Ireland's construction industry challenge

Housing minister Eoghan Murphy has been handed a stiff essay assignment for the summer vacation. In what is already an overheating market, he has been tasked by the Taoiseach with a rewrite of predecessor Simon Coveney’s strategy, on which the ink is barely dry.

There have been broad hints that the first-time buyer subsidy will go, on the grounds that it stimulates demand and has been making things worse.

This difficulty has nothing to do with finance, public or private.

But Minister Murphy faces bigger obstacles than the roll-back of this much-criticised initiative.

The biggest problem facing housebuilders over the next few years could turn out to be a shortage of construction workers.

The large numbers dislodged from the industry during the employment collapse from 2008 onwards have not returned and builders around the country are reporting difficulty in filling vacancies.

The problem is most acute in Dublin, the area of greatest housing shortage, where the available pool of workers is being drawn into the building of commercial premises and hotels. If the Government decides to expand the public capital programme too quickly, the shortage will get worse.

This difficulty has nothing to do with finance, public or private. If the workers are not available, priorities will have to be chosen explicitly by the Government or they will be dictated anyway in the marketplace.

Prospects

At present, some builders see better prospects outside the housing sector and the situation will get worse if the Government allocates extra money for schools and hospitals.

The total employed in the sector is already approaching the levels seen in 2000 or 2001 and the Government needs to think carefully about the implications of a further sharp increase.

In the longer term, the would-be housebuilder needs not just land but also residential zoning, local authority services and planning permission.

There is too little zoned land, too little is serviced and it is too difficult and too costly to secure planning permission for commercially viable developments.

There is a crying need to make planning permission almost automatic for developments in the Dublin area. Instead, the objectors are frequently led by local TDs, including Government TDs supposedly committed to addressing the housing shortage.

The system

The planning system has been subverted to an anti-housing agenda in some peculiar ways. Converting older buildings to modern residential use is far more difficult than it needs to be.

All around the country, buildings of no obvious architectural merit are given protected status by local authorities, which means that they cannot be demolished and replaced.

Moreover, they cannot even be modified internally without prohibitive cost. In the Dublin City Council area (the central districts, excluding Dun Laoghaire, Fingal and South County Dublin), a total of 9,000 buildings enjoy protected status, an extraordinary number for such a small area.

Any building can be declared a protected structure if a planning authority considers it to be “of special interest from an architectural, historical, archaeological, artistic, cultural, scientific, social or technical point of view” under Part IV of the Planning and Development Act 2000.

These are woefully imprecise terms; it is very difficult to appeal successfully against designation and there must be a suspicion that unjustified designation is being used by planners and councillors to inhibit development in the city.

"Daft planning practises"

There are other daft planning practices. Bank branches have been closed around the country, mainly in smaller towns where retail outlets are in surplus. In two towns, one in Wicklow and one in Meath, both about 60km from Dublin, local authorities have declined to re-designate disused bank branches for residential conversion, the only plausible alternative use.

House prices are high in both towns and planning permission hard to come by. These buildings will rot if the councils insist on denying permission for residential use.

Closer to Dublin, there are several 1970s industrial estates without tenants or the prospect of any. Developers have been refused permission to knock these buildings and build houses or apartments. The Minister should ponder the case for curtailing the powers of local authorities to behave so perversely.

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