The Housing Crisis - What actions would you take to improve things?

[Howth Head]

In lots of cases around where i live the larger new builds sold in the last 7/8 years only one person lives in them,
the smaller units appear to be families,

This appears to be true. I visited a friend (ex-Dubliner -divorced) who has recently moved to a new estate in a commuter town about an hour from Dublin. It's a very decent sized brand new 3-bedroom house - and he's on his own. He's keeping one guest room for visitors - and the smaller b/room as an office/study.

His new next door neighbor is another Dublin exile - a single working woman in her early 50s also living alone in the same type of 3-bed. It's a smallish estate of about 140 houses in a series of quiet cul-de-sacs. He's noticed some elderly downsizers and some families with children moving in. But the place certainly won't be over-run with kids...

 

[letitroll]

Surely a 15% net margin, when the sale of all of your product is guaranteed, is a good return?

€60,000 pure profit per house seems good to me.

On a 100-house site, after several years of planning and construction, the developer makes 6m pure profit, after all costs.

Well apart from the fact that the only two builder doing those numbers are the highly scaled PLC players....so 15% operating margin is aspirational for most homebuilders.

But you kind of answered your own question above....... "On a 100-house site, after several years of planning and construction".....returns are both an absolute number but also a time value of money....capital doesn't need to be involved in home building its fungible and can invested elsewhere.......in homebuilding you've capital out there at risk for years as you've said, sitting in the acquired land getting no return, capital at risk from planning knockbacks/objections, capital sitting under direct bank debt and mezzanine financing (10%+++).....as I said a 15% but really ~8% for the non-scaled builders is pretty poor once you do an IRR.....which accounts for time, funding costs....then one should do a risk adjusted return.....a homebuilder at the very beginning of any 100 home greenfield project is making assumptions about what home prices will be perhaps fours years out, what material/labor prices will be three years out, what the interest rate, planning environment will be two to three years out. Its the opposite of easy and its most certainly the opposite of riskless. Sometimes I'm surprised that we are even getting 23,000 homes at all based on the macro enviroment.

Its a risky business.....and contrary to da media.....and as evidenced by the housing delivery figures not a boondoggle of profits....if becoming a millionaire in housing was a zinch? Where are all the developers in helicopters gone? Why aren't we hitting 90,000 homes p/a like we did in 2007 if its such easy money. The answer is staring folks in the face - it just aint that attractive relative to other things financial and human capital could be doing to get into the homebuilding game.....and that needs to change.

 

[letitroll]

This appears to be true. I visited a friend (ex-Dubliner -divorced) who has recently moved to a new estate in a commuter town about an hour from Dublin. It's a very decent sized brand new 3-bedroom house - and he's on his own. He's keeping one guest room for visitors - and the smaller b/room as an office/study.

Yep - for all the density talk and apartment talk and all the aspirational planning frameworks that have been created - at the end of the day people buy homes according to their preference......Irish home purchases preference overwhelmingly are for three bed semis, own door with some kind of back garden even if they have no need for the space......time for planners & politicains to stop telling people what type of place they should want to live in and start serving the market what it wants.....again this stuff is a version of central planning.....where a bureaucrat decides how big a bedroom should be.......the market can figure this stuff out way better than a planner sitting in 5-bed detached house in leafy suburan home that he/she bought in the 1970's on one income. Everywhere you look in the Irish property market you see the dead hand of central planning....now I get safety standards etc. but pretty clear a bunch of this stuff has gone too far.

 

[Purple]

Like I grew up in a 3 bed late 60s build - 900 square foot - just shy of 84m2 in today’s money. This is absolutely at the bottom of the minimum for new builds in 2025 so its simply not true that housing is getting smaller

The issue isn’t that houses are getting smaller. The issue is that household sizes are getting smaller. The household size is the number of people living in the household.
Since the 1980’s the reduction in the average household size has accounted for half of all of the properties built without housing a single extra person. That’s over €100 billion worth of extra housing stock housing no extra people.

 

[letitroll]

The issue isn’t that houses are getting smaller. The issue is that household sizes are getting smaller. The household size is the number of people living in the household.
Since the 1980’s the reduction in the average household size has accounted for half of all of the properties built without housing a single extra person. That’s over €100 billion worth of extra housing stock housing no extra people.

So what we gonna do - bring out a household size pressure zones (HPZ) to go with the rent pressure zones (RPZ)? Mandate areas of the metros that the homes must have a minimum of 3 people in them? The meddling with the market has reached insane levels.

