ireland’shousing need & policy options: an overview...•1-2 person households have increased...
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Ireland’s Housing Need & Policy Options: An Overview
• Ronan Lyons, Identify Consulting• For: Irish Institutional Property• August 2020
Structure
• Medium-term Need
• Current Context
• Policy Options
There are four principal sources of housing demand in any economy –some of which are more responsive to external conditions than others
• Four principal sources of housing demand1. Natural increase: changes in the native-born population, in particular in household-forming
cohorts – best measured by comparing the 25-34 year-old female cohort with an older counterpart (e.g. 65-74 or 75-84 year-olds) – largely exogenous to economic conditions
2. Net migration: movement of people into the economy – in Ireland, hugely endogenous to economic conditions
3. Change in household size: determines the number of dwellings given a population – long-run trends largely exogenous but short-run trends hugely depending on housing supply
4. Replacement of obsolescent stock: each year, a small fraction of existing housing falls out of use – this will be higher in economies with greater internal migration (e.g. urbanisation)
• These cover all tenure types – owner-occupied, private rental and social
• The spread of housing demand within the Irish economy depends on preferences (e.g. urbanisation) but also public policy
The first two sources of demand – natural increase and net migration –currently translate into at least 30,000 homes needed per year
-20
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0
10
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30
40
50
60
1980
s
1990
s
2000
s
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
e
2020
s*
2030
s*
Estimated housing demand, by source (population increase only, 000s)
Natural increase Net migration Total
• 30,000 homes a year are needed to meet likely population changes alone
• Natural increase peaked in 2010 and will level off ~17,000 per year by 2020s
• Offsetting this is increasingly positive trends in migration• Emigration fell 2010-2014 and each year
since 2015 has seen larger numbers of net migrants into Ireland
• Official migration projections are relatively simplistic, with a baseline case of 30,000 per year (vs. 34,000 in 2018)
Source: CSO. Notes: Net natural increase is calculated by the difference between 25-34 and 75-84 female cohorts; net migration is converted from persons into 2-person households; projections for 2020s and 2030s based on CSO population projections (including average of M1/M2 scenarios for migration)
The natural increase in the population in Ireland is by far the largest in Europe
-1.0%
-0.8%
-0.6%
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
Irel
and
Bulg
aria
Latv
ia
Croa
tia
Lith
uani
a
Hun
gary
Rom
ania
Gre
ece
Italy
Port
ugal
Ger
man
y
Esto
nia
Spai
n
Finl
and
Slov
enia
Pola
nd
Czec
h Re
p.
Aust
ria
Slov
akia
Belg
ium
Net
herla
nds
Den
mar
k
Mal
ta UK
Swed
en
Fran
ce
Luxe
mbo
urg
Cypr
us
Natural Change, as percentage of 2017 adult population
Source: Eurostat
Net migration has been positive and growing since 2015 – every extra 10,000 migrants require on average 4,000 new dwellings, principally in the cities
• Annual gross migration to Ireland between 2010 and 2018 more than doubled from 42,000 to 90,000• Emigration fell from 80,000 to 56,000 in
the same period, resulting in a swing from net emigration of 27,000 in 2010 to net immigration of 34,000 in 2018
• The fall in emigration is driven by fewer Irish leaving minus the rise in immigration by more non-EU nationals coming to Ireland
• Every additional 10,000 migrants require on average 4,000 dwellings• Non-Irish households have a lower
number of people per HH than the average: 2.52 vs. 2.73 in Census 2011
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50
100
150
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Immigration (I) and emigration (E), by year and nationality (000s), 2006-2018
Irish (I) UK (I) EU15 (I) NEU (I)
Other (I) Irish (E) UK (E) EU15 (E)
NEU (E) Other (E) Net migration
Source: Census, CSO; “NEU” refers to new (post-2003) EU Member States
Ireland has Western Europe’s largest average household size –but it has been falling steadily over the last five decades
0.0
0.5
1.0
1.5
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2.5
3.0
Irel
and
Port
ugal
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ece
Spai
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Ital
y
Luxe
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Bel
gium U
K
Switz
erla
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Net
herl
ands
Aus
tria
Swed
en
Nor
way
Den
mar
k
Ger
man
y
Fin
lan
d
Ave
rage
Average household size, by country (2014)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
1966 1971 1979 1981 1986 1991 1996 2002 2006 2011
Average household size in Ireland, by year
Source: Hypostat 2016; Census of ireland (various issues)
Two thirds of the growth in Irish households since 1996 has been 1-2 person households, who now form the majority of households in Ireland
• The number of Irish households grew by 50% between the 1996 and 2016 Censuses –from 1.1m to 1.7m
• Of the 580,000 new households, two thirds (390,000) were one or two person households• This represented 80% growth, from
0.5m to 0.9m households• 1-2 person households have increased
from 44% to 52% of all households in Ireland
• A further 40,000 new households were ‘crammer’ households
499
886
505
741
120
75
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
1996 2016
Number of households (000s),by size and Census year
1-2 persons 3-5 persons 6+ persons
Source: Census of Ireland (various editions)
