Next year will be critical for Ireland’s efforts to resolve its housing crisis and critical infrastructure issues, writes Tom Parlon.
With major investment in housing and infrastructure from Government in the pipeline, the Construction Industry Federation expects a significant increase in both areas.
How and where this investment translates into construction activity on the ground will be the challenge in 2018.
The Government will set out the first step in a journey to Ireland 2040 with the launch of the new National Planning Framework in early 2018. This document will set out the spatial strategy for this country’s development over the next 25 years.
It’s our belief that Cork and Limerick’s progress or otherwise should be the yardstick we measure our progress in housing and infrastructure next year.
If we get the Cork/Limerick region’s development right, then we can be more confident that we’re developing a balanced and sustainable economy.
If the inevitable growth in residential, commercial and infrastructure is concentrated solely in Dublin, or not spread more evenly across the regions, then alarm bells should be ringing about the long-term sustainability of the plan.
Within this context, Cork/Limerick should be developed as a complementary counter-balance to the sprawling unsustainable growth that has seen the greater Dublin area now account for nearly 50% of GDP.
This situation is untenable for the regions and for the capital. The Irish economy and its citizens will be best served with Dublin operating as a global city, connected to thriving regions by world class infrastructure.
We need to rise above parochial interests and understand our relative size in the global economy; we should view Ireland as one region and develop and connect our urban centres accordingly in one network.
Currently, we have a capital city that it is flattening out across the Leinster region, whilst the regions are being denuded of people by a lack of opportunity.
It was unsettling to see that population in regional areas had declined and that in the recent CSO Census data on employment that Dublin’s daytime population swells by 27% as over 148,000 people commute into the city for work due to the lack of opportunity in their local area.
This is part of a global trend where people are moving to urban areas. Some 60% of the population live in urban areas and this is expected to reach 75% by 2050.
The reality is that if we don’t develop regions like Cork/Limerick rapidly then the current trend of urbanisation will see Dublin become unsustainably dominant in terms of population and economic growth.
From a construction industry perspective, many thousands of our employees are amongst those swelling the Dublin population daily to work.
With over 30,000 small enterprises operating in the sector, the industry is dispersed across the country and as a result, will be instrumental in delivering the roads, rail, housing and general construction that will dictate whether the NPF is a success.
It’s essential that the Government nurtures construction SMEs with the same levels of support that the farming and retail sectors benefit from.
The other key benchmark of success next year will be housing delivery. CIF analysis shows that 14,917 new houses were started in the Jan/Oct period this year.
This represents an increase of 35.6% in the commencement of new housing from 11,000 to 14,917 units up to October 2017.
The ESRI recently upgraded the required housing output target for Ireland from 25,000 per year to 35,000 per year. Simply put, where there is finance available, construction is occurring strongly. Hotel, commercial, student accommodation and particular types of housing are also showing strong activity.
However, there is a decade of pent-up demand for more housing that currently surpasses the levels of finance available. Finance Minister Paschal Donohoe and Housing Minister Eoghan Murphy have introduced key initiatives over the past few years and they are pulling all the levers they can to unclog the system.
These measures take time to wend through legislative processes before they can even begin to have an impact. Even from that point due to inertia in the planning system, the impact of measures are often two years in the future.
Then, due to the time it takes to build modern housing, you can be looking at five years from launch of Government strategy to handing over the keys to a homeowner — if everything goes well and there is no change of Government.
As an example, the Government formally announced the establishment of the Homebuilding Finance Ireland agency in the budget this October. This agency will command €750m to go where the banks fear to tread and invest in housebuilding outside Dublin.
Legislation is required and within the current political environment, you can foresee many challenges to its progress to the Dáil. Without political consensus, this legislation could take a year to get through; even longer, if there’s an election
Fortunately, a number of both Mr Donohoe’s and Mr Murphy’s initiatives have been in place for a couple of years.
As a result, we expect these to bite down next year with a significant increase in the rate of commencements and completions. The rate of new house commencements this year was up 35% and might break 15,000 this year for the first time in nearly a decade. We expect this rate to be significantly higher by this time next year.
Finally, back to our barometer of success: Cork and Limerick. The rate of commencements in these areas in 2017 was relatively static compared to 2016. Most of the new houses being started were in the greater Dublin area.
We could approach 25,000 commencements in 2018 with the right conditions.
However, if a significant proportion of these are not in the Cork and Limerick urban centres (and other urban centres), increased housing output will become a pyrrhic victory as Ireland’s economy continues to become unsustainably imbalanced.
Tom Parlon is the director general of the CIF