If State doesn’t start building houses on its land we face a slump – experts
‘Difference between what we need and can afford’
THE Government needs to start building homes itself on State land to meet demand without risking another housing slump, experts have said.
Instead, the purchase of social and affordable homes from private developers is among Government measures that are skewing the market, they say.
Earlier this month the Central Bank said Ireland needs 34,000 new homes annually until 2030 to meet demand, due to population growth and increased migration.
This seemingly contradicts figures from the Housing Agency published in 2017 which suggested 16,200 would be needed annually.
There is a gap of around 19,000 homes between what the housing market can provide without damaging itself and what Irish people need, and the Government needs to step in to bridge it, experts say.
Dr Lorcan Sirr, senior lecturer at Technological University Dublin, told the Irish Mail on Sunday there was a difference between housing need and what the market can provide without causing another housing slump.
If 34,000 new houses came on the market, there would not be buyers for all of them, which could hurt the housing market.
‘In terms of demographics, the Central Bank is absolutely right, we need more than 30,000 homes a year, but there’s a difference between the number of people that need houses, and market demand, which is the number of people who need houses and can afford houses,’ Dr Sirr said.
‘Last year, we built 18,000 houses, and about half of those came on the market and already prices are beginning to stabilise.
‘If builders built 30,000 to 40,000 houses a year, they wouldn’t be able to sell them. Builders don’t build when prices fall, so you’re never going to get that many houses built. When prices began to stabilise this year after we built around 10,000 to 15,000 homes last year, building levelled off. They don’t build in a falling market, why would they?’
The number of houses that can be brought onto the market every year without negatively affecting the sales price is called the
‘absorption rate’, which stands somewhere between 15,000 and 34,000, Dr Sirr said.
A quarter of the 18,000 built last year were one-off houses that won’t appear on the market, typically people building for themselves.
Another quarter were for the State, for social housing and housing associations. This left under 10,000 houses on the market last year, and already house prices are beginning to level off. So, while there’s only a market for 10000-15000 a year but there’s still a need for more than 34,000.
Dr Sirr said: ‘The gap between the 15,000 and the 34,000 is where the State needs to step in in terms of affordable housing.
‘Housing for people who have too much money for social housing but not enough money to be able to afford a private house, households between €36,000 and €80,000 a year.’
He says the answer is building houses on State land. It is estimated that about 114,000 homes could be built on 3,000 hectares of land owned by the state across the country.
However, the State has been favouring the purchase of homes from developers instead of building directly, effectively
bidding against private buyers for housing and affecting the market.
Architect and housing policy expert Mel Reynolds says the single biggest non-household entity purchasing homes is the State.
‘Last year, they bought 2,000 new houses from developments,’ Mr Reynolds said. ‘[The State is] not bringing on their own separate supply, they’re sitting on land they seem intent not to build on. The State, through various initiatives is adding to rent inflation and [competition}.’
Orla Hegarty, housing expert and professor in UCD’s School of Architecture, Planning and Environmental Policy, added that the type of home being built is key.
‘The first priority shouldn’t be estimating demand,’ she said, ‘it should be a strategy for building good size affordable family homes . . in more dense communities.’