More than 45,000 homes stuck in planning system despite housing crisis, consultants say

More than 45,000 homes are stuck in the planning system, according to a report by construction consultants Mitchell McDermott. A further 28,000 have approval but no work has yet begun on building any of them. The figures account for close to three years’ worth of the Government target for residential construction across the State.

“Delays due to judicial reviews, and spiralling construction inflation have all contributed to the dramatic drop off in commencements we are seeing,” said Paul McDermott, one of the authors of the report, noting that just 9 per cent of homes have come through the judicial review process intact over the past five years.

“The fact institutional investors have begun moving away from property investment as interest rates continue to rise has created a very challenging environment and one in which the Government will clearly struggle to hit their Housing for All targets of 33,000 units annually,” he said. “However, we believe the real need is closer to 50,000 units a year and in order to scale up supply the priority must be to put a functioning planning system in place.”

The Mitchell McDermott figures suggest 28,000 homes were built last year, of which one-third were apartments. This is up on around 21,000 in each of the previous three years.

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Mr McDermott noted that an average apartment block of 150 units can take four years to develop from the time the site is purchased to the first apartments being available to customers – assuming there are no planning delays or judicial reviews.

The report finds that the construction costs of a two-bed mid-range apartment rose by 9.6 per cent – or between €21,000 to €25,000 depending on location and specification – last year.

Mitchell McDermott found that the hard costs of building a two-bed, medium rise suburban apartment is now over €240,000. Once you include other costs such as the provision of parking, siteworks, VAT and profit margin, the average cost of a suburban mid-rise two-bed apartment is €460,000. Market prices would need to be set at this level or higher.

The report says the biggest factors in higher costs over last year were the price of brickwork, which is 39 per cent more expensive, concrete (+27 percent) and mechanical and electrical services (+18 per cent).

For the construction industry as a whole, costs jumped 12 per cent in 2022. The figure is skewed higher by the more expensive facades in office complexes. Mitchell McDermott said price pressures were easing and he expects increases in costs to soften to between 5 and 7 per cent this year.

By sector, the report says the pipeline for hotels in Dublin is strong, with 3,000 rooms expected to be added by the end of next year to the 23,000 rooms currently available in the capital. Applications for a further 8,000 rooms are in the planning process.

In student accommodation, it says the Government will fall well short of the Higher Education Authority target of 75,640 shared living units required by next year. The report says 55,000 units may be available by 2026 but that challenges with inflation and supply of land is affecting the viability of such projects.

Very few new office buildings were started last year, unless they had been pre-let, the report says, though the sector was busy completing office blocks on which construction had started over the previous two years.

“Tech company lay-offs affected confidence in the latter part of the year, with a number of fit outs scaled back and space sublet,” it said, adding that many companies are still using flexible working arrangements which impacts decision-making for companies considering expansion

“Although the number of people employed in construction increased by 25,000 in 2022, to 171,000, we will need another 20,000-30,000 in the short term if we are to push inflation lower while increasing apartment output,” Mr McDermott said. “Given Ireland’s low unemployment rates and the departure of many workers to their home countries post Covid, this will be a real challenge.”

The impact of judicial review on the fast-track Strategic Housing Development scheme is evident in data showing that 17,805 of the 31,125 homes subject to judicial review over the past five years are still awaiting a decision.

“Our analysis of strategic housing development applications in 2022 found that while An Bord Pleanála had granted permission for 26 per cent of applications or almost 13,000 units, it has yet to decide on 59 per cent of submissions made to them – a total of 28,786 units,” said Mr McDermott, calling for a “functioning planning system” to be put in place.

“Everyone knows the board has had its issues last year but to have so many units delayed amid a housing crisis is unacceptable. You would imagine this backlog could easily be addressed by drafting in additional temporary resources from private practice here or from the UK and we believe this should be done straight away.”