The news from the Central Bank that the Government is on track to hit its target for home completions this year is welcome. According to the Bank’s latest quarterly bulletin some 35,000 homes will be completed this year, ahead of the target set in the Housing for All strategy of 34, 600, rising to 36,500 and 37,000 in 2025 and 2026.
There are even grounds for optimism in the bulletin that these later targets will be hit as there are over 58,000 cumulative planning permissions in the pipeline that have been granted since 2019 but have not yet progressed to commencement stage. The bank tempers its optimism by saying that the forecasts are conditional on limited delays in the planning system and improved connection times to utilities.
These caveats – and the fact that the gains may have been partially achieved as a consequence of problems festering elsewhere in the economy-– are unlikely to stop the Government claiming its housing plans are finally coming good.
One of the problems is the slowdown in the commercial property sector which has freed up labour and other resources for the residential construction sector. The commercial property slowdown is driven in part by the growth of home working post the pandemic but also by retrenchment in the technology sector. The consequences of this will take time to emerge but ultimately somebody will have to foot the bill. In the first instance the most likely candidates are financial institutions and a range of investors.
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The news on housing completions also disguises another significant change in the market, which is a rethink by the private investment funds who have driven much of the build-to-rent market over the last few years. They account for around one in five new builds.
The cheap money that drove these projects has dried up as global interest rates rise. The departure of at least some of these funds will not necessarily be mourned - but someone will have to step in to fill the funding gap. The Banking and Payments Federation, which represents Irish lenders, believes it will have to be the Government.
The increase in the supply of new homes is welcome, but needs also to be kept in context. The Government’s own Housing Commission believes that something in the region of 42,000 to 62,000 houses a year are actually needed. Updated population forecasts due from the ESRI are also likely to underline the need for yet more housing to be built. And significant questions remain about what type of houses are being built, where they are located and what they cost to buy.
Government policy is aiming to tackle these issues, too, but this is clearly a long-term project. While pointing to the progress made, Ministers also need to recognise the distance still to be travelled and the policy questions still to be answered.