Committee on Housing and Homelessness díospóireacht -
Tuesday, 3 May 2016

Society of Chartered Surveyors Ireland

Chairman

I bid the witnesses a good afternoon. They are very welcome. At the outset I wish to read the note on privilege. I draw the witnesses' attention to the fact that, by virtue of section 17(2)(l) of the Defamation Act 2009, they are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by it to cease giving evidence on a particular matter and they continue to do so, they are entitled thereafter only to a qualified privilege in respect of their evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. The opening statements that have been submitted to the committee will be published on the committee's website. Members are reminded of the long-standing practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable. I also remind those present to switch off mobile telephones or to put them on flight mode because the proceedings are being recorded and broadcast and mobile telephones interfere with that.

I welcome the Society of Chartered Surveyors Ireland, represented this afternoon by Ms Patricia Byron, director general, Mr. Micheál Mahon and Mr. Michael Cleary. I invite Ms Byron to make an opening statement.

Ms Patricia Byron

Thank you, Chairman, for the invitation to attend the committee. I am the director general of the Society of Chartered Surveyors Ireland. I wish to introduce on my right Mr. Micheál Mahon, who is in private practice but is chairman of the society's quantity surveying professional group. On my left is Mr. Michael Cleary. He is also in private practice and is a member of the planning and development professional group within the society. I would like to give a brief introduction and then I will hand over to Mr. Mahon and Mr. Cleary to talk about the technical side of this homelessness and housing debate.

The society is a professional body. We look after the charter for chartered surveyors in Ireland but committee members will also see a logo on the slides reading "RICS". We are a part of the Royal Institute of Chartered Surveyors worldwide, with a membership of approximately 100,000, all the way to the far side of the world and back. We see ourselves as being at the cutting edge of the property sector in the widest sense. The society encompasses a wide variety of disciplines, namely, quantity surveying, building surveying, mineral surveying and geomatic surveying. We look after anything from the land up. Also included are facilities management, the rental side and the property side. One will find auctioneers, valuers and technical surveyors are all part of this group.

The society is represented by public and private sector members. One will find our members in the Valuations Office, Ordnance Survey Ireland, the Office of Public Works, large construction environments, right down to offices and shopfronts in our local towns and villages where one will see differentiating factors when one sees our logo, Chartered Surveyors Ireland and the Royal Institute of Chartered Surveyors. It is a mark of excellence. It is also a mark of regulation and a mark of people who have spent four years doing a base degree plus three years for a professional qualification.

I also mention that, of our 5,000 members in Ireland, half are rural. I am sure most members will have come across them in one shape or other. There is a very rich vein of knowledge and qualification among our members. We have been given powers under the Building Control Act to register building and quantity surveyors in the country so we look after that.

We regulate them. We are the regulator in that regard, and we make sure they work to the highest standards.

In respect of the presentation, we believe it is a time for political bravery and we will set out a number of key points which we have also put in a number of publications in recent years. We warned about the lack of supply four or five years ago. We warned about the lack of building regulations, and we see where that has led us in that we are retrofitting and bringing housing back into a safe condition. We differentiated between quality of building standards and design, which is mixed up in many people's minds, and we believe it is time that the voice of the professionals in this space is heard. I will pass over to Mr. Mahon.

Mr. Micheál Mahon

As chair of the quantity surveying professional group, quantity surveyors deal with costs of buildings. While in the past there was a major focus, in light of the Central Bank loan to income ratio, on the actual cost of building houses, if we take it that there is a limit on the Central Bank rules on loan to income, to get equilibrium we need the developers to be able to provide the units and achieve a margin within that space. The problem across the industry is that we are relying a great deal on anecdotal evidence. To digress slightly, one of the measures we have sought for quite a while is a Minister for construction who can collate real-time, independent information and monitor the effectiveness of measures that are introduced. That is an aside but returning to the housing cost, we have undertaken a detailed study of housing cost across the greater Dublin area. That study will be issued by the end of next week but in terms of the methodology we adopted, we took ten live housing projects in which our members were involved and collated the data from that. I will not disclose the-----

Chairman

Are they 2016 projects?

