Dáil Éireann Debate, Wednesday - 5 May 2021
30. Deputy Eoin Ó Broin asked the Minister for Housing, Local Government and Heritage the steps he plans to take to bring down the all-in cost of residential development in order to make homes more affordable for working persons in view of the 2020 and 2021 reports by an organisation (details supplied) on the real cost of house and apartment delivery. [22934/21]
View answerAs the Minister knows, the Society of Chartered Surveyors Ireland, SCSI, has produced two reports on the real cost of housing and apartment developments last year and this year. These have confirmed the growing gap between the all-in development costs of residential developments in the private sector and the sales price. Separate from specific measures targeting eligible affordable home buyers, will the Minister outline the work he and his officials are doing to address the key viability and affordability gap that the studies identified?
I appreciate the opportunity to address this matter. I met virtually with the Society of Chartered Surveyors Ireland and its representatives went through the report with me. It is a very informative and good piece of work, which the SCSI did with my senior officials. We have taken that work on and are continuing some collaborative work with the organisation. The reports, Real Cost of New Housing Delivery 2020 and the Real Costs of New Apartment Delivery, published in 2021, set out the typical costs associated with residential delivery. The reports identified the constituent costs, which include construction, land, developments levies, professional fees, selling costs, finance and VAT.
A multipronged collaborative approach across government and industry is required to address and reduce the wide-ranging costs involved in residential delivery. Interestingly, the report found apartment developments of between five and eight stories recorded reductions of between 2% and 9% in overall cost delivery in that area where the focus was on off-site build and delivery. I would like to see more of that.
Both reports demonstrate that construction costs account for almost 50% of the delivery costs. Issues relating to construction costs are generally a matter for the Department of Public Expenditure and Reform but the Department of Housing, Local Government and Heritage has an input in that area.
An innovation and digital adoption team to improve industry productivity across seven actions has been established. My Department is actively engaging on these initiatives which aim to improve efficiency and reduce construction costs, while achieving compliance with building regulations and other minimum quality standards. Separately, I am bringing forward reforms to the planning system, such as mainstreaming aspects of the strategic housing development process, which will conclude once the extension granted by the previous Minister has expired, reviewing the judicial review process and developing new e-planning initiatives, which may contribute to some reduction in holding times and costs and provide greater clarity around procedures.
This issue has a wider relevance than just first-time buyers. Last year, only 1,000 of the 5,000 or so real social homes that were delivered were directly delivered by local authorities and approved housing bodies, and more than half of them were turnkey properties. I do not object to turnkeys. They deliver social homes but the price paid is far higher if they are acquired when all-in development costs are rising. Some of the figures in the SCSI report are startling. All-in development costs for a standard two-bedroom apartment in Dublin city range from €410,000 to €521,000.
In fact, at the very top end one is looking at €618,000. The biggest areas of cost growth are finance, land and other aspects of the soft costs, so that there has been some increase in construction costs. Could the Minister outline specifically what the Government is doing, both his Department and his colleagues, to tackle the dramatic increase in land costs and finance costs because they are driving the rising gap between viability and affordability in the private sector, especially in the city?
I am pleased the Deputy mentioned that. There are a few initiatives. One very significant one was the creation of the Land Development Agency, which ensures that State-owned land is used productively. We bring land that has not been previously identified or used for housing into public use, and if we bring more land like that at a greatly reduced cost in many instances, effectively a zero value, that will have a positive impact on the overall cost of land because in many of those instances, the cost of land will be near zero as a result of the 90% affordability threshold we will be setting along with the 10% affordability element. There are other measures but the Land Development Agency will be significant in terms of ensuring that we use State-owned land productively at a much lower cost than normal land prices.
The Minister is being wildly optimistic about the impact of the Land Development Agency on the price of private land in the private sector. We will have a row about the Land Development Agency when the Bill comes before the select committee in two weeks.
The real problem here is that the Minister does not seem to understand the question. Due to high levels of speculative investment, particularly in the inner city but also at suburban land sites, land prices have gone up dramatically again. The SCSI report shows an increase of between 40% and 60% since its previous study in 2017. That adds enormously to the cost of delivering the homes and then selling them. The Minister is aware that his constituency is particularly badly affected and median house prices are between €460,000 and €540,000. Escalating land prices are part of that. Is the Government taking any initiatives beyond the Land Development Agency to bring down the cost of finance, land and construction in the overall private sector, which is still ultimately responsible for 80% to 90% of construction, including PPPs, turnkey projects and smart finance?
I fully understand the question. As the Deputy knows there are many aspects to this. In terms of direct interventions, the local infrastructure housing activation fund, LIHAF, is one which involves the direct allocation of €200 million to provide for public infrastructure. There are issues with the planning process including delays and continued objections. There are some infamous delays affecting social and affordable homes on State-owned sites across the country.
A group within the Department is working with the industry on costs, including those relating to construction. The SCSI report was interesting in that regard. It pointed to reductions in certain types of building. We need to look at what we are delivering in terms of off-site construction, smarter buildings, the Construction Industry Register Ireland, which we are bringing forward as well and also with regard to registration and building standards. I would not underestimate the impact of what the State can do in the delivery of affordable homes in bringing down costs. The purpose of the Affordable Housing Bill we published yesterday is to bring down cost for the people who need it most.
