Relying on private sector to build houses a ‘vulnerability’, officials say

Reliance on the private sector to deliver housing is a “vulnerability”, particularly with 2023 delivery targets coming under pressure, the Government’s spending department has said.

Concerns about the challenges in housing and other areas are contained in a briefing document prepared by the Department of Public Expenditure and Reform for its new minister, Paschal Donohoe who took up the role in last month’s midterm rotation in Government.

The Government department pointed to problems ahead in the year, saying that the overall 2023 target of 29,000 new housing units would be “challenging” to achieve due to high construction costs, capacity constraints, rising interest rates and disruptions in the supply chain.

The department said structural issues such as planning, productivity and innovation, along with high construction costs, would “continue to challenge housing supply”.

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There was a 14 per cent year-on-year decline in new housing units commenced in the third quarter of 2022 and, if this downward trend continues, overall completions will fall, it said.

It raised doubt around whether new schemes to address vacancy – a central plank in increasing supply – would deliver the scale of supply required, given that the schemes, including the Croí Cónaithe Towns grants initiative for derelict homes, were only recently introduced.

The Government’s Housing for All strategy, launched in September 2021, commits to delivering 33,000 housing units on average every year, though experts warn significantly more units will be required to address chronic supply shortages in the housing crisis.

The department said there were a significant number of uncommenced apartment planning permissions, some 43,000 apartments at the end of 2021, but there were viability issues around delivering housing through build-to-rent/sell and student accommodation schemes.

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The “complex” design of the €450 million Croí Cónaithe scheme, aimed at delivering 5,000 apartments by 2025 in otherwise unviable developments, has “meant a lower-than-anticipated interest from developers” and is “likely too small” to address the scale of viability issues.

It is estimated about 6,500 new social housing units will be delivered in 2023, some 2,500 units below target. Less than 1,000 affordable units are expected to be delivered for 2022.

The department said the housing assistance payment (HAP) scheme – the main scheme to house the homeless – had reached its capacity due to constraints in the private rental market.

This has resulted in fewer properties being available to accommodate homeless people and the problem has been exacerbated by large numbers of private landlords leaving the market.

While the department said, in the 131-page briefing document, that the temporary ban on evictions would help manage homelessness during the winter, the longer-term consequences were “likely to negatively impact the rental market and deter investment in the rental sector”.

“It is critical that the rental sector is reviewed, including an examination of options to curb further exits of landlords from the market,” the department said.

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In the response to accommodating people fleeing the war in Ukraine, the department said the Department of Education indicated that many of the excess places in schools for Ukrainian students had been “exhausted” and that further increases would require capital investment.

The Department of Education said that, as of December 22nd last, 13,753 Ukrainian pupils had been enrolled in schools, including 8,823 in primary schools and 4,930 in secondary schools.

It is “anticipating significant challenges” in finding enough places for 2023, particularly at post-primary level, due to continued arrivals, the relocation of existing Ukrainian students around the country and more than 1,000 students graduating from sixth class.

“The department continues to work close with the Department of Children to, where possible, match new arrivals with existing school capacity,” it said.

The overall State support provided in humanitarian supports for Ukrainian refugees is expected to be about €1 billion in 2022 and between €1.6 billion and €2.2 billion in 2023.