Rebuilding Ireland

Minister Coveney’s Action Plan for Housing is here, pdf is here.

Lots to discuss and digest. I’ll let property experts like Ronan Lyons weigh in when they have time. For now let’s open the thread below for reactions.

By Stephen Kinsella

Senior Lecturer in Economics at the University of Limerick.

19 replies on “Rebuilding Ireland”

Probably not the most important question, but after the emigration of the skilled workforce, the almost total collapse in apprentice numbers as the main feeder into the skillbase, who will build all these new houses?

Different firms can bid for the work but where is the workforce?

And if there is a return of workers or influx of immigrant labour then where will they be housed? A further accelerant of the housing crisis?

If you read last week’s census, you’ll see that the emigration levels were one-fifth of what was thought. And, even if some building-workers emigrated from London, so what? They can fly back to London for £20.

So, the government has launched a massive house-building drive. It aims to get the annual number of number of new houses built up to 25k by 2019 and to 35k as soon as possible after that. Well done. This is exactly what I asked for in my post on another thread. At long last the construction industry is being brought in from the cold to the centre of economic decision-making, as I have long advocated. The report is a tacit admission that banishing the construction industry to the wilderness in response to mob frenzy was a big mistake. Too late for the Galway Tent this year, but I wouldn’t be surprised if its back next year.

I see no reason why these targets should not be met easily. It is essential that they are to fix homelessness, to keep rents down and to keep prices affordable for first-time buyers. The laws of supply and demand always prevail. Ireland built more than twice that number in the decade to 2007. If it built 85k in 2007, its ludicrous to say it can’t build 25k in 2020. Some have said that Ireland can not get back to those levels because all the builders have emigrated. This claim was scotched by last week’s census results. The vast majority of building workers laid off in Ireland post-2007 are in Ireland. And those who emigrated to London can fly back to Dublin on Ryanair for £20. This is all the more likely post-Brexit as the construction industry in the London and South-East England region is likely to be badly hit.

The number of new houses being built annually is already rising sharply. Some might say ‘at long last’. It hit a low of 8,300 in 2013. But, this had risen to 12,600 in 2015. So far in 2016 the number is up 20% and in May it was up 30%. It looks like its heading for a total of between 15k and 16k in 2016. At this rate of growth it should hit 20k in 2017 and 25k in 2018. Looking beyond into the mid 2020s, I can easily foresee the number of new houses being built annually returning to peak Celtic Tiger levels (60k plus annually). It depends on the trend of net migration and population growth, of course. At the moment the omens for this look very strong.

However, the question needs to be asked as to why the number was allowed to fall so much. A total of just over 8k in 2013 was always ridiculous. What factors contributed to it falling that low? There should be a Dail inquiry. I’d say there are 2 reasons: (a) massive over-estimation of the surplus of houses in 2008-2010 (b) massive under-estimation of population growth (confirmed last week). If it wasn’t for the tragedy of homelessness and the difficulties some have in paying rents, it would be almost comical. One minute we were being told that a decade’s economic growth was entirely down to over-building of new houses and that, as a consequence, there were 350 empty houses scattered the length and breadth of the lad. The next minute we were being told that that there is a shortage of houses and emergency measures are introduced to bring the number built back up to levels that were being denounced as excessive just a short time ago.

Since 2008 the prevailing view in Ireland has been that the population was not growing. A mass population exodus was supposed to be underway. Emigration was supposed to be at immediate post-famine levels. Now it turns out that the population actually grew by 400k between 2008 and 2016, the highest rate of growth in the EU. Is it any wonder that new house building has not kept pace with population growth if no one actually knew there was population growth? We can put things in perspective by comparing with the U. States. Suppose the prevailing view had been that the U. States population had not grown since Obama took office. Then, a census was held and it turned out it had grown by 28 million. Would it be any wonder if there was a housing shortage in the U. States in those circumstances?

