ESRI Report underlines needs to reduce barriers to house building

The ESRI’s latest Quarterly Economic Commentary underlines the need for measures to reduce the barriers to house building, according to the Construction Industry Federation (CIF).

The report highlights the need for 25,000 houses to be built in Ireland per year, but the CIF estimates only 10,000 units will be built in 2014.

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Speaking about the ESRI report, CIF Director General Tom Parlon said, “It’s positive that once more we are seeing the ESRI confirm that 25,000 houses need to be built in this country every year.  Unfortunately we are a long way away from that figure.  The past three years have seen successive record low levels of house building take place.  The total number of units built dropped to only 8,301 houses and apartments last year and we don’t expect more than 10,000 units will be built this year.

“There’s no question that more house building would take place in this country if builders could overcome the barriers that are currently blocking their progress.  Builders want to build.  But there are a large number of hurdles that are preventing that from happening.

“Builders can’t get access to usable finance for example. The banks have only started lending for housing projects in the last couple of months and even now the terms and conditions attached don’t make it impossible to move forward with viable projects.  Construction companies are not in a position to come up with 30 – 50% of the equity that the banks now seem to be demanding.  If they could afford half the project price they wouldn’t need a loan in the first place.

“Another problem is the cost of house building.  House prices have come down considerably since the boom, but building prices haven’t.  The Part V obligations for social and affordable housing are still at pre boom levels while the development levies have only marginally dropped in the case of some local authorities.

“There are also issues with planning permission.  A lot of the permissions that exist at the moment are for apartments and people are not looking for apartments in the current market.  If a builder wants to change that planning permission from apartments to houses then they have to reapply for new planning permission.  That can take as long as a year and there is no guarantee that it will be successful.

“So you can see why we have such limited house building taking place.  If more houses were being built then there would be more jobs created, more tax generated for the Exchequer and it would reduce the pressure on house prices in some parts of the country.

“The Government has the opportunity to address some of these issues in their forthcoming strategy for the construction sector.  Hopefully they will remove several of these barriers because it takes time for housing projects to move from being drawn up to completion.  The longer the barriers remain, the longer it will take for the market to start building sufficient numbers of houses again,” Mr. Parlon concluded.