Average household size rose between the 2011 and 2016 Censuses – but this was driven by scarcity rather than demographics
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 population 2011-2016 growth
Irish households, by type, 2011-2016
"Crammers"
With others
With children
No children
• In the 2016 Census, the average household size in Ireland was 2.75, up from 2.73 in 2011
• This was not driven by a baby boom • Households with children made up 63%
of the population in 2011 but just 48% of the population growth 2011-2016
• ‘Crammers’ (households with unrelated parties) made up 15% of the 2011 population, but 35% of the 2011-2016 growth
• In order to fall to 2.6 – in line with recent trends – Ireland would have required an extra 120,000 dwellings
Source: Census of Ireland (various editions)
Household growth 2011-2016 was driven by three groups: older no-children households in rural locations, families in towns, and ‘crammers’ in Dublin
-5,000
0
5,000
10,000
15,000
20,000
25,000
Dublin Other Cities Towns Rural
Change in number of households, by broad type and size, 2011-2016
"Crammers"
Families
No kids
Source: Census of Ireland (various editions)
‘Crammer’ households keep household size high – demographics imply a true household size in 2016 closer to 2.4, requiring an additional 217,000 households
2.26 2.222.45
2.672.44
2.69 2.60 2.59
2.912.75
0
15,000
30,000
45,000
60,000
75,000
90,000
0.00
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1.00
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Dublin Other Cities Towns Rural State
Household size, actual and calculated from demographics, by region (and implied housing need), 2016
Average household size,implied by demographics
Actual average householdsize (2016 Census)
Estimated dwellingsrequired to achievedemographic householdsize (RHS)
Source: Calculations, based on Census of Ireland (various editions)
If Ireland’s average household size converges to the European average, itwill create major demand, especially for homes for smaller households
• Even with a fixed population, a rise in the fraction of 1-2 person households creates demand for a significant number of new dwellings
• Relative to a 2.7 average household size, a population of 4.8m with an average household size of 2.5 requires 142,000 extra dwellings• This is the equivalent of 11
years construction output at 2015 rates
• Convergence to EU average of 2.3 would require an additional 300,000 dwellings
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2.9 2.8 2.7 2.6 2.5 2.4 2.3
Number of extra dwellings required (000s) for a population of 4.8m, for different average household
sizes (relative to 2.7)
Source: Author calculations
On demographics, the overall picture is clear: Dublin has a relatively homogenous housing stock that is ill-suited to meeting the diverse needs of its residents
• In total, Dublin is missing roughly 125,000 multifamily apartment dwellings• The Greater Dublin Area is home to ~360k
households of 1-2 persons but has just ~230k dwellings of for 1-2 person-households
• In contrast, it has a surplus of ~100k family homes, given its population structure
• The mismatch is even larger outside GDA: between 250k and 300k units
• Within multifamily, there is a need at all lifecycle stages – from student accommodation to assisted living• The largest gap likely relates to housing
workers, including those moving to Ireland from overseas, both long- and short-stay
232358
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418
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GDA Ex-GDA
Households by number of persons and related dwelling stock (000s), 2016
Other
3-5 persons/5-9 rooms
1-2 persons/1-4 rooms
Source: Calculations, based on Census of Ireland
Ireland is a laggard in urbanisation – but as it continues to urbanise, this will concentrate housing demand in and around its largest cities
• Urbanisation is at the heart of economic growth• Cities allow specialisation (more productive
labour) and agglomeration (more productive capital and land)
• Density also allows cheaper utilities and a wider variety of public/private services
• Since 1960, the fraction of people in high-income countries living in cities has risen from ~60% to ~80%• Ireland is only now at 64%, having been at 46%
in 1960• Over the coming half-century, this is likely to
increase to at least 80%, creating significant demand for urban housing
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ethe
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elan
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Bel
gium
Urbanisation rates, 1960-2016 by country
1960-2016 change
1960 urbanization
Source: World urbanisation Prospects, 2016
Ireland’s labour market is as urbanised as other high-income countries – meaning its under-urbanisation reflects inadequate housing close to cities
0%10%20%30%40%50%60%70%80%90%
100%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Cum
ulat
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tota
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popu
lati
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Cumulative total of census districts
Inequality curves of place of residence and work, Ireland (2016)
Equality
Residence
Work/School
Top 20% of Census districts account for:• 83% of work – in line with
urbanisation rates elsewhere in the high-income world
• 65% of residents – Ireland’s low urbanisation rate
Most densely populated 20% of Census districts (i.e. Irish cities)
Source: Calculations, based on Census of Ireland POWSCAR 2016
How to read this chart:On the horizontal axis, going from 0% up gives the total fraction of workers or residents in the bottom x% of Census districts. For example, going to 40% on the horizontal axis, the bottom 40% of Census districts account for less than 5% of workers – but almost 10% of residents.
