Dáil Éireann Debate, Wednesday - 29 June 2016
8. Deputy Ruth Coppinger asked the Minister for the Environment, Community and Local Government if he has completed any independent research into the component costs of building a new house and renting residential properties; and if he will make a statement on the matter. [18472/16]
View answerThe cost of a house emerged as a key issue in the Committee on Housing and Homelessness. If we want to be able to supply 140,000 families with housing, plus those who are not on the social housing list who are paying massive rents and need affordable housing, the issue must be tackled. Will the Minister get independent research on this issue as he takes over in his Department and not just that of the Construction Industry Federation or from surveyors? I refer to research from workers who work in the industry as well.
I thank the Deputy for the question. In the context of social housing provision, my Department has undertaken analysis in respect of the average costs associated with the delivery of a range of differently sized social housing units, both in terms of construction costs and all-in costs. These costs are based on an analysis of returned data from local authorities on social housing schemes and as such it is on actual costs. Nevertheless, information on the average cost of current social housing developments of various sizes is preliminary at this stage and will be better informed when a greater number of projects have completed the tendering stage over the months ahead. My Department has also had an input into work led by the Department of Finance on construction costs which was undertaken under the Construction 2020 strategy.
In general terms, the cost of delivering housing is largely dependent on the type, size and geographic location of the development concerned, the availability of services, access to infrastructure and on the contractual arrangements leading to its construction. Against this background, construction costs can vary greatly throughout the country which gives rise to difficulties in developing more accurate costings for the various house types in the absence of site-specific and evidence-based information. The prevailing economic conditions appear to suggest that without intervention, housing costs, including social housing costs, are more likely to rise rather than fall during 2016. This is due to the fact that, in general, housing supply currently falls significantly short of housing demand and construction input costs are subject to inflationary pressures as the construction industry transitions from under-activity over an extended period to significant growth in all sectors, including residential, commercial and civil construction.
On residential renting, the market has grown significantly in recent years and now accounts for around 20% of total households. In Dublin, rents are back to 2007 peak boom-time levels. While the most recent Residential Tenancies Board rent index shows that in the first quarter of 2016, rents have continued to increase, the rate of growth has slowed in most sectors. It is anticipated that this is the first stage in a welcome stabilisation of the rental market as the measures introduced through the Residential Tenancies (Amendment) Act 2015 begin to take proper effect.
In accordance with the programme for a partnership Government, my Department is preparing an action plan for housing to be finalised in the coming weeks. In that context, one of the issues being considered is the scope to reduce construction overheads in a manner that will support an increased level of housing output into the future. The action plan will also contain a commitment to publish a strategy for the rental sector this autumn, which will chart a path for the future of the sector.
The Minister of State is over his time.
One more line might just help the answer. Built into the plan is a gathering of information from all sides and stakeholders on the costs of construction. That includes those in the business, those who work for developers and those with various skills as well as departmental officials across Government. There is a lot of analysis there and we going deeply into the figures to see what we can do.
That was a great rehearsed reply but it did not answer my question. The Construction Industry Federation representatives came crying into their soup before the Committee on Housing and Homelessness and argued that 36% of the cost of a house was going on taxes. Thus, they argued that the Government should reduce VAT and taxes on builders. However, 36% is not the correct figure. It is 16% according to chartered surveyors. This demonstrates the need for independent research. In the programme for Government, there is a huge array of tax reductions for developers and there is no evidence that it will lead to housing being cheaper. In fact, quite the opposite is the case. All the evidence suggests that previous tax incentives were simply pocketed by developers and not passed on to unfortunate buyers. There is also a hoarding of land taking place while owners wait for house prices to increase. The developers are on strike and should not be rewarded with a range of tax cuts as indicated in the programme for Government.
If it is of help to the Deputy, I note that the programme for Government and the action plan for housing being developed are focused on increasing the supply of housing both in the private and social markets by a combination of all the various arrangements.
Part of that is ensuring houses are affordable and available to people in the right place, facilitating them where they want to live and work. If it was the case that developers were ripping people off and making a fortune, more than 12,000 houses would have been completed last year and supply would not be an issue. However, it is. There is something wrong across the sector. The aim of the programme for Government and any action plan developed is to find the barriers which are affecting supply across the system, change them and increase the supply of affordable, quality housing to the previous level. That is our sole ambition. It is not to make anyone rich; rather, it is to provide accommodation, which is what every Deputy has been seeking.
The Deputy referred to tax changes and so on. We are committed to considering everything. Everything we believe will help to increase the supply of affordable housing is on the table.
