House prices may rise by 24%, warns builders' association

The Irish House Builders' Association (IHBA) has warned that new house prices may rise by as much as 24 per cent as a consequence of the Planning and Development Bill which was yesterday declared constitutional by the Supreme Court.

The IHBA said the rise in house prices, which would be in addition to the expected 11 to 15 per cent rise in house prices this year, would affect new home buyers.

According to Mr Ciaran Ryan, director of the IHBA, the house builders would have to pass on the costs associated with the provision of land for social and affordable housing.

While Mr Ryan acknowledged that some of the profits on building schemes seemed to be large, builders needed to amass profits to fund future building projects and land acquisitions. The measures in the Planning and Development Bill would result in a cost on builders restricting their ability to plan for future developments and as such it would have to be passed on, he insisted.

Mr Ryan said that the IHBA had been consistently increasing its output of housing over the past five years, and that new Homebond registrations - a measure of the number of new houses coming on stream - were up 22 per cent in the first six months of the year.

"The private sector was doing its bit," he insisted.

However, he maintained that the Government was having a difficulty because it was not providing social housing in enough quantities to keep pace with demand. "The number of public houses built last year was 500 less than the number built in 1995.

"What you are seeing here is the diversion of resources to build social housing from the private sector to the public sector."

Mr Ryan said that the IHBA had proposed a tax on the person who owned the land "as they are the ones who make the real money".

He said that this tax was proposed regardless of whether the land owner was a house builder or a farmer or anybody else. The money raised by the tax would be payable to the planning authority and, according to the IHBA, would be available for use in the provision of schools, libraries or other community facilities.

Mr Ryan said that the house builders had made their alternative proposals known to the Minister for the Environment, Mr Dempsey, and officials from his Department but they had received no response.

The IHBA said it also took exception to the fact that the Planning and Development Bill addressed only residential development and not commercial development, a factor which Mr Ryan said was "ill-conceived".

While the IHBA maintains the Planning and Development Bill is ill-conceived, it says it is prepared to go along with the measures.

"This clarifies the uncertainty and we know exactly where we stand. We have some worries about the practicalities of the scheme and we know that local authority planners have questioned how it is to be implemented.

"However, it has been long known for example that Fingal County Council has a cross subsidisation requirement which adds about 15 per cent to the cost of a £90,000 three-bed house. So cross-subsidisation is already here."

The Minister for the Environment said that a firm of consultants have been asked to design a model for the application of the new measures and planning authorities across the State will be able to see clearly how the schemes work.

The Minister intends to begin the supply of housing elements in the Planning and Development Bill next October. The necessary regulations requiring the planning authorities to take part are currently being prepared by the Department.