Related to urbanisation, obsolescence also creates housing need –with Ireland’s dwellings skewed to older/rural stock, over 10,000 homes are needed each year to keep stock constant
• Almost two thirds of Ireland’s stock of dwellings is in rural locations• Ireland is experiencing delayed
urbanisation – one that is being spatially skewed by land-use restrictions
• 150,000 households (9%) live in dwellings that are 100+ years old• 6.3% of Ireland’s dwellings are buildings
100+ years old in rural locations
• If 5% of old urban stock and 10% of old rural stock falls obsolete annually, ~13,000 to “stand still”
0%
10%
20%
30%
40%
50%
60%
70%
Urban Rural
Ireland’s Dwelling Stock, by Age
Pre-1919 1919-1945 1946-1960 1961-1970 1971-1980
1981-1990 1991-2000 2001-2005 2006+ NS
Source: Census; “NS” = Not Stated
For 2020-2025, demand for housing nationwide is likely to be 47,000 per year – compared to a target of 25,000 per year in Ireland 2040
Source State GDA
Obsolescence 8,000 2,500
Headship 12,500 5,000
Natural Increase 18,500 7,400
Net Migration 8,000 3,200
Total 47,000 18,100
• Available evidence suggests underlying housing demand of 47,000 homes per year• This covers all elements of demand,
including owner-occupied, rental and social housing
• While 25%+ social is common in many countries, it seems unlikely that more than 10% of new construction will be social• Major policy reforms, e.g. implementing
cost-rental, could change this• Of the remainder, current trends suggest
that ~60% (28,000) are needed for owner-occupancy, with the other 30% (14,000) for rental
Rounded estimates of new units required in Ireland and in Greater Dublin area, per year, 2020-2025
Assumptions: 0.4% obsolescence, a fall in household size to 2.5 by 2035, andnatural increase (as defined by 25/34-75/84 cohort difference) of 18,000 and netmigration averaging 20,000 per year (in 2.5 person households due to dwellingmix)
Structure
• Medium-term Need
• Current Context
• Policy Options
After roughly six years of strong inflation, sale prices in Ireland have now stabilised, having risen by >50% but remaining ~30% below 2007 peak levels
€0
€50,000
€100,000
€150,000
€200,000
€250,000
€300,000
€350,000
€400,000
€450,000
€500,000
2006q1 2008q1 2010q1 2012q1 2014q1 2016q1 2018q1 2020q1
Average sale price, by market
National Dublin Other cities
Leinster Munster Connacht-Ulster
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
2006
q2
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q2
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2013
q2
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q2
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q2
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q2
2017
q2
2018
q2
2019
q2
2020
q2
National sale price inflation
Quarterly
Annual
Source: Analysis of Daft.ie Report
The ending of sale price inflation comes as the stock and flow of properties available has increased significantly in recent quarters
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20000
2007
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2020
Stock available to sell, by region
Leinster Munster Conn-U
Dublin (RHS) Other (RHS)
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2007
2008
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2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Flow of sale listings during quarter,by market, since 2007
Rest of Country
Rest of Leinster
Dublin
Source: Analysis of Daft.ie Report
Rent inflation has slowed in 2019, but rents have risen for 29 consecutive quarters, nearly doubling in total and 35% higher than the previous peak
€0
€500
€1,000
€1,500
€2,000
€2,500
2006q1 2008q1 2010q1 2012q1 2014q1 2016q1 2018q1 2020q1
Average monthly rental price, by market
National Dublin Other cities
Leinster Munster Connacht-Ulster
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
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q2
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q2
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q2
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q2
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2017
q2
2018
q2
2019
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2020
q2
National rental price inflation
Quarterly
Annual
Source: Analysis of Daft.ie Report
In the private rental market, availability remains at extremely low levels
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Stock available to rent, by region
