By Mary Lee Rhodes
Associate Professor, Business and Administrative Studies
The session I’m chairing on the 26th of May concerns the massive ‘opportunity’ we are all aware of and sick of hearing about. [Note – in management speak, no matter how bad the problem – its an ‘opportunity’.] There’s a serious shortage of housing arising from the meltdown of the construction and housing finance sectors in 2008. Studies by ESRI and Future Analytics Consulting for the Housing Agency forecast a need for 20,000 – 25,000 new dwellings per year for the foreseeable future – and that was without considering separately the approximately 90,000 households on social housing waiting lists. These people may be in accommodation, but being on the housing list means that their accommodation is unsuitable. So they need something else. And let’s not forget all those international students that the universities want to attract into Ireland …
And there ain’t anything out there. In his quarterly housing report for Daft (Q1 2016) Ronan Lyons reported that as of May 1st, the number of properties available for rent was 3,082 nationwide – “by far the lowest total since the series started in 2006”. Furthermore, the Social Housing Strategy 2020 stated that 35,000 new social housing units were needed over six years beginning in 2015. In 2015 less than 500 units were completed.
The same strategy proposed that an additional 75,000 households (more or less consistent with the housing waiting list figure) would be accommodated through housing assistant payments (HAP) and Rental Accommodation Scheme (RAS) leases in the private market over the period 2015-2020. In 2015, 7,500 households (10% of the overall target) were accommodated through these schemes. Where are the other 67,500 households going to go if there are only 3,600 properties available at the moment?
Returning to the private market, purchase price and rent are still moving upward and largely out of reach for the average wage earner. The ‘median multiple’ ratio is used to measure housing affordability and divides the median house price by the median gross (before tax) annual household income. Based on a median household income of €42,400 and an average house price €223,000 – Ireland is in the ‘seriously unaffordable’ housing category. And that’s after our median household finds a way to save up the 20% down payment.
Rental prices are similarly challenging – or should I say present another ‘opportunity’? – in that a household earning the median gross income and paying average rent (€998/mo) will be shelling out 28.5% of income … before tax. Affordable in this context is generally understood to be anything under 30% … after tax!
The thing is that there is plenty of capacity to build houses. Another recent report on Housing Supply Capacity from the friendly lads in Future Analytics (shout out to Billy Hynes and his crew) – this time for the Society of Chartered Surveyors in Ireland – estimated that there was enough zoned land in the Dublin region to build a minimum of 102,500 extra dwellings. And its not like we don’t have willing hands in the construction industry to build what the market wants (and will pay for). Before the crash, total housing output hit 93,419 units (2006). Last year there were 12,666 new dwellings delivered.
So that brings us to our topic: “The accommodation shortage and the future of Irish business”. There’s plenty of opportunity – why the delay? What’s holding us back from supplying what is clearly demanded? What’s wrong with this market and what impact will continued under-supply have economically, socially and environmentally? Policy wonks might want to read the latest on the topic from ESRI – but the rest of us should just show up on the 26th of May. Bring your hard-hats 😉
I will be joined by Ronan Lyons, Assistant Professor of Economics at Trinity and Author of Daft.ie reports, Kevin O’Kelly, Trinity Dean of Students and Associate Professor in Mechanical and Manufacturing Engineering, Brian Moran, Senior Managing Director at Hines, Aidan Culhane, Consultant at WK Nowlan Real Estate Advisors and Former Special Advisor to Department of Environment, Community and Local Government.
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