People had no need to be “dickying up” their houses during Covid, as Simon Harris famously put it, when he was questioned about the closure of hardware and homeware stores in mid-2020. “Curtains can wait,” he tweeted, in a sharp rebuke to suburban Ireland’s pretensions. Well, it seems that people are now making up for lost dickying time. The latest figures from the State’s banking group show a 15 per cent surge in borrowing for home improvement to over €500 million last year, overtaking lending for new cars for the first time.
You only need to drive around any suburb to note the deluge of dickying – vans everywhere, houses being knocked down and rebuilt, extensions going up, solar panels going on rooftops and so on. Dermot Bannon has a lot to answer for as rooms – sorry, “spaces” – are reimagined. Some of this is old wrecks being done up to become habitable – adding to the housing stock. But the bulk of it is people improving where they live. Behind this lies a wider picture about who has money and how economic incentives work. And particularly how building resources are being deployed at a time when new home building is urgently needed.
It may be an over-simplification to divide Ireland into the older generation who can afford to do up their homes and the younger generation who struggle to buy – or rent – one in the first place. But it tells a lot of the story. Buoyed by money saved during lockdown, older, more established households have the financial firepower to do up their houses. Surveys during Covid pointed to home improvements as a likely place for the cash to be spent. The data shows, on the other hand, that those who are currently renting typically have far smaller Covid cash pots.
There is nothing wrong with people spending money and investing in their homes. There is some encouragement to be had from the general rise in personal borrowings last year, not only for home improvements but also cars, weddings, holidays, and so on. It shows significant resilience in household finances.
But there is also a question of how resources are being allocated. Sources say that Ireland’s smaller and medium-sized builders are increasingly working on home-improvement projects rather than building new homes, which is left largely to the bigger building groups. Building new homes is a long drawn-out and complicated process, with planning uncertainties and – crucially for all but the biggest building groups – challenges in raising finance from Irish banks who generally don’t want to know. Costs have risen sharply, which makes the viability of many projects questionable and increases the risk.
This is part of the long tail of the last financial crash, which pretty much destroyed large parts of the building industry
Home improvements, on the other hand, are more straightforward, offering a much more reliable profit margin to the smaller builders. These projects, too, have been affected by rising costs, but these are generally passed on to the client – as anyone who has been planning a project in their home in recent months knows all too well.
This is part of the long tail of the last financial crash, which pretty much destroyed large parts of the building industry. There are a few big players now – such as Glenveagh and Cairn Homes – and an awful lot of smaller ones. Capacity in the industry to build the new homes we need is lacking. The slowing in commercial office building may free some resources. But for now the home improvement industry is going from strength to strength.
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It is another part of the puzzle of trying to solve the housing crisis. How do we direct resources at building the new homes which are so desperately needed, both for the home-buying and rental market? The lengthy build-up of the housing crisis unfortunately shows that solutions will take time. And this message is politically difficult to deliver. Instead, debate ends up in a predictable to and fro in which the Government claims it is making progress while the Opposition says it could get a higher level of building much more quickly. Neither argument is entirely convincing.
Changing incentives
Part of the answer is changing incentives – making it profitable for housebuilders to build new houses and apartments or some kind of smaller dwellings. This will require significant State involvement and in many cases the State effectively acting as developer and funder. Either way, builders will be needed to do the work and they will need funding and a strong supply of skilled employees.
The trade-off between retrofitting and new home building will become particularly acute after 2026, when under Government plans the bulk of the 500,000 homes due to be retrofitted by 2030 will be worked on
There is another twist in the story, too. As part of the green transition, the State is planning a major retrofitting programme. The solar panels and home insulation projects are part of this. But huge building resources will be needed here, too, for the huge job of retrofitting old commercial buildings and homes, and this will be another draw on an already overstretched sector. An official report last December estimated that 29,000 new professional and skilled or semi-skilled construction workers will be needed by 2030. This compares to 48,000 already employed – and the need to employ thousands more to replace those who retire. Hiking the new home targets will increase this need even more.
The trade-off between retrofitting and new home building will become particularly acute after 2026, when under Government plans the bulk of the 500,000 homes due to be retrofitted by 2030 will be worked on.
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How do we get affordable houses built when there are all these other draws on the construction sector? The rise in interest rates and the cost of building threatens to entrench the problem further by making new building less profitable for private developers and more expensive for the State. The home-improvement trade looks to have the momentum to keep on gong – but accelerating new home building is a really big task. For now, while the older group continue to dicky up their homes, the younger ones will just keep on juggling their finances and hoping things improve.