Mr. Micheál Mahon

These are 2016 projects. They have either wrapped up or are currently on site. It is real, live data but, importantly, it is independent data; they are independent costs. We will have the report next week, and I will gladly go through the granular detail of that with the committee or any working group of the committee, but in simple terms the cost of providing a house is not very complicated and there are only so many key headings. To outline the key ones briefly, there is the hard cost of building the unit and, as our report will disclose, the actual cost of building the unit is less than 50% of the overall cost of delivery of a house to the public. There are then professional fees, levies, land and development costs, and the Part V levy associated with that, sales and marketing costs, and finance and margin, which we would put together in one bracket. The elements are there in terms of analysing them and we would gladly do that in granular detail with the committee once we have the report done, or we can talk about it today. That study is done. We can outline to the members what would happen if VAT was reduced to a certain proportion. We can outline in an independent manner the cost effects of measures that may be introduced.

That is the position on the construction cost side. Members may wish to ask questions later. I will hand over to Mr. Cleary.

Mr. Michael Cleary

My area of involvement is planning and also development, so it is at the coalface in terms of dealing with developers, the acquisition of land and the delivery of a variety of development projects.

To cut to the chase on some of the issues, in terms of private sector output, the number one issue, as members have heard previously, is the availability of reasonable construction finance. Regardless of whether the house is affordable or it is an open market transaction, the physical supply of housing is being affected by the issue of the availability of construction finance.

As everyone is aware at this stage, this is a legacy of what has gone on over the past seven or eight years when the banking system has not been available to support construction. One recommendation we have made a number of times in this regard is the provision of a specialist construction finance bank and while members have heard this suggestion previously, it needs real consideration. The policy objective behind its implementation would be to build up a strong banking system in that area that was a bit like ACC Bank or ICC Bank and targeted particular areas of infrastructure and of housing construction. One then would have expertise in that area that understood the risks associated with construction and could then build up relationships with the appropriate people to support that construction base. At present, the majority of construction finance is being delivered by the real estate investment trusts, REITs, through their building of the office schemes. Beyond that, however, it is being delivered by a variety of private equity houses and while it already has been well documented, the percentage rates of finance in this regard vary anywhere from 8% to 15%, which is simply unsustainable. We perceive this to be a big issue.

The second issue is the availability of housing land and there has been a variety of well-reported sales transactions for private land. We differentiate between what is a crisis in delivery of housing where there is a need and where there is a want - or a desire should I say - in that it is all well and good for someone to bid on sites and pay whatever price he or she can at open market value. If such people who have the capacity to buy that house make such a transaction, that is the private market in action and perhaps it should go its own way.

However, if there is a real housing need - as there is - we are of the view it should be supported in a much more rigorous way. One option available in this regard is through the housing associations. They have been filling a gap both over the past five or six years and going back a further 100 years when they were set up originally. They have advanced over time and offer a real specialist service in this regard. From the society's knowledge and my personal, professional knowledge of dealing with some of the larger entities, they have the capacity that would lead on to possibly freeing up the local authorities to do much more of the planning side, as well as the long-term strategic side in respect of the advancement of planning on the basis of strategic development zones. While not all the strategic development zones worked that well, some that have worked have worked quite well. If one takes the docklands in Dublin, for example, while residential housing is not necessarily happening there at present, a number of other projects have come to fruition on the basis of a strategic development zone, SDZ.

In summary, we suggest the planning system needs to be streamlined in order that when measures like SDZs are undertaken throughout Ireland, this would be the planning process, rather than local area plans, regional plans and then county plans every seven or eight years. This is a real area that can be focused upon. Moreover, the society suggests all this could be under the auspices of an entity, such as a housing Minister of a type, in which one would have a full-time professional Civil Service that would support it, would take those work streams and apply itself to it and which would report back to a central entity.