Munster Conn-U Dublin (RHS)
Other Leinster (RHS)
0
5,000
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20,000
25,000
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35,000
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45,000
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2007
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Flow of rental listings during quarter,by market, since 2007
Rest of Country
Rest of Leinster
Dublin
Source: Analysis of Daft.ie Report
The overwhelming evidence from both sale and rental markets in Dublin is that availability is the key determinant of subsequent price changes: supply matters
y = -0%x + 11%R² = 76%
-8%
-6%
-4%
-2%
0%
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10%
1500 3000 4500 6000 7500Qua
rter
ly c
hang
e in
Dub
lin s
ale
pric
es
Stock on Dublin sale market, 1st day of quarter
Scatterplot of Dublin sale listings and quarterly changes in sale
prices, 2006-2019y = -0%x + 7%
R² = 59%
-8%
-6%
-4%
-2%
0%
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4%
6%
8%
10%
1500 3000 4500 6000 7500
Qua
rter
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Dub
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ents
Stock on Dublin rental market, 1st day of quarter
Scatterplot of Dublin rental listings and quarterly changes in rents,
2006-2019
Source: Analysis of Daft.ie Report
But since the crash, supply (of all forms) has been inadequate – and recent improvements still fall short of underlying demand (47,000 per year)
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New dwellings commenced, by local authority and month
Ex-GDA
GDA
Demand (40k)
Demand (50k)
Source: Analysis of Census, CSO and Department of Housing figures
Estimated monthly demand
Ireland’s housing is out of line not only with its own demographics, but also compared to all other European countries, where typically 50% of dwellings are apartments
0% 10% 20% 30% 40% 50% 60% 70%
IrelandNetherlands
BelgiumNorway
DenmarkPortugal
FranceGreece
UKSwedenAustria
GermanyFinlandIceland
SwitzerlandSpain
Italy
Fraction of dwellings in apartments
0%
2%
4%
6%
8%
10%
12%
14%
Leitr
imRo
scom
mon
Long
ford
Don
egal
Cava
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igo
May
oM
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han
Gal
way
Co
Tipp
erar
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ffaly
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ick
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rlow
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eKe
rry
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ford
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thKi
lken
nyW
ater
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City
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rd C
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uth
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k Ci
tyM
eath
Kild
are
Gal
way
City
Cork
City
Dub
lin 1
7W
ickl
owD
ublin
22
Dub
lin 1
0D
ublin
24
Wes
t Dub
Dub
lin 1
1N
orth
Dub
Dub
lin 1
5D
ublin
12
Dub
lin 2
0D
ublin
5D
ublin
9D
ublin
13
Dub
lin 7
Dub
lin 8
Dub
lin 1
6D
ublin
1D
ublin
18
Dub
lin 3
Dub
lin 1
4D
ublin
6W
Dub
lin 2
Sout
h D
ubD
ublin
6D
ublin
4
Average gross yield for residential real estate, mid-2019, by property size and location
1-bed
2-bed
3-bed
4-bed
Significantly higher gross yields on homes for smaller households highlight the concentration of future demand in 1 or 2 bedroom homes
Source: Analysis of Daft.ie Report; Markets are sorted from left to right by the 2019Q2 price of a 3-bed semi-detached propertyNote: gross yield calculated as the annual rent divided by the capital value, for particular property type-location combinations
y = -144%ln(x) + 423%R² = 60%
0%
20%
40%
60%
80%
100%
12 13 14 15 16 17 18 19 2013 = 0.4m Population in logs 19 =178m
Share of population in largest city, European countries (n=42)
Little evidence that Dublin’s population share is too big –smaller populations mean bigger share in largest city
Ireland (Rep)
Ireland (Island)
Source: Author calculations, based on jakubmarian.com, Wikipedia/CIA World Factbook
Norway
Denmark
Finland
Germany,Turkey
Malta
Luxembourg
In fact, Dublin has gone from largest importer to largest exporter of people within Ireland – with consequences for commuting and quality of life
-200
-150
-100
-50
0
50
100
150
200
250
Dublin Kildare, Meath& Wicklow
Rest ofLeinster
Munster Connacht-Ulster