I joke and get giving empty nesters attractive options to downsize too…..but you can’t beat the simple solutions……have a property tax that just hurts a little such that it focuses the mind of those choosing stay in a five bed house after the family has flown the nest. The current property tax level does not cause five bed empty nesters a second thought or sleepless night it’s comically low relative to household or house NAV.

Anyway folks are voting with their wallets and their feet in the market and ignoring aspirational town planning density hawks…..their deciding to live in smaller households in homes that are providing them more space per person than in the past. Isnt this what people do as they become wealthier? - they go on more holidays, they eat out more, they live in houses with less people in them, they buy bigger houses. You can quibble with it but at the end of the day folks have free will and they are screaming at the town planners that they're gonna do what they wanna do re:housing…..and much to their frustration the Irish home purchaser is saying you can keep your apartment, triplex, duplex that works so well in academic county council planning meetings….get out of my way they say…..”I want a 3 bed semi-d with a little back garden I can call my own, thanks.”

Time to stop imposing PHD planning ideals on the Irish housing market....and time to start letting the free market serve the various housing needs out there.....where those housing needs are being expressed via bottoms up preferences i.e. market democracy versus central planners deciding that XYZ bedsit just isn’t good enough for a person they’ve never met before in their lives and frankly a person so distant from the planner/beaucrats social strata they simply have no idea what constitutes an adequate solution for them….indeed making this product illegal told you everything you needed to know about the prawn cocktail folks drawing up these regs.

 

[TomEdison]

Time to stop imposing PHD planning ideals on the Irish housing market....and time to start letting the free market serve the various housing needs out there.....where those housing needs are being expressed via bottoms up preferences i.e. market democracy versus central planners . . .

You can't have housing without central planning, unless you think that "market democracy" is going to lay on roads, transport links, water supply, power supply, sewage, etc. Also there's a bit of tension between your arguments in favour of "market democracy" and your proposal that people living in the "wrong" property should simply be taxed at a rate that will encourage them to move into the "right" property. It's not clear to me why we should use tax to force people into the housing we think they should be in, but not use planning and development laws to facilitate the provision of that housing.

As to the suggestion that the falling household size is a function of peole becoming wealthier, two thoughts occur to me:

First, it's possible that as a result of becoming wealthier people may aspire to live in smaller households, but it doesn't follow that they have become sufficiently wealthier to actually pay for that (because it may cost a lot more than they expect it to). That would help to explain why people can't afford the houses they think they ought to have.

Secondly, and probably the bigger point: the decline in average household size is not mainly about becoming wealthier; it's about later marriage and smaller family sizes. So, relative to a generation ago, we need a lot more accommodation suitable for single people (because we are single for longer) but we don't require as many big family houses (because we don't have big families).

Another factor that's at work here is the impact of rapid population growth. Ireland used to have a relatively low population density; we are now almost exactly at the European average for population density. We also used to have a relatively dispersed population; we are now pretty much at the EU average for urbanisation.

All-in-all, I suspect our aspirations and expectations with regard to housing are conditioned by history, by culture and by memory of past conditions and experiences more than they are by current realities. We want a housing stock that is like the housing stock of a generation or two ago but of a higher standard and more of it. But for a variety of reasons that's not the housing stock we most need and actually providing the housing stock we want would be inefficient, in a context in which we pay a very high price for inefficiency.

Ther may be a choice to be made between:

(a) providing housing units of the type that people aspire to, but nothing like enough of them and at a very high price; or

(b) providing a greater number of housing units at a more affordable cost that are a better fit to the relevant demographic and other factors, but that people will feel somewhat dissatisfied with.

 

[letitroll]

You can't have housing without central planning, unless you think that "market democracy" is going to lay on roads, transport links, water supply, power supply, sewage, etc.

Of course what you describe is enabling infrastructure......what I abhor is central planners deciding the type of housing that occupies or sits on that infrastructure.....the market is the best mechanism to figure this out...as developers can asses and customers can feedback loop what they want and what they can afford in that area for a given a price range..... and therefore the capitalist is incented to make the most optimal trade offs in the given set of circumstances. Nothing quite like a PnL to sharpen the sense for what the most people want in terms of housing solutions in a given area constrained by affordability....and nothing quite like the feedback of customers who show up with money to buy or dont!

