The report on defects in apartments published on Thursday is a damning indictment, were it needed, of widespread building practices during the Celtic Tiger. They immiserated thousands of blameless homebuyers and now leave little more than a bill for billions of euro in their wake.
Even though the contours of the scandalous practices were well known, the report is still astonishing. It outlines how, when more building was going on than at any other time in the history of the State, vast numbers of professionals basically didn’t know what they were doing — or didn’t care. It’s worth quoting at length:
“The common thread [to defects] seems to be an overall lack of understanding of the complexities of constructing these buildings in accordance with the Building Regulations in place at the time, inadequate supervision and inspection, together with a lack of experience and lack of coordination of relevant construction information.”
This “appears to have run through construction professionals, contractors and subcontractors, developers, insurers, financiers and lenders and all parties involved in the development of purpose-built apartment and duplex developments.” It details ineffective or absent fire stopping, inappropriate cladding, building layouts that didn’t match fire safety certs, movement in foundations, cracks in substructures, water ingress through walls — the list goes on.
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There was poor selection of products, misuse and poor installation of some materials and the omission of others. It conjures the image of drive-by inspections and systems of regulatory oversight that were constructively indifferent to outcomes: “It appears in most cases opinions of compliance were provided on the basis of non-invasive viewings at completion, without any inspections during construction.” Enforcement of the system, it pointedly notes, was in the hands of local authorities.
To anyone who has opened up a cavity wall in a boomtime apartment and been confronted by an absence of fire stopping, or seen the balcony of their apartment crumble, or lay sleepless worrying if their family is safe in their home, this is not news. But across its 260 pages, the report definitively measures and defines the problem to the greatest extent to date.
[ Builders guilty of constructing homes with defects should pay — advocacy groupOpens in new window ]
So, what to do about it? There is a significant legacy from boomtime building defects — and it is structural in more than one sense. More than many countries, Irish household net worth is tied up with the value of housing assets, be they your own home or an investment property. The longer term legacy for those encumbered with a defective apartment, their standard of living, and the value of their estate in retirement and for their children are big things that the State should worry about.
Also, given how widespread the issues are — up to an estimated 100,000 units — there is now a question mark over the suitability of a not-insignificant portion of the housing stock — apartments built in or around the boom. There are about 2 million homes in the country; about 200,000 are flats or apartments, and just under 120,000 are purpose-built flats built from 1991-2016. As a proportion of the total it is not massive, but it is a large majority of purpose-built apartments and many of these are in densely populated urban centres. To maintain the integrity of the State’s stock of homes, remediation is needed.
The owners, who invested in their most expensive purchase in good faith (often mortgaged up to the gills at inflated boomtime prices), now find themselves stuck. The report notes that 82 per cent of those surveyed indicated they had been unable to sell their homes, or felt the presence of defects made it more difficult to sell. Many of these people understandably bought into boom-era bromide about starter homes, and have been let down and their reasonable hopes and expectations betrayed. These homes have to be remediated in a robust way, with standardised results certified independently — and the report has useful recommendations in this regard.
Who should pay? Many thousands of homeowners have, in piecemeal ways, been paying already, on top of monthly bills. The State cannot remain indifferent to this. The report argues that consideration should be given to retrospectively applying any scheme to blocks that have been remediated or where work is in progress. That makes sense from a fairness point of view. As opposition spokesman, Darragh O’Brien argued for relief for homeowners.
[ Cost of addressing fire safety defects in apartments put at €17,000 per unitOpens in new window ]
So who else could pay? The report’s clear verdict is that a levy specifically targeted at the builders of defective apartments can’t be done; this is particularly galling for those living in apartments built by those who are still in the game.
The report does leave the door open to a wider levy — but with caveats: that it would hit builders who did no wrong, and risks driving up the cost of construction as it would be passed on to consumers. It may also be open to legal challenge.
A grant scheme is possible, but could be unwieldy; or the Government could step in directly and fund remediation works.
In the end, a blended approach may be the best way forward. The spectacle of the State stepping up — again, in the wake of the mica scheme (pricetag: up to €3 billion plus) — to pay for shoddy practices is likely to prove politically unsustainable. Some form of levy — perhaps a blanket one designed to raise funds for mica, pyrite, and now defective apartments — should be part of the solution. The report talks about something in the order of €80 million per year.
Using the taxation system can also help. The report estimates small landlords with one or two rental properties are the most exposed category of owner, facing a bill of between €753 million and €1.2 billion collectively. Investments they make can be written off against tax — perhaps more quickly, if it encourages faster remediation.
Between them, local authorities and voluntary bodies own an estimated 16 per cent of impacted homes — the State may well fund these directly, or through grants. Meanwhile, a solution must be found that allows for the quick and safe remediation of the 25 per cent of apartments where owner-occupiers are in situ.
There will be a push to get some funding for owners in Budget 2023 — of that there is little doubt. But the complexities of designing a scheme mean the State’s portion will likely come in later budgets. O’Brien’s credit in the bank with officials from the Department of Public Expenditure is probably not great, so a little breathing room may be needed before he goes back to that well.
Whatever the outcome, the report forensically details the extent of the malaise left by the Celtic Tiger and its shoddy legacy. There has to be a cure applied.
