, they became known as Khrushchyovkas.
This week, Minister for Housing James Browne issued new apartment standards that resurrect the old Khrushchyovkas as the urban housing ambition for 21st century Ireland. It is now possible to build entire blocks of 32sq m studio bedsits with no limit on the number of residents sharing a corridor or lift. Up to half of these homes may have no private amenity space. On urban sites, communal outdoor space is negotiable, and on larger schemes developers can design out playgrounds and childcare facilities. Local authorities may no longer require space to be set aside for laundry, clothes-drying, gyms, community or cultural use.
There is no transparency about where these standards originated, and they came into force immediately without public consultation, pre-legislative scrutiny or a regulatory impact assessment. Almost a Trumpian executive order, the suddenness and absence of transition arrangements have brought uncertainty into the entire sector, risking delays, additional costs and, inevitably, legal action. It seems in direct defiance of the Department of Finance’s recent warning that “in order to attract private capital, policy certainty is key”.
This uncertainty is more likely to shake confidence than to “get apartment building moving”. A new Planning Bill – as yet unseen – is to be rushed through, putting in doubt current planning applications, local authority development plans, statutory housing needs and demand assessments, and indeed forecasts for infrastructure capacity.
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So are these changes justified? The Minister claims savings of a “an average of €50k and up to €100k cost reduction per unit”, although no calculations are provided. His own department’s most recent figures for urban apartment development indicate hard construction costs of almost €180,000 (incl VAT) to build a 37q m one-person studio. On this basis, cutting 5sq m from the structure would only save about €3,500 (incl VAT) (€615/m2 structure costs + VAT = €698x 5 = €3,490 structure costs) given no reduction in other hard costs (kitchen, bathroom, windows, doors, heating, plumbing, electrics, etc). In all likelihood any potential savings would be wiped out within months on redesign, tender inflation of 3 per cent annually and finance.
The Minister may believe that squeezing more smaller apartments into the same building will result in lower unit costs. Evidently, a studio for one person will be a cheaper unit than an apartment for two, three or more. Without the evidence, this seems more spin than worked solution.
We might hope that developers and investors won’t buy into these lower standards. Experience tells us otherwise. When lower standards for build-to-rent apartments and co-living were introduced, it wiped out the “viability” of urban build-to-sell which was marginally less profitable. Consequently, investment funds now control more than 17,000 new rental apartments, according to figures reported in the Business Post, while only 943 were sold in Dublin, Cork, Limerick and Galway cities in the last six years, CSO figures show.
In response to these changes, many investors will pause to assess whether the uncertainty, disruption and legal risks are worth it. So how might they jump? Let’s imagine an apartment block of 100 units with permission for 50 two-bedroom apartments, 25 one-bedroom and 25 studios. Using typical rents for new-build apartments in Dublin, our 100-unit scheme could generate a rent roll of €275,000 per month (gross). However, replacing it with 178 small studios could bring in €370,000, a 35 per cent increase.
This is certainly enough to send many back to the drawing board. But regardless of how – or when – they jump, this week’s announcement gifted all residential landowners a new profit (on paper) from increased development potential. Land is valued on the “residual” of the end value less the development costs. When the future rent roll increases, it brings up the current land value. This windfall is now booked on the balance sheets and baked in, eventually to be paid in higher rents and mortgages – in one stroke both worsening the “viability” of larger apartments, and widening the affordability gap.
So how many people could be housed in these newly configured buildings? Taking, our example above, a permitted block of 100 apartments can now squeeze in 178 studios. Good news for the “supply target” with a 78 per cent increase in units on the site. Unfortunately, not so good for anything else. Small units are very inefficient: a block of 178 studios can only legally accommodate 178 people, whereas the same space laid out as 100 apartments can house 275. In fact, the larger 2016 Dublin City Council standards could comfortably fit more than 300 people in a mix of units -all with decent, flexible living conditions, suited to couples, families and sharers.
So, in our example, for the same development cost and the same drain on limited construction resources, Browne has incentivised 78 per cent more units, but housed 41 per cent fewer people. Bizarrely, his initiative may give us poorer quality homes while taking longer and costing more.
Browne says that he is “prepared to take risks”. Perhaps consider these risks – of regulatory capture; of rejecting evidence-based plans and democratic processes; of further inflating land values; of incentivising a glut of over-priced substandard homes; of ignoring the 50 per cent of households with children; of believing that squeezing out a washing machine or space for a pram will tip the balance of international financial markets in Ireland’s favour.
Ireland’s speculative housing system has legacies of boom and bust, planning irregularities, ghost estates, low standards, over-inflated values, market crashes and deep recessions that are both recent and painful. We are still paying the price for the last time developers were left to decide what to build, where, and at what quality and cost. In this complex ecosystem even seemingly minor decisions are not without major consequence. If his new Housing Minister doesn’t see the risks, Taoiseach Micheál Martin surely should.
Orla Hegarty is an assistant professor at the School of Architecture, Planning and Environmental Policy, UCD