 

[TomEdison]

Of course what you describe is enabling infrastructure......what I abhor is central planners deciding the type of housing that occupies or sits on that infrastructure

The two questions are linked — for example, whether schools are required depends on how much of the housing to be provided is suitable for family accommodation. And you're missign the main point, which is the tension between what customers want, on the one hand, and what (at a time when supply is constrained) we are best equipped to provide.

Apart from anything else, leaving the matter to be determined by the preferences of buyers looks certain to exclude the preferences (and the needs) of those who can't afford to buy — the people most affected by the housing crisis. Unrestrained capitalism is very good at catering to the needs of the rich, and there's a good argument to be made that we have a housing affordability crisis as least partly because we have aleady prioritised the needs of the (relatively) rich.

 

[Dr Strangelove]

Ireland’s population is ageing and younger people are simply getting married and/or having families either later or not at all. This all points to greater demand for one-person housing units.

To top all of that off, ministerial guidelines add the following maximum proportions of 1 bed units and minimum of 3 bed or bigger units:

• A maximum of 25-30% one-bedroom units
• A minimum of 15% three- or more bedroom units

It’s truly daft when all sensible projections suggest that growth in demand is overwhelmingly from people who live alone.

 

[Purple]

Of course what you describe is enabling infrastructure......what I abhor is central planners deciding the type of housing that occupies or sits on that infrastructure.....the market is the best mechanism to figure this out...as developers can asses and customers can feedback loop what they want and what they can afford in that area for a given a price range..... and therefore the capitalist is incented to make the most optimal trade offs in the given set of circumstances. Nothing quite like a PnL to sharpen the sense for what the most people want in terms of housing solutions in a given area constrained by affordability....and nothing quite like the feedback of customers who show up with money to buy or dont!

The more micro level engagement the State has with the housing market the worse they make it. The most obvious and egregious example of this is the State buying existing private housing stock and turning it in to social housing. That is the ultimate slap in the face to anyone trying to buy their first home.

We need high level strategies. Increased property taxing is the most obvious one and a strategy that has been shown to work all over the developed world.

The hardest problem to fix is the State's inefficiency. Everything from the delivery of infrastructure to planning is adding massively to the problem. Changing the Public Sector's culture of mediocrity is a very hard nut to crack.

 

[Purple]

The opposition have announced that they are having a Housing protest outside Leinster House next month.
Paul Murphy said that we need to declare a housing emergency. What, in practical terms, does that mean? Is there some legislation or additional powers that the Government can invoke if a emergency is declared?

 

[Marsupial]

The opposition have announced that they are having a Housing protest outside Leinster House next month.
Paul Murphy said that we need to declare a housing emergency. What, in practical terms, does that mean? Is there some legislation or additional powers that the Government can invoke if a emergency is declared?

More magic wand politics from populist opposition TDs, given uncritical free publicity by an Irish media who consistently refuse to ask them any hard questions.

Just look at the quartet in the photo and ask youself: would you buy a used car (or even a roast chicken) from any of them?

 

[TomEdison]

What, in practical terms, does that mean? Is there some legislation or additional powers that the Government can invoke if a emergency is declared?

I seem to recall that Eoghan Murphy, in his recent book (which I haven't read, so I could have this wrong) wanted the State to declare a housing emergency because he saw that as a measure which would open the way to overriding or short-circuiting EU obligations regarding planning, environmental protection, public procurement and/or borrowing in order to build more houses, faster, than would otherwise be practicable.

(Whether he was right about a declaration of emergency making these things possible, I cannot say. But I think that was the idea.)

 

[Peanuts20]

To bring it back to the original question, what actions could be taken to improve the housing situation.

I've not worried about the leigislation, need for a constitutional referendum etc. This is strategy and I'm a firm believer that strategy drives delivery and outcomes. Implementation is another story. A lot of people won't like what I am suggesting, but are we serious about fixing the problem or not? I believe we need to be brutal and aggressive to fix this problem, otherwise we'll still be talking about it in 10 years time.

1: Ban Air BnB and all such short term lets. That would free up 20000 properties at least. Give the owners 6 months to put the property on the market or rent it out long term and if they fail to do so, hit them an onerous property tax (1% per month of the property value for each month they fail to comply). Yes, that will hit the tourism industry hard, so what- we need more houses. Yes we are interfering with people's property rights, so what- we need more houses- pass a referendum to allow this if needed. It also might incentivise the building of new hotels

2: Review and remove most of the restrictions on one off housing in rural areas. That will take some of the pressure off on country towns. Yes it might lead to more "bungalow blight", so what? we need more houses and decentralising away from the big cities to maintain, support and enhance rural communities may be a good thing.