I will pick the example that is familiar to me of the Dublin Docklands Development Authority. When that body was set up originally, the entire area was derelict and were one to bring back someone who had departed this Earth in 1989 or 1990 and were one to drop them down on the north or south quays of Dublin, they would not recognise these areas in the docklands in particular. They would ask how this could have happened, would say it was unfathomable and yet this was done on the basis of a strategic development plan supported by the Dublin Docklands Development Authority. We understand that in the long term, the Dublin Docklands Development Authority did not end up in the manner in which it was envisaged but for the years it was in place, it did a majority of good work in the early days. We need its equivalent, albeit perhaps on a national scale, to deal with this issue.

As an introductory piece, the society would suggest we must be focused both on the immediate issues before us today and on avoiding being caught out from the planning point of view. We should look at the long-term issues in respect of the current demographics and the age profile of people in housing. Any person or entity taking on this role should have a remit to consider the long term and it is extremely difficult, when one carries out short-term planning, to deal on a long-term basis. One can quote reports going back 40 years, such as the Buchanan report and others, that had highly strategic views and which needed support over the lifetimes of multiple administrations to make them happen.

Finally, in terms of high-level issues, on the implementation and cost of public versus private housing, my colleague, Mr. Mahon, referred to a relevant piece of work that the guys on the quantity surveying side have done, and it would be of real benefit to anyone. If one wanted a stimulus, one of the immediate elements one would pick - it does not matter whether it is in the private or public sector - would be a reduction in VAT. In the middle of all that, in terms of granular provisions, it is what needs to be done to assist development. Another granular issue that might assist in development is a reduction in levies, as is the finance costs which I referred to earlier.

Ms Patricia Byron

We would be delighted to take the members' questions. To summarise the headings, we feel the system is broken. We believe the Government should have a Minister who will look after the whole area of infrastructure, land, construction, the financial model, market data and something that is scalable. Obviously, we need to build for what we need and the pipeline, no more than any other pipeline, needs to have foresight and sustainability. That would come within the Department allocated to draw these pieces together.

On availability of finance, the local authorities should bring together the infrastructure investment, and ahead of time rather than after the houses are half built. My colleagues mentioned reducing the VAT and streamlining the planning process.

On the rental sector, while there is a dialogue that seems to be along the line that if we go in the direction of rental, it will solve all our problems, as in many areas, there must be balance in that space. Much of the wealth of this country has been built up as people buy and save for their houses over 20 years, at which time they own them, their income stream has come down and that looks after them in their old age. If people do not invest in their houses, there will be another problem for the State in the long term. While we look at a sustainable and regulated rental sector, there must be balance included in that piece.

Chairman

At this stage, we will take questions. I am conscious that we are resuming in the early afternoon and the members might keep the questions as direct and as specific as possible.

Deputy Maureen O'Sullivan

I thank the society for its presentation. The first point I would have to take issue with is what Mr. Cleary said about the docklands. As somebody who is from a docklands community, still living there and representing it, that model is not to be totally recommended because it certainly made many mistakes, not least of which was the conflict of interest between the Dublin Docklands Development Authority, DDDA, and the banks and their lack of engagement with the existing communities in the area. My difficulty with them, through the strategic development zone, SDZ, has been the limited amount of land becoming available for housing, particularly social housing, if they had the space, and that brings us back to the 10%. I merely wanted to make that point and to get the witnesses' view as to whether more could be done on housing in the docklands because the space is there. My fear is that much of the housing will be for attracting in workers through foreign direct investment rather than for those whom we need to house.

My second question was on the hard cost of the building unit. The witnesses stated less than 50% is on the building. Could they provide a breakdown of the other 50%?

Chairman

I will take a few of the members together and come back to the society.

Deputy Mary Butler

I refer to the society's proposals to improve supply and sustainability. Will the witnesses expand on the reference to streamlining the planning process and the alternative social housing delivery model?

Deputy Bernard J. Durkan

First, on the point that the current crisis is a direct consequence of a lack of a national strategy, in my view it is a consequence of a bad national strategy in which a change took place approximately 15 years ago when there was an over-reliance on the private rental sector to deliver everything. During the boom, rents achieved the same level as mortgages. There is obviously a contradiction.