Anyone who wants to know why there is a housing shortage in Ireland in 2016 should read this, from on 13 September 2009. What memories of long-disappeared names it brings back.

EoinBond was just Eoin then. And JohnTheOptimist was just John. I think the predictions of those two have stood the test of time. I was interested to see that in September 2009 I predicted that Ireland’s population would reach 5 million by 2020. Bang on target in last week’s census.

Apologies for my years of absence!

I am not trying to be obstructive to the intended plans here…

But has there been a labour needs analysis carried out?

Has the labour capacity been identified and a sourcing strategy is in place?

Will the works roll out concurrent or consecutively if there are labour shortages?

In creating a division in the required labour between skilled/ professionals, higher education has continued to produce graduate professionals but the further education sector has ground to a halt with construction related skills training almost non existent, training areas shut down and staff redeployed.

While migration may alleviate shortages partially, serious consideration is needed on building standards and quality control as different regions have different methodologies and requirements not all identical to Irish methodologies…

And why has the density argument been avoided and we are back to “houses”?
Surely we need to engage the density question in terms of water & waste service provision, planning for schools, hospital/ primary care centres, etc?


RE: Supply.

It’s an opportunity to look at other reasons constraining supply; poor banking sector risk management (financing), existing NPL’s in the sector driving up the cost of capital (bank + developer.) I envisage UK prop co’s / builders expanding here to offset the decline in the London if incumbents don’t pick up the opportunity.

-Doesn’t address the very high cost to build; if US & UK can build a 2-3BR for 100k (ex land), why is a 3 BR 200k here? To fund the developers / banks /revenue commissioners fees, when it’s all “% of value”?

-Doesn’t address the waste built into the cost base; 50% of that cost is “waste” (building waste/materials, poor design).

Stronger framework opportunity there.

-Doesn’t address the requirement to integrate building AND energy (renewables); we have the 2nd highest energy cost/capita and one of the least efficient. If new homes had solar, battery etc it would bring the cost of energy down by 1.500 to 2k per year. The installation cost of said solar creates 20,000 jobs, and reduces the dependency on energy import & rising costs (risk as 90% energy comes from UK.) But then that means overhaul the monopoly that is ESB with their own 3.5bn maintenance hole…(to be funded by households.)

-Using the 200,000 or so vacant houses is an opportunity to immediately help homeless until the fast-builds are in place, then renovate and sell / rent to 1st time buyers as a priority.

-Building 100,000 homes over 4 years, or 5.9% increase in supply vs % of current households (1.7m excl social), or 1.5% p.a., is low relative to population growth just out. That growth excludes the “Brexit opportunity” of 1-2% increase in population if IDA/FDI accelerates and/or the 10% of the 4m with UK Irish citizen decide to return home…a 400,000 population increase in 4-5 years from UK / Irish, who must be looking at their UK assets / property prices in London of 600k-800k vs 300-400k thinking “that’s a way to unlock 500k euro and live nicely!”)

-Implement a “use or lose it” to councils and those sat on Land-banks, with councils funding the financing, which, over the lifecycle, is 30% of the cost. Thus, bringing down the cost

-Building “UP”; not just semi’s, but build apartments and come off the habit of big houses, an Irish mindset.

-Put in place rent rise caps per annum (in line with consumer income NOT GDP); similar to what other bubble countries (UAE) did to ensure landlords aren’t driving yield and then also leveraging themselves in buy-to-let’s to further transfer wealth from the 80% to the 20%, or even the 1% with asset-backed loans.

-Allow new home owners to rent-then-buy; (like the UK) and mandate banks to lend at preferential rates to new.

All that takes the steam out of the rent & property bubble to allow the then higher disposable incomes to flow into consumer and heaven forbid, Irish people pay off debt (still high @ 200% of disposable income) or start saving (as 1% of consumer income is one of the lowest savings rates in Europe).