First, the Minister of State should stop using the words "housing market". Fr. Peter McVerry also said this. There is no housing market. The market led us to this problem in the first place. Second, the Minister of State should accept the fact that developers are deliberately not building because it would not be profitable enough. The CEO of NAMA let the cat out of the bag when he stated developers were not happy with a profit of €20,000 on a €300,000 house and were withholding on building until prices increased.
I was disturbed when the Minister of State did not use the words "local authority house building" in answer to any of today's questions. Clearly, he is not looking to local authorities to meet housing need. It is not the case that dealing with supply on its own will be enough. There was plenty of supply during the Celtic tiger boom, but it was unaffordable for most. We need a supply of affordable and social housing, not just private housing which would not be affordable for most. Local authorities can build houses more cheaply by using direct labour and cutting out the profit percentage and motive. This will keep the cost down, not off-balance sheet building or encouraging private developers. Using local authorities would cut out all of the profiteering by private developers. That is how we should supply housing with the money available to us.
I will make a couple of observations. The Deputy only hears what she wants to hear. The Minister, Deputy Simon Coveney, and I have repeatedly said we wanted to increase greatly the supply of housing being built by local authorities. Has the Deputy missed that?
I have missed it all morning.
One of the Minister's first acts was to meet all of the local authorities to ask them how they would ramp up supply and what would be needed across government to make that happen. As the Deputy may have missed that, I will be clear - that is what we want to do. However, we also recognise that we need more houses across the system. The Deputy might not like calling it a housing "market", but it is my understanding that, anywhere there is a sale of goods, it is called a market. There is a housing market and we need to activate it to increase supply. That is what we are trying to do via a combination of social, private and rented housing, including student accommodation. I meet people involved in the building industry on a daily basis-----
I am sure the Minister of State does.
-----young people of all ages who want to use their skills. They want to work. They are not sitting at home waiting to increase profits. They want to work on sites. I accept that a percentage are involved in the speculative market, but the majority want to go to work and build houses and will settle for a small margin on that work.
Then why are they not doing it?
Exactly. That is what we are trying to fix.
They are waiting for prices to increase.
There is a range of reasons across the system. We will change the situation. That is our job. It will involve a major ramping up in the supply of social housing delivered through local authorities and the rebuilding of the capacity of the Department and local government to make this happen.
I thank the Minister of State, but we are way over time. This is Deputy Ruth Coppinger's question, but Deputy Jan O'Sullivan is allowed to make a small point.
Yes. Other Deputies are allowed to contribute in taking ordinary questions.
As I have been told.
If the availability of affordable land is one of the problems in local authorities building houses, will the Government consider implementing a recommendation made in the Kenny report of more than 40 years ago, one that was considered to be constitutional by an Oireachtas all-party committee? I am referring to land being made available at its existing zoning level price, usually agricultural, plus 25%. That would help to provide land for local authorities.
I call Deputy Ruth Coppinger. I will take the questions together, if that is okay with her.
That is marvellous.
Only the Minister of State can contribute now.
My apologies.
Access to land for a range of developers, as well as local authorities, is one of the barriers. In most cases though local authorities have sites available, but there are delays in the system, issues in accessing finance, off-balance sheet concerns, etc. Affordable land is an issue for everyone in the long term. To deliver affordable housing, we need affordable land. There is some evidence that councils are purchasing land and trying to do the right thing at the right time.
The Kenny report made recommendations on the issue of affordable land.
Yes. In general, access to land at the right price is an issue for all providers. It has a major effect on the end price.
I must allow Deputy Ruth Coppinger to conclude.
The Minister of State has to conclude.
Are we out of time? My apologies. We will move to Question No. 9 in the name of Deputy Mick Wallace which I understand is being taken with Question No. 18.
May I clarify a matter? I contributed-----
Twice.
-----for 30 seconds.
Yes, but Deputy Jan O'Sullivan was within her rights to ask a brief question under the rules agreed to by the House. I must interpret the rules accordingly. If Deputy Ruth Coppinger has-----
That does not take away her right to ask a second supplementary question.
I am sorry, but I am talking to Deputy Ruth Coppinger.
Deputy Mick Wallace is being help up.
If Deputy Ruth Coppinger has an issue with this, I ask her to contact the Ceann Comhairle's office.
No. I just asked how many-----
The Deputy received-----
I was not given a second chance to revert.
Actually, the Deputy did. We gave her a lot of time. Deputy Jan O'Sullivan was within her rights to ask her question.
I am not trampling on her rights; I am just asking about mine.
May I make one point? In my capacity as Acting Chairman I seek to help the House.
A volunteer.
I am interpreting the rules as they are laid out. If any Member has an issue with them, I ask him or her to contact the Ceann Comhairle's office.
