Key Post How the government could cut the cost of new houses

Brendan Burgess

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It's not very profitable to build houses in many places at the moment, so builders won't build. If the government were to cut the cost of building, it would increase the supply.

Summary of the cost of building
See attached Report on the cost of constructing a 3 bed house

upload_2015-1-30_8-16-31.png


So how is the sale price determined?

upload_2015-1-30_8-16-46.png


The development contribution will vary hugely. In some areas, e.g. close to the LUAS, the local authority can impose a levy of €30k per unit.
 

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  • Report On Construction Cost of 3 Bedroomed Semi Detached House 4 July 2014.pdf
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Now, let's say that the government decided that it wanted to reduce the cost of building houses so as to increase the supply:
  • Change the VAT rate to 0% - saving €37k
  • Stop charging buyers for the costs of social housing -€10k
It could go even further and scrap the recently introduced very high specifications
  • Insulation - €9k
  • Solar panels - €5k
  • Rainwater harvesting - €4k
The government could cut the cost of a €300k house as follows:

upload_2015-1-30_8-36-46.png

The revised figures would be

upload_2015-1-30_8-29-28.png


So how is the sale price determined?

upload_2015-1-30_8-32-37.png


Of course, the Exchequer is still getting a big tax payoff in terms of PAYE, PRSI, USC on salaries and Corporation Taxes on the profits of the builders. It would also save a lot of social welfare payments by getting people back building houses.
 

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  • upload_2015-1-30_8-30-9.png
    upload_2015-1-30_8-30-9.png
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