3: As of August 2024, there were 20000 derelict properties in Ireland. In fairness, that number is dropping. Give the owner 6 months to commence building and refurb works (with a timeframe for completion) or force them to sell and then the buyer has a fixed period of time to either build and refurb or demolish and build on the site. Incentivise this with onerous property taxes for those that fail to comply. Those sites could often have new houses built on them in rural areas if they were made available (and see point 2 above).

4: Restrict what Electricity and Water can charge for connections. This may need state subsidies and also for them to hire the staff they need from overseas if needed. But we need more houses.

5: Remove the height restrictions on new buildings in the city. We need more homes, build up as well as build out.

 

[Marsupial]

Ban Air BnB and all such short term lets.

Against EU legislation I understand, (but open to correction). Also, what leads you to believe that such a referendum would be passed?

Review and remove most of the restrictions on one off housing in rural areas. That will take some of the pressure off on country towns. Yes it might lead to more "bungalow blight", so what? we need more houses and decentralising away from the big cities to maintain, support and enhance rural communities may be a good thing.

Yep; after all, who really cares about the scenery, or if a few thousand more streams are polluted by human waste from faulty septic tanks? And who the hell - other than ducks - really needs pure, fresh drinking water? After all, it's an emergency.

As of August 2024, there were 20000 derelict properties in Ireland. In fairness, that number is dropping. Give the owner 6 months to commence building and refurb works (with a timeframe for completion) or force them to sell and then the buyer has a fixed period of time to either build and refurb or demolish and build on the site.

Probably constitutionally impossible. And, if someone decides to challenge it, it could be years before it gets to the Supreme Court, or beyond.

Restrict what Electricity and Water can charge for connections. This may need state subsidies and also for them to hire the staff they need from overseas if needed. But we need more houses.

More homes mean more human waste, and more need for potable water. And IW/UÉ is already struggling to meet the growing demand for water and sewage processing. (And the NIMBYs along the Shannon are opposed to the proposal (about a decade old by now) to draw off flood water and pipe it to the East side of the country.)

Is the national grid capable of delivering energy to it's needed. Can Ireland generate much more 'clean' electricity after 5 years of the Greens blocking a national gas terminal? When will the new interconnector to France be ready?

And where will all those overseas staff live? Oh I know, lets build even more houses!

Remove the height restrictions on new buildings in the city. We need more homes, build up as well as build out.

That one may be a runner. But have we got enough construction workers/tradesmen to build them?

 

[Purple]

But you kind of answered your own question above....... "On a 100-house site, after several years of planning and construction".....returns are both an absolute number but also a time value of money....capital doesn't need to be involved in home building its fungible and can invested elsewhere.......in homebuilding you've capital out there at risk for years as you've said, sitting in the acquired land getting no return, capital at risk from planning knockbacks/objections, capital sitting under direct bank debt and mezzanine financing (10%+++).....as I said a 15% but really ~8% for the non-scaled builders is pretty poor once you do an IRR.....which accounts for time, funding costs....then one should do a risk adjusted return.....a homebuilder at the very beginning of any 100 home greenfield project is making assumptions about what home prices will be perhaps fours years out, what material/labor prices will be three years out, what the interest rate, planning environment will be two to three years out. Its the opposite of easy and its most certainly the opposite of riskless. Sometimes I'm surprised that we are even getting 23,000 homes at all based on the macro enviroment.

Great post, sums things up really well. If the State got its act together and planning and infrastructure didn't take so many years then the profit margin would probably double. At the moment it's 15% (or 8% as you pointed out) over 10 years. With a delivery time of 5 years that mezzanine finance isn't costing €30k-€50k per unit , or more, so the net margin would be 20% over 5 years, not 15% over 10 years.

 

[Purple]

To bring it back to the original question, what actions could be taken to improve the housing situation.

I've not worried about the leigislation, need for a constitutional referendum etc. This is strategy and I'm a firm believer that strategy drives delivery and outcomes. Implementation is another story. A lot of people won't like what I am suggesting, but are we serious about fixing the problem or not? I believe we need to be brutal and aggressive to fix this problem, otherwise we'll still be talking about it in 10 years time.

