Minister Murphy’s cost of residential development reports deeply disappointing

Posted: April 18, 2018 in Uncategorized

The e-mail landed at the news desk at 7.37pm on Wednesday. The three Government reports ran to a combined 120 pages. Not enough time to scrutinise the detail. Not enough time to send them on to experts or opposition politicians for comment.

Frustrated, the journalist had a dilemma. Run the story tonight without real scrutiny or hold till tomorrow and risk losing out to the competition. Old news doesn’t sell papers, so despite the misgivings the story must run.

On Thursday morning the Government press officer perused the news online. His satisfaction was clear. The Governments attempt to frame the coverage of the reports was a success. Almost every story on every platform read the same – based mainly on his press release.

While the Minister would be pleased the public interest was definitely not well served. The reports, officially published last Thursday afternoon on the Department of Housing’s website, deal with an issue of critical importance – the development cost and thus the affordability of delivering houses and apartments.

Back in 2016, before the current government was formed, the Dáil Housing and Homeless Committee were repeatedly told that there was a problem with residential delivery costs. Unfortunately data was patchy making it difficult to identify where the problem was let alone what the best solutions would be.

In our report the Committee unanimously recommended that Government ask the Housing Agency to produce an annual audit of residential delivery costs and compare these with other similar jurisdictions. We specifically asked that such a study would look at all costs including construction, financing, levies and taxes and professional fees.

Our thinking was that the incoming Government could request the study immediately. Have it in advance of Budget 2017. And use it to make informed decisions about what policy options were best placed to drive down the cost of new homes.

In May Simon Coveney was appointed as the new Minister for Housing. He ignored our recommendation and a valuable opportunity to put some affordability measures in place in Budget 2017 was lost. As 2016 came to a close house prices increased by 8%.

In November Minister Coveney did belatedly announce the commissioning of two reports. The Department of Housing world provide a report on delivery costs while the Housing Agency would undertake a comparative study with other countries. 2017 came and went with no reports published. Meanwhile house prices increased a further 9%.

In April of this year Daft.ie reported that house prices in Dublin were now 67% above their lowest point since the crash. Friends First said they expected house price inflation to rise a further 10%.

Meanwhile in scenes grimly reminiscent of the Celtic Tiger era people camped out over night in Kilternan, Co Dublin to put a deposit on new homes priced between €300k and €500k.

Finally, after many sparsely answered Parliamentary Questions and refused Freedom of Information Requests, the Government’s residential delivery cost reports were published this week. Unfortunately the crass manipulation of the media coverage of their release was not the biggest disappointment.

Despite the very clear recommendation from the cross party Dáil Housing and Homeless Committee, the reports fall far short of what is needed to provide a real evidence base for intervention by Government.

The main report was procured by the Department of Housing. It is described as a Review of Delivery Costs and Viability for Affordable Residential Developments. It’s methodology is unclear. It’s data sources are not listed. It doesn’t tell us anything we don’t already know. And its recommendations are vague and without timelines.

As if this was not bad enough it has two glaring problems which undermine the entire publication.

The section of costs does not include an independent audit of residential delivery costs. This means that the entire discussion is based on the same patchy information that is already in the public domain – the very problem which lead the Dáil Housing and Homeless Committee to call for such an audit in the first place.

The section on affordability is based on a household income range of €68k to €91k and a house price range of €239k to €319k. This conflicts with existing Government definitions of affordable housing which are based on an income range of between €45k and €75k and a house price range of €170k to €280k. The reports inflated income range effectively excludes the majority of those most in need of affordable housing.

In the end however it makes little difference. Even with the inflated income and house price ranges the report concludes that the private sector cannot deliver homes at affordable prices. But of course we knew that all ready which begs the question what use is the report.

The Housing Agency cross country cost study is equally of limited use. For reasons that are hard to comprehend it only looks at construction costs and excludes land, site development, finance, tax, professional fees and other costs.

The report concludes that our straight build costs are in line with most comparable countries. That’s good to know but only deals with 40% of the development costs. Whether any of the non construction costs, which account for 60% of the total are inflated remains unknown.

So after twenty one months and significant effort on the part of staff in the Department of Housing and Housing Agency we have two reports that are unable to answer a very important question – why is it so expensive for the private sector to deliver homes and which element of the costs should we seek to reduce to deliver homes at affordable prices.

Meanwhile the elephant in the room -and indeed the report- is that affordable housing can be delivered at affordable prices with public money on public land. So rather that waste another two years waiting for another report here’s an idea – fund Local Authorities to deliver good quality affordable rental and purchase homes alongside social housing in mixed income estates on a scale necessary to tackle the housing crisis. If only someone had thought of that sooner.

First published in ther Sunday Business Post oN 16.4.18

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