The Construction Industry Federation (CIF) has welcomed Minister Eoghan Murphy’s analysis outlining the severe challenges facing the construction industry regarding the viability of building affordable homes.
Tom Parlon, Director General, CIF commented: “We need to continually look at construction costs and how they can be reduced. Scope for reduction in development contributions should be considered. As Minister Eoghan Murphy has rightly pointed out, viability in affordable home building is an essential element to our recovery. While some house building has resumed in more affluent urban and commuter areas, the lack of viability in the construction of affordable homes remains a major issue, particularly in regional areas, where costs are still prohibitive.”
The CIF welcomes the publication of the following three reports on the cost of residential delivery in Ireland:
- Review of Delivery Costs and Viability for Affordable Residential Developments;
- Cost analysis of the updated Sustainable Urban Housing: Design Standards for New Apartments, Guidelines for Planning Authorities; and
- Comparison of Residential Construction Costs in Ireland to other European Countries.
The Review of Delivery Costs and Viability for Affordable Residential Developments report demonstrates the construction of apartments to be sold at affordable prices of up to €320,000 are not viable and the construction of affordable housing units up to €260,000 are marginal, highlighting the real difficulties for builders in delivering affordable units.
The Construction Industry Federation welcome the updated Design Standards for New Apartments and see the tangible benefit of increased flexibility surrounding the design of apartments to support the future viability and see it as a positive in attempting to reduce construction costs while maintaining quality delivery.
Main reductions will come from the relaxation of mandatory car parking spaces in apartment blocks, an increase in high-rise building, fast-track planning permission for large-scale developments, as well as more apartments per floor. The like for like savings of anything from 3-15% against 2015 guidelines will depend greatly on the nature of the development and vary from case to case.
The report on ‘Residential Construction Costs in Ireland to other European Countries’ investigated all costs related to delivering housing for Ireland such as construction build costs, land costs, professional fees, development contributions, finance costs and VAT.
The shortage in skills currently being experienced in the construction sector has led to wage inflation and the report compounds that one of the most significant challenges still facing the construction industry, is access to finance.
Tom Parlon, Director General, CIF added: “These reports illustrate the real difficulties for builders in delivering affordable units and that hard construction costs are not out of line with other jurisdictions on a like for like basis but in fact, it is all the other add on costs that create viability difficulties.”
Several key recommendations of the ‘Review of Delivery Costs and Viability for Affordable Residential Developments’ are outlined as follows;
- The strategic management of state land portfolio, allowing the opportunity for all delivery sectors to gain access to supply of land at reasonable land prices as appropriate and ensure early and economic delivery.
- Coordinated approach to development bonds across the industry and with local authorities should be agreed and implemented.
- The review of the recommendations for site development works for housing areas to be undertaken.
- Standardised approach to taking in charge should be agreed and implemented
- Common protocol between local authority areas should be put in place in relation to staged payment of development contributions.
- Review of local authority development contribution schemes with review of high rise structures to encourage better site and infrastructure usage.
- Requirement for alternative providers of affordable development finance for the building industry.