Sir, – Eoin Burke-Kennedy compares the detailed breakdown of housing construction costs in the recent Mitchell McDermott report for the Department of Housing to the justification Aer Lingus might have put forward for its fares in the 1980s, before Ryanair showed it could be done for a lot less (“What we really need is a low-cost Ryanair for housing”, Business, Opinion, October 28th). However, he departs from the Michael O’Leary approach himself by not questioning the most obvious factor inflating costs, over-reliance on apartments, as he believes they are “what Ireland’s low-density, under-supplied housing market has been crying out for”.
They are not what most would-be first time buyers are crying out for, nor are they likely to be, unless extraordinarily effective Ryanair-type economies or State subsidies are applied selectively to reduce their prices below those for semi-detached or terrace houses. Mitchell McDermott estimate the production cost of apartments in Dublin at €550,000 to €590,000, and those of semis at €450,000, even though the semis have around 30 per cent more floorspace than the apartments.
New apartments are thus much more expensive than new conventional houses, even more so if priced on a per square metre basis. Mitchell McDermott estimate costs per square metre at €4,100 for semis, and €6,040 to €6,500 for apartments. If one assumes the cost per square metre for a semi and a terrace house are similar, the cost of a two-bedroom terrace houses in Dublin with the same floorspace as a two-bedroom apartment would be around €370,000.
This is still much too high, but currently we are in a sellers’ market, and these are generically favourable to overpricing. While it might take a long time for overall increases in supply to moderate prices, a more selective increase designed to create a balanced market in lower-cost housing could work more quickly. If current ratios between the cost of different house types do not change much, this would in practice mean policy changes to promote small terrace houses at volume.
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These would be efficient, in the sense that more units would be produced for a given amount of construction resources or government finance, and would help control the price of small second-hand terrace houses, another option for first-time buyers. Preferably, such policies would promote extendible houses, or at any rate ensure they had generous storage space, by requiring unobstructed internal roof space, using purlins instead of conventional roof trusses.
A number of cost calculations similar to the Mitchell McDermott ones have been carried out from 2016 on, mainly by the Society of Chartered Surveyors (SCSI). They all calculate the cost of semis and apartments, presumably on the basis that most new housing in Dublin falls into these categories, but none calculate the costs of conventional small terrace houses.
If they had calculated the costs of what could be produced, as well as what was being produced, the choices available to governments might have been clearer. The density of terrace house developments are typically lower than those of apartments, but higher than semis or detached houses. As against this, conventional houses use more timber, which is renewable and stores carbon, and less steel and concrete, which are carbon intensive. At present, the question of whether the net advantages of apartments outweigh the €200,000 extra cost, relative to a terrace house of the same size, does not even get asked.
It may be difficult for specialists to emancipate themselves from the assumptions of their own industry to this extent, but it shouldn’t stop the media, or indeed anyone else, from doing so. – Yours, etc,
Dr NICHOLAS MANSERGH, MIPI
Cork.
Sir, – The recent Total Development Cost Study report from the Department of Housing, Local Government and Heritage appears to have been accepted as evidence that the costs of building apartments in Ireland are so high as to make them unaffordable for most people. However, even a somewhat casual read through the report shows that this need not be the case. The report uses costings and examples that tend to raise the costs of apartments relative to houses. For example, it compares the cost of land for a three-bed semi in North County Dublin with land for an apartment block in central Dublin – this rather obviously makes the apartment more expensive than if it were to be built in the same or a similar location to the house.
But there is more. Why should (according to the report) finishes and fittings for a two-bed apartment cost 70 per cent more than those in a larger three-bedroom house?
Why should the cost of services and “preliminaries” for an apartment be almost twice those for a house? Why is the cost of a parking space almost two-thirds higher in one type of apartment block than in another? Why are professional fees nearly three times higher for apartments than houses? Why are sales and legal costs almost one-third higher?
The report has little in the way of answers to these questions – these are the figures industry gave to the authors, so there is nothing more to be said.
Really? – Yours, etc,
MARK HAYDEN,
Sauvian,
France.