I might as well mention there was a reliance previously on two sources of income for those borrowing for personal house purchase.

One source was the building societies when they were mutual societies. The other source was the banks, which only came onto the scene relatively soon afterwards and we know what happened in that area. There was over-availability of finance which, in turn, resulted in a massive increase in house prices because the banks were competing with one another to find out which of them could give the most money with the least difficulty.

The next factor is the quality of housing. I would not regard some of the houses developed during the boom, particularly local authority houses, as an adequate response to anybody’s housing requirements.

The issue of margins has been referred to. They range from 15% to 60%. Somewhere in the middle, there must be some recommendation, or an area with which we can deal.

The last point is on policy options in the provision of affordable housing. Some of us have made numerous submissions in the past ten years or so to the Department of Finance, the Department of the Environment, Community and Local Government and the Department of Public Expenditure and Reform. Prior to that, we made submissions to Ministers in previous Administrations. There seems to be a difficulty regarding the crucial question of how to provide funding and the wherewithal for the local authorities to deliver in their part of the market.

Deputy Joan Collins

My question is similar to the one I put to the CIF. I seek a breakdown of the cost of building a house. I generally agree that there has to be a national strategy and that it has to come from somewhere such as a ministry. I have always argued that the right to property brings with it responsibility. It always seems to fail on this aspect in the private end of things. I would like the delegates to develop the idea of a national strategy. They will obviously have to take on board the fact that land is cheaper in some areas than in others and also the question of caps on land prices. They will also have to consider targeting areas where houses need to be built, in addition to private developers coming in at the back of this.

What is the delegates' thinking on how great the profit margin should be? Should it be 10%, 20% or otherwise? Keeping construction costs down over time will be very difficult. There will be people seeking extra money in the selling of materials, including cement. That plays a part. May I, please, have a breakdown of the labour costs involved?

Chairman

The delegates might like to address that series of questions first.

Mr. Micheál Mahon

On the issue of costs, particularly site costs, it is difficult to answer because a site in one area can be more expensive than in another. The Deputy raised a very valid point. The hard cost depends on housing specification, etc., but it is under 50% of the overall cost of the provision of a unit. The Deputy is 100% correct regarding the pressure exerted. That is why we advocate a Minister with responsibility for construction examine the overall output of the industry and likely demands. If we double housing output, which is what is required, there will be supply and demand pressures. We recently published a tender index for 2015 that indicated the level of tender price inflation affecting construction was 5.5% in that year. If we double housing output and private sector investment increases, there will be upward pressure on prices. The Deputy is correct in that regard.

Chairman

If a property is valued at €300,000 and the hard cost is €150,000, what is the breakdown of the latter between materials and labour? This is the specific point at which Deputy Joan Collins was trying to get.

Mr. Micheál Mahon

We will be issuing a report next week, but we have not gone down to the level of materials and labour. We have studied approximately ten housing projects across the greater Dublin area in 2016. Some of them are just being finished, while on others workers are still on site. We have taken the average hard cost of building. We have not broken it down into labour and material costs but costs such as the cost of foundations and walls. It is possible, however, to give a breakdown at the level of detail required.

Chairman

I share the Deputy's concern about building costs because I am frustrated. We are talking about building a house, yet, as a committee, we are not able to find out the labour cost in building one. This is the second group we have asked and it is somewhat frustrating because Mr. Mahon is saying inflation is to occur.

Mr. Micheál Mahon

Correct.

Chairman

The 5% inflation on the contract rate was quite high. We are trying to understand what is going on, yet we do not know how much the wage element of it is. Frankly, I am a little surprised that we do not know that because we would have thought that was significant.

