Over-regulating new design specs will make development unviable
Published in the Irish Times Friday 17th July 2015, by Garrett Sherry
The shortage of available housing in Dublin is now acute. It is creating enormous social problems, not least the very worrying rise in homeless children and families. It is also fast becoming a major economic concern.
Undersupply and rising prices are putting severe pressure on young families, jobseekers and workers. They are making the capital a lot less attractive to those thinking of relocating there.
The lack of suitable and affordable housing has become the biggest constraint on the region’s potential to grow and create quality jobs. It is making it more difficult for companies to attract and retain a skilled workforce. It is indirectly driving up business costs.
We’ve been here before. Businesses experienced the adverse impact of rising housing costs in the Celtic Tiger years in the form of higher wage demands. Dramatic house-price inflation was a key contributor to the loss of Ireland’s competitive edge. It fuelled a wider, unsustainable bubble beyond just the construction sector, which in turn resulted in a deep and painful economic adjustment. There is a danger of history repeating itself.
Growing numbers of current and would-be workers are again desperately competing for a dwindling supply of properties. For many, finding a house is much more difficult than finding a job and this is a bigger problem for employers than it used to be.
Traditionally, companies decided where to locate and the workforce followed. But in many sectors the talent is now deciding where it wants to live, based on quality of life factors, and firms are following them.
This poses a dilemma: why would you take a job in Dublin, even if it involved a pay rise, if the hassle and expense of moving reduced your living standards? If Dublin is to succeed in the competition for talent and to prosper, it needs to get its house in order.
The city needs about 5,600 new houses a year, rising to 8,900 in 2018. But last year the supply was under 2,800 units. This unmet demand is getting worse. What can be done?
Firstly, the Government needs to invest much more in social housing. By delivering a greater number of social housing units, pressure will be eased on other parts of the private rental market.
The regulatory and financing burden for local authorities in social housing provision should also be improved by changes to VAT and how local government has to account for the property tax.
Secondly, apartment design specifications set by local authorities need to be reviewed. Recent changes to building regulations increased the cost of building apartments, but these are largely sensible and result in better homes. There can be no compromise on build quality and safety.
New and broadly sensible design specifications were also introduced by the Department of the Environment. However, local authorities were also given the scope to adopt additional specifications over and above those set. It is here that some Dublin local authorities have significantly added to the general national requirements, often dramatically pushing up the cost of construction in the process.
The design specifications cover issues such as minimum apartment floor size, standards for dual aspects, and minimum floor to ceiling heights. These are not construction regulation issues – they are enforced, additional design preferences. Experts from Property Industry Ireland recently advised the committee I chair in Ibec that additional specifications, which are over and above the national guidelines, add €76,000 to the cost of a two-bed apartment in Dublin city.
These inflated costs are undermining the economic viability of many apartment developments. As a result investment is directed elsewhere. This, in turn is curtailing the supply of homes.
We know the risks if policymakers just wait for a recovery in housing supply to happen.
Instead they must move to swiftly clear the obstacles preventing private investors from developing the high quality, affordable mixed-housing stock the capital needs.
We cannot continue with the same policies and expect improved outcomes. Without action to ensure an adequate supply, Dublin is going to struggle to achieve its potential as a great city in which to live and work.
Garrett Sherry is president of the Ibec Dublin and Mid-East Region and vice-president and general manager EMEA for Prometric.