Net difference between population by county of birth and county of residence (000s)
1996 2002 2006 2011 2016
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
1981 1986 1991 1996 2002 2006 2011 2016
Fraction of commuters with a ‘long commute’ by distance/time
% travelling16km or more
% travelling 30minutes ormore
Source: Author calculations, based on various issues of the Irish census
The location of new housing supply has been inadequate, with the emergence of a 100% Dublin housing price premium in recent decades
0%
20%
40%
60%
80%
100%
120%
1970
1971
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2020
Dublin/Rural Ireland housing price premium
Unweighted average New to 2nd hand Listings (adjusted) Rents (adjusted)
Source: Author calculations, based on Department of Housing statistics (1970-2005) and Daft.ie Report (2006-2019)
And the mix of new housing supply has been inadequate, with the new homes built increasingly out of sync with Ireland’s household structure
499886
1171505
741
680
120
7563
0200400600800
1,0001,2001,4001,6001,8002,000
1996 2016 2016*
Number of households (000s),by size and Census year
1-2 persons 3-5 persons 6+ persons
125
215
53237
228
New dwellings completed in Ireland, 1996-2015 (thousands)
Urban/GDA apts Urban/GDA houses
Rural apts Rural one-offs
Other rural
Source: Author calculations, based on CSO Census and Dept of Environment/Housing statistics
675k smaller homes needed, 175k delivered
vs.175k larger
homes needed, 675k delivered
In recent years, affordability has deteriorated, with rent and sale prices rising faster than incomes.
0%
5%
10%
15%
20%
25%
30%
35%
40%
1997
Q1
1998
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1999
Q1
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2018
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2019
Q1
Average rent to average income
3-bedroom house in West Dublin, twoincomes
Double-room in Dublin, one income
Source: Analysis of CSO, OECD, PTSB and Daft.ie figures
0
1
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1997
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2018
Q1
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Q4
2019
Q3
Average FTB house price to average income
Source: Dublin Residential Cost Benchmark (2020) by Linesight construction consultants for IIP 32
However, supply is determined by viability, not affordability – and viability is extremely challenging for apartments in Ireland
• For apartments in Dublin, construction costs are
€225,000 per unit excluding site costs and land
• Costs rise to over €300,000 when legal, planning
and finance costs are included (details are shown
on the graphic)
• The addition of land, VAT, levies and equity sees the
final cost rise to over €460,000
One of the main reasons supply of new apartments has been so weak is that total construction costs in Ireland are high by international standards
€0
€500
€1,000
€1,500
€2,000
€2,500
€3,000
2015 2016 2017 2018 2019 2020e 2021f
Listed cost, per m2 of internal space, of building mid-rise, medium-spec apartments, by city and year
Toronto Munich Dublin Amsterdam Warsaw Madrid Belfast Edinburgh
Source: Analysis of Turner & Townsend International Construction Market Survey, various issues
Build costs for suburban homes (excluding land, government tax and developer’s profit) are between €2,100 and €3,000 approx. per square metre. Apartments are more expensive to build than houses.
€0 €500 €1,000 €1,500 €2,000 €2,500 €3,000 €3,500
Suburban townhouse
Suburban apartment
Build cost per m2 of suburban housing, by type in 2020 Q1Construction
Sales and marketing
Planning, professional fees,compliance
Development staff, legaland administration
Contingency
Part V costs
Finance and banking
Irish Water and utilityconnections
Source and notes: Figures based on analysis provided by Linesight to IIP for dwellings with 100m2 gross floor area (83m2 nett floor area for apartment dwelling types). Figures exclude site acquisition costs, cost of equity capital/profit, and tax, as well as costs relating to any abnormal ground conditions or contamination. For City Centre / Complex Build cost may be up to 20-40% higher depending on site conditions, height, specification and the like. Other assumptions available on request.
Looking ahead, permissions data suggest that new estate houses will continue to come on to the market in 2020 and 2021 and, from 2021, apartments too. But level of supply far behind projected demand.