Mr. Michael Cleary

I wish to add to what my colleague, Mr. Mahon, said. Getting that granular so that we are clear on it, the issue is that, unfortunately, it is not like the production of a motor car where this or that piece costs so much and there is someone on the production line. What has happened, particularly in the downturn, is that if people - we are not builders, but to give the committee a sense of how they go about it - go to build a house they will want someone to put in lights, skirting boards and doors, as well as someone laying the blocks. They will do a deal with someone. They do not care about their labour costs but they will want a fixed price for that. The reflection in what my colleague and his colleagues are putting together is what the rates for sub-structure and structure are. Within that there has to be an in-built cost for labour but the cost for labour may not reflect the true cost because in the last five or six years someone was just buying turnover, for want of a better term.

Maybe it is for the construction industry representatives, the builders as such, to give the committee more on that. However, one may ask what the labour costs are within that. The reality is, no more than anyone building anything, that one tries to fix a price with someone for it. The sense is that over the last few years, they were pricing below margin.

Mr. Micheál Mahon

Notwithstanding that, the industry has developed in that way. Builders do not seem to carry their own labour; there is a lot of subcontracting and outsourcing. We do not have that today but the society would be able to breakdown approximately the labour and material content of building a house.

Chairman

If you can forward that to us we would appreciate it.

Mr. Micheál Mahon

That could be done and we can forward it to the committee. As Mr. Cleary said, every house has different specifications, but we can certainly give the committee broadly what the labour and material percentages of a unit are.

Chairman

Thank you. I am sorry for interrupting, but the other questions were for your colleague.

Mr. Michael Cleary

There was a question about supply, particular to the docklands area. I cannot profess to have been involved in the original SDZ or the most recent one and the negotiations around housing supply there. However, my own observations from anything I am involved with down there are - and I think it has been alluded to - that there is a requirement not only from immediate local residents, but from a lot of people coming into that area working in various industries. The society would have an overall concern that Ireland Inc. is not being well serviced by the fact that we are not producing enough apartments, particularly in that location.

I cannot be specific about individual local needs, but one of the biggest impediments so far in the last five or six years in terms of that location, has been the finance cost and the uncertainty around not even the selling price but the rental stream. Long-term security of tenure should be to the benefit of the tenant and there should be certainty for the landlord. In that respect, we have really only been coming to terms with professional landlordism in the last five or six years since a number of funds have bought and invested in Ireland.

To answer that question in a nutshell, first of all, there should be greater densities in brownfield sites because we have to build up and there is no way we can build out. We can leverage the infrastructure there. Second, we believe the mechanism for delivering the affordable element of housing - not the commercial end - should be directed more towards social housing. They should be provided with the means to deliver on that. This might address a query from someone else in terms of how one funds the delivery of supply. One of the biggest impediments to large, not-for-profit housing authorities so far has been their capacity to leverage in and borrow money at low-level rates to develop housing on a real scale. That deals with a technical issue regarding off-balance sheet and balance sheet from the European EIS study on statistics.

In a nutshell, local authorities should probably not be the providers. The providers should be housing associations which have the skill sets and they should be supported. The construction costs for those will be tendered on the open market and that might address some of the issues in general terms. If the land comes at a very low cost to a social housing entity, it can build it for whatever the market rates are by the tendering process. If it has the skill sets and the people within its organisation to do it, that is how one gets transparency. I hope that answers the question.

Ms Patricia Byron

I will take the one on the planning process. It is the synched response. We believe there should be an independent review of the operations of the planning process. We believe there should be some sort of incentivised structure put within the process whereby those seeking planning are incentivised to produce the right information as determined by the review of the process and there should be a responsibility on and accountability by the authority to work within that process so it is a two-way street in terms of how it should work. There should be appropriate resourcing of systems. The authority has been there for a long period and any review would probably turn up a need for resourcing. That does not always mean more people but perhaps more skilled people and the required systems. I pass to Mr. Mahon if he would like to take the alternative social housing.

Mr. Micheál Mahon

Without giving our report away in advance, we did not deal with the cost of public sector housing from a quantity surveying perspective. In terms of private sector housing, a 1,200 sq. ft. unit, or something of that order, is costing well in excess of €300,000. We have also looked at the public sector and it appears that the equivalent cost in the greater Dublin area is of the order of €230,000 to €260,000 because one does not have certain elements the private sector has to cost. It is information that is perhaps useful to the committee.

