‘Retaining Help to Buy scheme is critical first step in ensuring more homes are built’
CSO figures show there were 18,072 new dwelling completions in Ireland in 2018, representing a 25pc year-on-year increase. If this trend continues, the industry could deliver the Government’s stated aim of 25,000 completions by 2021.
However, from speaking to housebuilders, I know the next 25pc increase in output represents a much harder challenge, as there are a number of barriers to delivery, particularly in regional Ireland.
The launch of the Home Building Finance Ireland (HBFI) fund is the latest in a range of measures aimed at increasing housing supply to a sustainable level.
Other measures such as Help to Buy (HTB) have significantly contributed to output. We estimate around 50pc of the purchases of new starter homes in the market are enabled by the HTB.
However, most of the impact of such policy measures has been localised in the Greater Dublin Area. Regional SME housebuilders have been unable to deliver housing, particularly outside these counties despite Government policy.
A survey on access to finance carried out by RSM for the CIF found 63pc who sought to borrow from financial institutions in the last year reported difficulty in securing finance and this figure rose to nearly 70pc amongst companies with a turnover of less than €9m. The HBFI should address this difficulty.
In many regional towns with real demand for housing, the market value of the completed unit would be currently well below the ‘all-in’ construction cost. The banks can’t lend, so the builders can’t build.
The Irish Homebuilders Association has identified several additional measures that should aid viability, or, with a combination of initiatives, enable people to purchase more readily.
The retention of the Help to Buy Scheme – due to expire on December 31 – is a critical first step. We believe the Government should clarify its intentions now in order to provide the necessary certainty to builders, banks and purchasers to make supply viable.
The Government should also review the income limits of the affordable loan scheme operated by local authorities. Current income limits of €50,000 for single income and €75,000 for dual income couples mean the squeezed middle are ineligible. With the result this group is left renting and are locked out of the market because they are unable to save enough for a deposit.
In formulating an affordable housing scheme, Government could adopt a shared equity loan scheme for specified categories of first-time purchasers and housing types.
Most people agree local authorities must start building again and the housebuilding sector will be at the forefront in this delivery. The local authority should offer the lands by licence, requiring delivery of a specific number of housing units at affordable prices on the open market.
This method would streamline the procurement process that can often take two years to complete before building commences whilst ensuring local builders can compete and ultimately deliver compliant housing units.
An easy win could be an extension to the development contribution rebate scheme countrywide for housing developments in excess of 10 houses and a maximum sales price of €300,000.
In addition, the roll-out of a standardised time-limited bond that all local authorities adopt is required. At the moment, each local authority has differing and sometimes unnecessarily prohibitive demands including “open ended” bonds the insurance and banking industry will not provide. Some local authorities require lodgement of cash-only security that builders must meet invariably with equity with interest rates of over 10pc generally. This can be the difference between securing finance or not.
Finally, there are several utilities that all affect housing and this complexity can delay delivery. The Commission for Regulation of Utilities recently granted Irish Water authority to charge housebuilders a flat rate of more than €5,000 upfront per house. However, the CRU did not set out any performance indicators, such as mandatory timeframes. Some housebuilders have reported 16 weeks-plus waiting times for a decision.
Irish Water should also agree a funding mechanism so a portion of the cost of services to land banks is shared. Currently, the entire cost of the improvements can be levied on the initial housebuilder at the outset.
Increasing housing supply requires a combination of many policy and regulatory measures. From the housebuilders’ perspective, where they can access development finance and there is viability, they are building.