I agree, but I'd have a different strategy.
I'd start by increasing property tax to about 10 times what it is now, based on the site value. Then I'd make it deductible against income tax. If you are retired etc then it should roll up and be paid by your estate when you die.

1: Ban Air BnB and all such short term lets. That would free up 20000 properties at least. Give the owners 6 months to put the property on the market or rent it out long term and if they fail to do so, hit them an onerous property tax (1% per month of the property value for each month they fail to comply). Yes, that will hit the tourism industry hard, so what- we need more houses. Yes we are interfering with people's property rights, so what- we need more houses- pass a referendum to allow this if needed. It also might incentivise the building of new hotels

Double the above rates of property tax on short term lets.

2: Review and remove most of the restrictions on one off housing in rural areas. That will take some of the pressure off on country towns. Yes it might lead to more "bungalow blight", so what? we need more houses and decentralising away from the big cities to maintain, support and enhance rural communities may be a good thing.

Really bad idea; those builds are very labour intensive and labour is a major constraint on supply. That and the environmental impact and cost of delivering utilities.

3: As of August 2024, there were 20000 derelict properties in Ireland. In fairness, that number is dropping. Give the owner 6 months to commence building and refurb works (with a timeframe for completion) or force them to sell and then the buyer has a fixed period of time to either build and refurb or demolish and build on the site. Incentivise this with onerous property taxes for those that fail to comply. Those sites could often have new houses built on them in rural areas if they were made available (and see point 2 above).

High property tax sorts that out too. Who wants to pay very high taxes on a derelict property?

4: Restrict what Electricity and Water can charge for connections. This may need state subsidies and also for them to hire the staff they need from overseas if needed. But we need more houses.

I agree with that but not to one-off houses. They are grossly inefficient and not in the national interest.

5: Remove the height restrictions on new buildings in the city. We need more homes, build up as well as build out.

I agree with that too but high-rise is quite cost prohibitive.

I'd also look at reducing or removing incentives to retrofit homes. It is also very labour intensive and adds to the supply problem for new builds.

 

[Peanuts20]

Really bad idea; those builds are very labour intensive and labour is a major constraint on supply. That and the environmental impact and cost of delivering utilities

We'll agree to disagree on this one. A lot of these houses would be built by local builders and tradesmen, not the big firms building 500 unit housing estates. Utilities in many of these sites would be less then in an estate (Septic tank and your own water supply /pump house for example) so just become part of the build cost.

I agree with that too but high-rise is quite cost prohibitive.

Yes, but it takes less space so more could be built in cities.

I'd also recommend action been taken on office blocks not being used (convert them to homes or pay a tax) and industrial estates. Broomhill in Tallaght is an example where old derelict factory sites are being demolished and new student accom/appartment blocks are being built. We need to see more of that.

The state should also hand over any unused state owned property for conversion or demolition to create a new site. 5% of the HSE's buildings are vacant for example. Use them or loose them. Gardai have 41 unused buildings, again use them or loose them.

 

[BIG-notorious]

You can't have housing without central planning

That's got to be news to anyone living or working in a pre-'63 property. Of which there are vast numbers.

If the aim is to increase the supply of housing then planning needs to move from a permissive system to a presumptive system. The current system prohibits development without permission, and permission will almost invariably fail if there is a legal challenge because the standard required of the planning authorities to grant permission is perfection and it's next to impossible to conduct a perfect planning process. Same applies to all of the associated infrastructure, schools, etc. It's ridiculous that a me feiner in Cork can successfully challenge planning permission for a school in Kildare because someone filled in a form incorrectly, which is effectively the current siuation.

There's a whole host of other steps which could and should be taken to increase supply- for example in January 2024 there were under 400 apprentices in the entire public sector which is beyond pathetic. Increasing that number by an order of magnitude would increase the supply of skilled labour. https://www.oireachtas.ie/en/debate...nuary 2024, there,41 are in Local Authorities.

But that assumes there's anything more than performative political or institutional will to significantly increase supply of housing (or related infrastructure). After a decade of inaction, it's hard to believe anyone who matters really wants to increase housing supply. We all saw what an all of government motivated response looked like during covid and this ain't it.

 

[TomEdison]

That's got to be news to anyone living or working in a pre-'63 property. Of which there are vast numbers

If those houses are served by roads, connected to sewage, have a public water supply, etc, yes, absolutely there was central planning involved.