Deputy Brendan Ryan

In terms of its proposals, the society has put in a comment in relation to NAMA with a question mark. Do the witnesses have some proposals in that regard or is it just a suggestion for us to think about?

Deputy Ruth Coppinger

The society is currently undertaking a house construction cost study, which is something that has obviously dogged everyone here. In the Irish Independent today, there is a report that the €300,000 starter house that everyone is talking about would actually cost €130,000. Mr. Parlon said in the previous session that it would be €150,000. It is just that. The committee needs to know what the component cost of a house is. What is the land cost, the profit cost, the labour cost, the finance cost and the development levies cost? It needs to be broken down. Hopefully, the society's report will do that.

The other issue is the reduction in VAT which the society is calling for and which the CIF also called for. The problem if one cuts taxes to get builders to build is that there is a social cost to that. It is less money for local authorities, less money for the public service and less money for social housing. I am completely opposed to it based on the cuts which have already been made to development levies, which the society also agrees with cutting.

Streamlining the planning process is obviously something we need emergency legislation for to speed up building. However, if the witnesses mean, as they indicate, that local authorities should not be able to put in their own safeguards with regard to development, there have already been cuts introduce by the Minister, Deputy Alan Kelly, in the previous regime to reduce, for example, the size of apartments. It is very dangerous to do things like that because in a few years' time, people will not be able to live in these apartments when they have children. It seems to be an array of the kinds of incentives and tax cuts for builders and developers that the witnesses are backing up and which have not served the country well in the past. What the witnesses said seems to be very similar to what the CIF said earlier. There does not seem to be anything new in calling for more cuts for developers.

Chairman

Does anyone else wish to speak? Everyone is happy. In the witnesses' proposals to improve supply and sustainability, they mention a review of Central Bank macro-prudential levels. Normally, when somebody asks for a review, he or she has something specific in mind and his or her own thoughts. The witnesses might elaborate what they are thinking of there.

Ms Patricia Byron

The society’s members are of the view that the review should be accelerated because it leaves uncertainty in the marketplace. While it is understood the Central Bank has decided on a review, the sooner it is done and it is clearer to the market, then it will offer some certainty.

Mr. Michael Cleary

It was inferred that there was a similarity between what we, as a society, said and what housebuilders said. In terms of streamlining and making the planning system more efficient, we are not talking about a reduction in the quality and the structures around the planning system. We are merely talking about a more efficient way of doing it. Without getting into too much granular detail, there are local area plans, regional planning guidelines and the county development plans which build up to a tier which is all merited. However, we are saying it might be more efficient to use much of that time to create strategic development zones where a majority of the issues, which would be dealt with in a detailed planning application, could be dealt with upfront, leading to a more efficient use of resources. We are not advocating a reduction in standards at all. Our profession is not constructing the houses but involved in overseeing a variety of the services which evolve with that. We do not support in any way any move that would reduce the quality of what will be delivered.

Mr. Micheál Mahon

On Deputy Coppinger’s question about costs, we are entirely independent of the house builders. If one breaks down the cost of building a unit, the hard cost is pretty much fixed. Our study has shown there is not a great range in the actual cost of building a unit. It leaves one with certain other items which one can review, VAT being one of them. We have stated in seminars previously that there is a concern - one which we share - of developers pocketing the proposed 3% VAT reduction.

Deputy Ruth Coppinger

Surely not.

Mr. Micheál Mahon

We are trying to provide independent analysis. If one goes back to the scenario we painted at the outset, the Central Bank has put a roof on what people can borrow for house purchases while costs remain at a certain level. The hard costs are fixed and will only go one way because of supply and demand as well as labour and material costs increasing. It leaves one with few elements of the cost of providing the unit that one can address. Finance is one, along with VAT and land costs. Other items such as levies or professional fees are relatively small in the overall context. We are aware of the social impact of the 3% reduction on the Exchequer and follow-on services. However, this is an emergency, so we are putting it out there. We can show the committee the “what ifs” in an independent manner. It is up to the committee to decide what it wants to do.