0
1,000
2,000
3,000
4,000
5,000
2011
Q1
2012
Q1
2013
Q1
2014
Q1
2015
Q1
2016
Q1
2017
Q1
2018
Q1
2019
Q1
2020
Q1
2021
Q1
2022
Q1
Dwellings completed and units granted permission (lagged), by quarter and type of
housing
Completions - one-off Completions - estate
Completions - apartments Planning - one-off (+2Q)
Planning - estate (+6Q) Planning - apartments (10-12Q)
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Dublin City South Dublin North Dublin Cork
Pipeline of new apartments (as of mid-2019)
Under construction Planning consented
Planning submitted Pre-planning
Source: Analysis of CSO and Department of Housing figures; LIV ConsultingLevel of supply far behind projected demand
Structure
• Medium-term Need
• Current Context
• Policy Options
Ireland has a persistent underlying medium-term need for significant additional housing – 47,000 units per year, concentrated in smaller urban homes
• To recap, there are four main sources of housing demand• Two relate to a growing population - natural increase and net migration• The other two are household size and obsolescence• The four sources combine to create a new for 47,000 new housing units per year• The bulk of new homes needed are:
(1) for smaller households and (2) are concentrated in and near the main cities
• There are three main segments in the housing system: owner-occupied, private rental and social housing• The owner-occupied sector looks largely in balance, with a significant increase in construction since
2015 meaning that supply appears to be meeting demand• The other sectors, however, still look chronically under-supplied and account for the majority of the
~25,000-unit shortfall between completions and underlying need
• Construction costs in Ireland are very high, compared both to average local incomes and to costs in other jurisdictions• The latest evidence is that, for a 2-bed apartment in Dublin’s outer city / suburbs, all-in build
costs are approximately €300,000 for a 83m2 home• If it is a city centre / complex build, the same 2-bed apartment could cost up to 20-40% higher
depending on site conditions, height, specification and the like• Without public subsidy, these costs are borne by the ultimate occupants in the sale or rental price
• In other words, high construction costs present a challenge between viability and affordability• The higher costs are, the less affordable new homes will be• The higher costs are, the higher the break-even rent denoting viability
• Very high construction costs require urgent addressing by policymakers – but, even with political will, it is unlikely to be fixed within 3-5 years• ‘Soft costs’ of construction – including taxes – may be easier to change quickly than ‘hard costs’,
such as labour and materials
Higher up-front costs for smaller homes in or near cities mean there is a tension between viability (sale/rental prices exceeding costs) and affordability (prices being in line with incomes)
The importance of financial and environmental sustainability places significant constraints on government policies to boost housing supply
• The Celtic Tiger bubble/crash episode provides a stark warning about the potential consequences of getting around high construction costs through increasing leverage• The typical deposit paid by a first-time buyer fell from 25% in 2000 to less than 5% by 2006 –
with a dramatic increase in the ratio of mortgage credit to household income• The subsequent dramatic rise and fall in property prices has led to the adoption of Central Bank
rules that limit the leverage individual households can take on for property purchase• At the same time, the move towards energy self-sufficiency to address the climate challenge affects
the potential to reduce build costs• Nearly Zero Energy Building (NZEB) standards impose up-front costs for significant future
benefits• This creates a capital market policy puzzle: if the amount of debt an individual household can
taken on is capped, how will investment take place in assets with high social returns, such as NZEB?
In the context of high costs, rent controls would have serious negative consequences for new supply – a cost-rental approach is recommended instead for alleviating this burden
• Ireland’s housing context over coming decades will be defined by the climate challenge, demographic change, and the drive towards greener, denser living
• Private rental and social rental will be central modes of tenure in meeting Ireland’s substantial housing needs over coming decades• Those housing needs will also be increasingly differentiated over the life-cycle, from purpose-built
student and co-living accommodation for younger households to independent and assisted living complexes for older households
• Given high costs, controls on rent levels for newly built homes will significantly exacerbate the shortage of non-owner-occupier housing
• Policy should instead focus on cost-rental schemes. (Cost rental is a mechanism whereby rent covers the cost of construction and long-term maintenance only. Building on state land can further reduce the cost).
• If home ownership remains a policy priority, then Shared Equity and Shared Ownership housing schemes are also open to policymakers
Where home-ownership is a policy priority, two further policy options are Shared Equity Housing and Shared Ownership Housing
• This report has examined Ireland’s housing need and the policy options available to meet that need• The composition of housing need in the medium-term will likely be driven by three factors:
(i) falling household size (ii) urbanisation and (iii) environment sustainability• All three factors imply a need for much greater diversity of housing options, especially for smaller
households in and close to Ireland’s major cities• The current context is one of strong demand and, with the exception of owner-occupied housing for
larger households, continuing weak supply
• The lack of responsiveness of new supply is ultimately a product of high construction costs, with viability (the price-cost ratio) well above normal levels of affordability (the price-income ratio) for most households and areas
• In addition to reducing costs, policy options include cost-rental, shared ownership and shared equity schemes
Ireland’s Housing Need & Policy Options: Conclusion