Two-thirds of developers expect pace of new home delivery to fall this year

The planning process tops the list of obstacles slowing down and preventing development in Ireland at a time when the Government is bringing in €1 billion worth of measures to assist housing delivery.

The results from Knight Frank’s latest annual survey of Ireland’s top residential developers show that two-thirds expect their output in 2023 to be the same or lower compared to 2022.

This suggests that the industry will be unable to build on the progress that was made in 2022 when 29,851 units were delivered, a notable increase in comparison to the 21,000 units that were completed each year in 2019, 2020 and 2021.

This finding is worrying, particularly in the context of research carried out by the Housing Commission which found that there is a need for 42,000-62,000 units each year between now and 2050 to satisfy demographic pressures brought on by population growth, in-migration and falling household sizes.

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It is in this context that the Government’s new €1 billion housing plan is welcome, as the survey results show that the cost of building materials and labour, as well as issues in terms of raising development finance, remain high on the list of obstacles to increasing output.

However, the planning process is by far the greatest obstacle to increasing output. According to Knight Frank’s analysis, 33 per cent of developers say it takes between seven to 12 months to receive a grant of planning permission from a local authority. Appeals and judicial reviews are also adding a considerable amount of time to the planning process. A total of 32 per cent believe an appeal could add 11-15 months, while 46 per cent report a judicial review could add anywhere in excess of 21 months. In total, it could take in the region of four years to receive a successful grant of planning permission to develop.

The timing and implementation of the residential zoned land tax is also out of sync with the reality on the ground as 92 per cent believe the tax will impact the viability of sites that fall within its scope.

Reasonable measures

The developers surveyed predict that while annual building material and labour cost inflation will ease in 2023, it will remain at an elevated level for the year ahead — 43 per cent of respondents believe annual building material and labour cost inflation will range between 7 to 9 per cent, while 38 per cent predict it will vary between 4 to 6 per cent. In addition, successive interest rate increases over the past year and recent turmoil in the global banking sector will make the task of raising development finance even more difficult this year according to 72 per cent of respondents, an increase of 30 per cent compared to last year’s analysis.

Residential developers who have been taking reasonable measures to position their sites for development, by attempting to connect them to services and by lodging planning applications, but who ultimately cannot commence construction due to factors outside of their control — such as delays in the planning process, difficulties obtaining development finance as well as the rising cost of building materials and labour — are now being saddled with a tax that will ultimately drive up development costs and impact viability. The recently published Land Value Sharing Bill is also likely to have a similar impact. Given the scale of the challenge confronting the sector, it is contradictory to have policies, designed to address issues in the housing market, act as another barrier to viability and increasing output.

In conjunction with their €1 billion housing measures package, this is an opportune moment for the Government to act and reduce or remove the barriers within the planning process. Such a move would give real momentum to addressing the housing crisis.

• Robert O’Connor is an associate director at Knight Frank Ireland