Ms Patricia Byron

On the VAT reduction, we also said it might only be on a trial basis for two to three years to deal with this emergency situation. We are not at all interested in denuding the Exchequer of valuable income. We are conscious of that. As Mr. Mahon said, we would like to emphasise that we are a professional and independent body. We see ourselves in a totally different space to the developers or the construction industry.

Mr. Micheál Mahon

It goes back to the point we made earlier, namely, if we had an overarching Minister who could review the effectiveness of these measures, then they could be changed. One had a VAT reduction to 9% in the hospitality sector. Some hotels, for example, might have made more from this than did others. However, that is the nature of it. It has to be reviewed constantly.

Chairman

I understand the point being made that if the rate comes down and the quantity goes up, then the total yield might go up.

Deputy Maurice Quinlivan

I welcome the comments made by the Society of Chartered Surveyors Ireland. I was struck by the terms used, namely, that the system is broken. In the presentation, the society stated the current crisis is a direct consequence of national strategy and that the over-reliance on the private sector to provide all housing is a significant problem. The Minister’s 2020 plan to deliver 100,000 housing units is based on 80% of these being delivered by the private sector. This needs to be flagged and is a problem the society has flagged itself.

The witnesses are flagging the fact that it will obviously be a problem and it is good to see it put down in documentation.

The witnesses talk about local authority investment in infrastructure. Could they expand on what they mean? What do local authorities need to do and what funding do they need to do it?

Mr. Michael Cleary

In terms of local authorities and infrastructure, lands are zoned but not serviced in many instances. There are impediments to getting that servicing in place. It is about facilitating the delivery of infrastructure to allow it to happen. In respect of facilitating development, it is never one solution but rather a variety of them that is required. One solution that has been proposed by our members - this was used in the 1960 and early 1970s - would involve local authorities providing the infrastructure to individual sites and areas of sites, on a large scale, being licensed out to smaller builders who would build a certain section of housing units. Therefore, one has diversity in terms of supply and competition in terms of deliverability yet there is no over-reliance on one or two key large players. That was used to a certain extent in that period and worked quite well. I presume anyone in the room can provide examples of where it did not work well but in the majority of cases, it did work well. We see this as an area where local authorities could play a role in the provision of infrastructure.

Chairman

Is everybody happy? Before we conclude, the witnesses mentioned the report next week. I would be very much obliged if they could forward it to the committee. The costs of housing and the component elements have been significant issues at previous meetings. One of our concerns is not just the cost now. The witnesses indicated that tenders and contract prices are going up yet previous speakers told this committee that if one was building on a bigger scale, there would be economies of scale in terms of materials. Coming from a relatively low construction base, we would not like to take it as given that prices should go up way ahead of the rate of inflation. That is why we are trying to find out what the labour component is - segregating the labour component from the material component. I understand development levies and VAT. We are looking at each section so that is what we are trying to get behind in terms of the witnesses' written response to the committee rather than taking it that construction inflation of 5% or anything like that is a given. It would be very worrying if that was the case. This is why we are trying to get a breakdown of the various components.

Ms Patricia Byron

We recognised, as did this committee, that getting to the real facts and breaking things down to the real costs was what was missing. We are able to poll our members within quick timelines in respect of real costs. We will come back to the committee with the information but we are very happy to work with it on an ongoing basis because we survey our members on a regular basis. Where other reports take six months to a year, we do not have that time lag. We are an independent professional body that tells it like it is. As part of our strategic objective, we intend to continue influencing policy in an independent manner. If we can do anything on that front on an ongoing basis, we will do that for the committee.

Chairman

I appreciate that, particularly in respect of Mr. Mahon's indication that the information he is sending us is from the 2016 project so it is up to date. We appreciate that. I thank Mr. Mahon, Ms Byron and Mr. Cleary for their attendance and their submission, which provoked a number of questions that were answered.

Sitting suspended at 1 p.m. and resumed at 2.05 p.m.