You forgot Yields or Bust (YOB)! If memory serves me right, he constantly reminded us that it is credit conditions that decide what happens in the housing market or, rather, the conditions that are created when these are distorted by attempts to interfere with them under the politically convenient mantra that (i) everyone is entitled to a roof over their heads and (ii) can afford to own it.

While (i) may be true, (ii) certainly is not. The popular belief in it, however, resulted in the housing boom, and subsequent crash, coupled with the abandonment, by FF in particular, of the building of social housing and the sale (!) of those that were built to their occupants at subsidised prices.

The Bourbons have nothing on the Irish political class. The problem lies not, however with it but the fact that its reading of what the electorate wants is almost certainly correct i.e. “let the good times roll again!”. Hence the resurgence of FF. You are right on that point.

The CB and the DOF are, however, on this occasion in a much better position to resist. Even the Dáil seems to have woken up to the fact.

“The ECB’s intervention was sparked by a Fianna Fáil motion on mortgage interest rates.”

Plus ca change!

I’ve only skimmed quickly through the report, but I can’t see any reference to population or to the date on which the report was compiled. Simon Coveney should clarify.

If it was compiled after last Thursday’s census results were published, well and good (but that would be remarkable to get it out so quickly, so very unlikely). If it was compiled before last Thursday’s census results were published, then I’m afraid its out-of-date already. Back to the drawing-board. The population is growing twice as fast as was thought before last Thursday. If 25k houses per annum were considered necessary for population growth as it was thought to be before last Thursday, then clearly many more than 25k are required for population growth twice that.

I wonder if growing realisation that a high level of house-building is required is the reason for FF’s surge in the polls in recent weeks. They are now firmly established as the largest party and back into the low 30s. People associate FF with a strong construction sector. Somehow, Bertie Ahern’s prioritisation of house-building and infrastructural development doesn’t seem as daft now as was thought a few years ago.


Somehow, Bertie Ahern’s prioritisation of house-building and infrastructural development doesn’t seem as daft now as was thought a few years ago.

You obviously weren’t among the 305,000 job losses and the hidden broken lives related to both that and the thousands of business collapses.

I remember drawing attention to this, presumably annual news story, 3 or 4 years ago – along with the eventual implications for housing supply in Ireland.

Its deja vu all over again, only now people are slightly interested because there are barely enough tradesmen to build the inadequate numbers of units currently being built – and they want to increase the numbers dramatically. Sometimes I wonder why we bother.

“JUST seven plasterers, eight painter decorators and less than 30 new “brickies” will enter the jobs market as newly qualified professionals in 2018, sparking fears of a crisis in the construction trade.”

Still, Ireland is almost at the top of the EU league for percentage of population with a degree. Presumably if there was one, it would be near the bottom of the league for percentage of population capable of putting up a shelf.

I wonder if we could indeed hit peak levels of construction. Remember construction during the boom was creating homes in the wrong places. A key role of the government in stimulating home construction should be to increase the availability of affordable land for people in the right places. This means opening up new areas to commuters by providing good transports links and discouraging hoarding of land banks in key locations.

@ BL Surely quality of the comments are more important than the number.

So far I see little to argue against the thrust of JTO’s points.

The Boom get boomier is starting to seem more on point that the doom getting doomier consensus of the last 4 or 5 years. In fact the doom wasn’t near as doomy as thought.

The problem is that banks won’t lend and lots of people can’t sell.

For eight years I’ve been pointing out that we need to do debt forgiveness on residential properties. If that was done banks wouldn’t be so terrified of house prices falling – nor would homeowners in negative equity. People would sell up or down based on their current circumstances.

The current circumstances are harming thousands of people. All the objections to debt forgiveness have been made and honestly you can make *all* of them as an objection to *not* forgiving debt.

I also think we should have a longer-term solution to this – namely get rid of personal guarantees. A mortgage is a loan to buy a house. The loan should be tied to the house. If the borrower defaults, the lender should get the property and no more. Banks will then lend more responsibly.

Note, I have no skin in this, I paid my house off a while ago and no longer have a mortgage. And I have no issue with my tax money helping reduce mortgage debt for others.

