Tuesday, 27 February 2018

Questions (35)

Barry Cowen


35. Deputy Barry Cowen asked the Minister for Housing, Planning and Local Government the status of the independent audit of residential construction costs; and if he will make a statement on the matter. [9731/18]

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Oral answers (6 contributions) (Question to Housing)

We have consistently said that the key to solving the housing crisis lies in supply. The key to supply is affordability and the key to affordability is cost. We have been conscious of the excessive costs associated with development levies, certification, credit or finance, and VAT. In April 2016, the Minister's predecessor and now Tánaiste, Deputy Coveney, said that he would need an independent audit or assessment of construction costs before he could confirm the obvious fact that was staring everybody in the face. Where is the independent audit? What has kept it? Why in God's name has it not been laid before the House in order for the Minister to be in a position to competently make recommendations that could reduce the cost of construction and encourage more building in order to improve supply?

I thank the Deputy for the question. Under the Government's Rebuilding Ireland action plan, my Department committed to undertaking a detailed analysis, in conjunction with the construction sector, to benchmark housing delivery input costs in Ireland in order to facilitate an increased level of housing output.

To advance this work, a working group, chaired by my Department, was established and has been specifically reviewing the delivery costs and viability for affordable residential developments in the domestic market. In parallel, the Housing Agency has been advancing a comparative analysis of international construction costs.

An executive summary of the working group's report was published last month to provide context for the review and update of the design standards for new apartments, which I will be finalising shortly. In summary, the report analyses each of the main input costs in order to make recommendations that may lead to economies. The inputs considered include: land; construction and build costs; professional fees; development levies and contributions; finance cost and development margins; and value-added tax.

Based on viability modelling, incorporating a level of development margin needed to secure development finance, one of the key findings of the report is that the viability of urban apartment schemes at affordable price levels is extremely challenging at present, while suburban housing schemes at similar price levels are marginally viable. The report points to a number of initiatives to address viability issues and therefore support increased supply.

Both my Department’s and the Housing Agency’s reports are being finalised at present and I expect to be in a position to publish them both shortly.

I have a simple question. The then Minister for Housing, Planning and Local Government, Deputy Coveney, announced a plan for an independent audit of construction costs in October 2016. Is the Minister surprised we have not had that yet? He mentioned other recommendations that emanated from special design groupings within his Department and in conjunction with other bodies and so forth. However, this was specific. This was the then Minister saying he needed at his disposal an independent audit of construction costs. He appointed a group to provide that in October 2016. By 27 February 2018 this Dáil has not yet seen sight of it even though it is thrown at us consistently when we suggest that in order to assist in addressing the cost of construction, many factors needed to be dealt with. These include, for example, development levies, certification, the cost of credit or finance and the VAT rate applicable to the construction sector.

Irrespective of whether the Minister agrees with it, the Government decided that it would be led by this independent assessment. That would be fine and we could deal with it if it were laid before the House. It seems a very long time. Is the Minister disappointed it has not been published earlier? Why has it not been published earlier? He already said that the other report could be available in six weeks. Maybe a similar commitment could be given in this area.

The Department's work in this area has been led by our independent study of construction costs. I have seen early drafts we have received in the past few months. We hope to have the Housing Agency's report on international cost comparisons next week. I anticipate that will show that we are not wildly out of line with other close countries such as the United Kingdom, France and Germany.

When we finalise the apartment guidelines, I hope to be able to publish the full construction cost study report, a summary of which was published a few weeks ago. As the Deputy said, many of the factors and difficulties the building industry is facing at the moment are obvious and they have informed policy decision making. For example, when we have looked at construction costs, we have moved to use more rapid build in social housing as has the private sector.

We have looked at proper planning guidelines, including taking costs out building apartments to make them more viable, such as the provision of car parking for apartment buildings, the number of units per core, dual-aspect ratio, height restrictions and so on. Other factors include: LIHAF funding; development levies and the costs faced in the sector; consistency across local authorities regarding the payments made by them; State payments when it comes to the building of social housing; home building finance Ireland which is the recommendation that will flow regarding finance for builders; the vacant site levy which has been increased; and now this new land and development regeneration agency. All these interventions that we have made and are making are as a result of the work the Department has done and also work done by the private sector. Given that builders and construction companies have found it challenging, these interventions will help them build apartments and homes at viable prices.

To bring it to a conclusion, will the Minister give a commitment to the House that this independent assessment and audit of construction costs will be published in the coming month to allow all parties and none on this side of the House to analyse and scrutinise that so that we can be in a position to make recommendations, perhaps including some that have already been made, but with the benefit of this report confirming our belief regarding the various contributors to high construction costs?

Nothing is delaying the report's publication. I intend to get it finalised and published as quickly as possible. I hope both reports will be available next week, but the Deputy might bear in mind that the Department is working on responding to this week's weather event, which is taking most of my attention this week.