The Republic will not be able to hit increasingly ambitious housing targets without support from international investment and pension funds, according to construction cost specialists Mitchell McDermott.
In its annual review of costs in the sector, the consultancy notes the increasingly important role of Government supports for the housing sector, initially through purchasing and now advance funding thousands of units.
“Last year, we saw lots of projects stall as private foreign investment exited the market,” said Paul Mitchell, one of the authors of the report. “We estimate that between 10,000 to 15,000 units would not have gone ahead if they had not been taken on by the Land Development Agency, local authorities and various approved housing bodies.”
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However, he warned that this level of support was not sustainable in the long term.
Total Government budget for capital expenditure on housing this year is about €5 billion, he noted, with some plans such as the Croí Cónaithe towns scheme, which funds the bringing back into use of vacant buildings, only getting a funding allocation of €50 million this year.
“If we assume that the total development cost of building around 32,000 units last year was in the region of €12.5 billion, it’s clear a plan will need to be put in place for the next two to three years to plug the finance gap left by the international funds which have departed,” Mr Mitchell said.
He argues that without the support of foreign investment funds and pension funds, Ireland will not be able to finance the estimated 50,000 housing units most commentators agree need to be built every year to service the State’s growing population.
Mitchell McDermott believes it will take until the end of the decade before Ireland reaches that 50,000 target anyway. Alongside planning logjams and the plugging of the finance gap, Mr Mitchell says there is a need to address is the lack of capacity in the market.
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“There are currently 168,000 people working in construction. To go from 30,000 residential units to 50,000 annually, we will need 50,000 more workers,” he said. “We need to train more people – including young migrants coming into the country and we need to incentivise those with the required skills who are working abroad to return home.
“Housing them will be an issue and will require imaginative solutions such as an Airbnb for Builders, construction hubs, the wider promotion of the rent-a-room scheme and perhaps even dedicated construction-worker hotels or hostels. But until we make a start, the problem is only going to get worse.
“We believe increasing the number of construction workers by 5,000 annually is a realistic target” Mr Mitchell concluded.
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