These measures if implemented are important but in the long term as land prices continue to outpace other costs including low wage rises against a backdrop of an expected further long period of historically low interest rates, more people will be unable to own their own homes while short-term-rent freezes, will not keep down rents in the long-term.

What chances are there of reforms of the land rezoning system that is the biggest stealth tax of all?

The Irish Times reports today that a group of private investors has paid €4.25m (0.96 acre) for a ready-to-go site for 17 family homes at Vernon Avenue in Clontarf, Dublin 3. The selling price works out at €250,000 per unit.

Poor land use in urban areas around the world and restrictions to protect vested interests are common. In Dublin, there should be selective approval of high rise while the poor quality of apartment developments with limited if any onsite facilities, makes it inevitable that people with children seek to live in a conventional house.

Less than 10% of England is built up but gardens cover nearly half that area while Ireland has the lowest population density in the EU. Last November Jason Furman, President Obama’s chief economic adviser, in a speech cited zoning restrictions that add as much as 50% to the cost of a house. See here.

Whether a development is publicly or privately-owned, it’s very important to have local community involvement in applying rules and the support of the authorities where needed. With the rush to meet housing demand, there is a danger that this will be ignored.

There was an impressive regeneration of Fatima Mansions in Dublin’s South Inner City from 2009 but a youth worker told a social conference in Dublin in 2014 that the area was “still struggling with . . . crime, drugs and gangs because of just five families.”

There is a lot of criticism of bad planning but less so of public representatives who while only having direct power on rezoning — and that record has been dismal — can at least bring attention to bad decisions. A study of the decisions that significantly increased the risk of flooding in Bandon, show that during the boom the property interests triumphed and there was no direct consultation with the people of the town — democratic deficits indeed!

Earlier this month I was at Garretstown beach in West Cork, about 11km west of Kinsale — one of West Cork’s big sandy beaches. It was grim with few people there and a chipper van and pizza van provided refreshments.

It used have 2 adjacent hotels and the last one to remain open was demolished in 2007.There was also a grocery shop.

Holiday homes were built on the hotel site and there was no requirement to provide space for a coffee shop or grocery store for an amenity for the people of the area including the second city, never mind visitors.

To get food other than from vans, a visitor would have to drive west to the Speckled Door pub near the Old Head of Kinsale or head back to the village of Ballinspittle and most pubs there were shut in the early afternoon.

A Chinese in China remarked to me a few years ago in respect of the impressive infrastructure that while the hardware was good, the software had a lot of catching up to do.

Wonder about the planners at the National Roads Authority who more than a decade ago decided services areas were not necessary on Ireland’s motorway network?

@ Michael H

The latest of your rambling posts of random paragraphs contains and obvious error. Finland has by far the lowest population density in the EU. I’m here at the minute. Probably about 20 of us in a 5km radius. Great 4G coverage though.

Finland has an urbanisation rate that is much higher than Ireland’s and a much lower utilised agricultural area (UAA). Check the data.

What matters here in the context of housing is modern living and while Lapland accounts for 30% of the land area, only 4% of the population live there.

Since Cummeenduff/ the Black Valley in Kerry was connected to the national electricity grid in the 1970s, ex-mountains and bogs, most places in Ireland are accessible to modern living even though broadband may not be available everywhere.

Ireland does not have the lowest density in the EU. i.e. the statement you made above is incorrect. Check the data.

As big an issue as how to supply sufficient housing with adequate infrastructure is how to adequately damp the macroeconomic and labour market impacts of doing so. Ireland’s exaggerated macro and labour market seesaw is not all about exaggerated swings in construction activity, but it is a large part of the story. There is a huge range of possible policy levers available, but a great many of them will sit uncomfortably with important interests.

Here’s one among many. It’s time to kill incentives for home renovations. Better to divert the construction capacity into new builds, and keep the fiscal boost to renovation activity for the next downturn.

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