Local authorities should get construction firms to tackle housing crisis, economist says

The Government should set up 31 separate State-owned construction companies linked to each of the country’s local authorities to replace the existing approach to housebuilding which is costing the State billions of euro without creating any new State assets, a leading economist has argued.

Dr Anthony Leddin said the Rebuilding Ireland Action Plan for Housing and Homelessness 2016-2021 had not resolved the housing crisis and was not financially sustainable after costing €9.9 billion.

Dr Leddin told the Dublin Economics Workshopin Wexford at the weekend that the aim of the six-year plan introduced by then taoiseach Enda Kenny and then minister for housing Simon Coveney in 2016 was to eliminate homelessness by 2021.

The plan had a target of creating 147,186 new social housing units, built around five pillars including eliminating homelessness, building more homes, utilising existing housing, accelerating social housing and improving the rental sector through providing more units at affordable prices.

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The Government had said its aim was to eliminate the need for emergency accommodation, but the number registered as homeless had increased from 5,401 in 2016 to 6,333 today and emergency accommodation was “now bursting at the seams”.

The plan also aimed to build 25,000 new dwellings annually on average over the course of the six years, but it never achieved this with an average build of 17,000 annually and the closest it got to the target was in 2020 when 20,514 new units were built, leaving a cumulative shortfall of 30,746.

Constant demand

Meanwhile the demand for new housing remained constant at 35,000 annually and while the number of vacant properties reduced from 183,3122 in 2016 to 166,752 in 2022, marking a drop from 9.1 per cent of housing stock to 7.8 per cent, it was not a sufficient improvement to address the problem.

Turning to the issue of providing social housing, Dr Leddin said that the plan involved three elements – providing new social housing through building, through acquisition and through leasing, and while the plan did exceed the 147, 000 target by 1,037, the picture was more complex and nuanced.

Of the 148,037 social housing units created, the number of new units built and added to the housing stock was 28,171 which was 6,000 below the actual new build target of 34,210, with rentals accounting for 99,813 of these new units, over 3,000 more than the target of 96,110, he said.

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One of the aims of the plan was to redress the imbalance between new builds on the one hand and subsidised rentals on the other from the situation that prevailed in 2016 when 16 per cent of social housing was new builds and subsidised rentals accounted for 70 per cent.

The plan set a target of achieving a new build/subsidised rental figure of 33 per cent to 53 per cent by 2021 but what was achieved was well below the target with the final figures coming in at 22pc for new builds and 56pc for subsidised rental accommodation, he said.

Local authorities built some 9,855 between 2016 and 2021, all by private developers at a total cost of €2.919 billion while approved housing bodies built 9,064 at a total cost of €804 million.

The average cost of a unit built by a local authority was €297,800 while the equivalent figure for a unit built by an approved housing body was €87,182 with the differential partly explained by the fact that local authorities provide 30 per cent grants to such bodies.

Construction costs

The cost of constructing the units ranged in the case of houses from a one-bedroom house costing on average €185,246 to a four-bedroom one costing €263,2014, while apartment construction costs ranged from a one-bedroom apartment costing €197,087 to a three-bedroom one costing €323,407.

Dr Leddin pointed out that these figures from 2019 for new build schemes approved under the social housing element of the plan did not include the cost of land or design and technical fees or utilities or other costs.

In terms of the rental sector, Dr Leddin said that, as of 2020, 545,006 households were living in rented accommodation with 251,333 of these receiving no rental support from the State, while 293,673 did which meant that 54 per cent of all people renting were receiving support from the State.

Of these 293 673 tenants in receipt of rent support, 54 per cent were in local authority homes, 20.4 per cent were in receipt of housing assistance payments (HAP), 12.8 per cent in approved housing body schemes, 6.1 per cent in receipt of rent supplement and 6 per cent in the rent accommodation scheme.

He said that, as of 2021, some 61,907 tenants in supported rented accommodation were getting on average €8,755 in HAP payments while another 17,183 occupants, also in supported rented accommodation, were each receiving €7,100 in RAS payments.

Dr Leddin said that the State had paid over €1.877 billion in HAP payments between 2016 and 2021 and a further €896 million in RAS payments during the same period. “The State has spent the best part of €3 billion on the current account without any new assets being created,” he said.

This approach, involving paying huge rent supports on the one hand and building very expensive houses via private developers on the other hand, was completely unsustainable, he said, and he believed a more viable alternative was the creation of 31 separate construction companies to build homes.

Each of these 31 State-owned construction companies would be linked to the country’s 31 local authorities. But independent of them, though, they would have a special relationship which would give them access to lands while planning permission times would also be reduced, he said.

The project would also involve digital integration to ensure specialisation and economies of scale so there would be an overlap between them while they would be built on a break-even basis in that the rental income from them would cover all the costs associated with them, he said.

*This article was amended on Tuesday, September 27th, 2022.