Chartered Surveyors say new housing supply will need to increase by 8% each year until 2030 if ‘Housing for All’ targets are to be met

Chartered Surveyors say new housing supply will need to increase by 8% each year until 2030 if ‘Housing for All’ targets are to be met

SCSI says overhaul of rental sector is required to stem flood of private landlords leaving the market

Call for clear targets to be set for renovation of vacant and derelict units

Monday Sept 12^th 2022. The Society of Chartered Surveyors Ireland has said that based on current projections, new housing delivery will need to increase by 7.65% each year until 2030 if the Government’s ‘Housing for All’ targets are to be met.

The Central Bank has estimated that 24,500 new homes will be delivered this year, well short of the 33,000 needed annually to meet housing demand as outlined in ‘Housing for All’.

Based on those figures and in order to make up annual deficits in supply from previous years, the SCSI says new housing output will need to steadily increase to 45,000 units per annum by the end of the decade if housing targets are to be achieved in the lifetime of the plan.

The President of the SCSI Kevin James said that given the shortage of construction workers, spiralling construction costs and rising interest rates it was vital that Government does everything possible to drive down soft costs.

“Soft costs – items such as utility connection charges, VAT, planning, procurement, and development contributions – make up around half the cost of delivering a new home in Ireland. These are areas Government and local authorities need to focus on if we want to reduce the costs of delivering new homes and bridge the affordability / viability gap which exists at the moment.”

In a budget submission which focused largely on the residential property market, the SCSI called for urgent action to be taken to stem the flood of landlords leaving the private rental market. The SCSI also wants to see annual targets set for the renovation of vacant and derelict residential units with sufficient grant funding set aside by the relevant government departments as a way of increasing housing supply.

Rental Market

According to a recent SCSI survey of estate agents, eighty-eight per-cent of estate agents believe rental stock lost to the sales market will not be replaced within the next two years.

That survey identified the four key reasons landlords are selling up and exiting the market as:

• Rental legislation is too complex and restrictive
• Landlords are finding compliance with minimum housing standards too onerous
• Landlords are coming out of negative equity
• Net rental returns are too low

Kevin James said smaller private landlords are voting with their feet and the supply situation will continue to deteriorate unless the reasons they are leaving are addressed.

“Smaller private landlords provide around half of total tenancies, so they have a key role to play in our rental market. Between the complex rules around renting, limits on rent increases due to rent pressure zones and the high cost of compliance too many are simply not making enough of a return to justify the risk and are selling up. It’s estimated that 20,000 have exited the market since 2016. That has taken between 30 to 40,000 rental properties off the market*. At the same time research from the RTB indicates that large landlords – those with 100+ tenancies are planning to continue to invest and expand their portfolios”.

“A levelling of the tax field between private landlords and institutional investors and a reduction in the red tape are essential if there is to be an increase of supply into the market. Many landlords are paying tax at a marginal rate of over 50% on rental income and its simply not worth their while to continue. At the same time Ireland is struggling to find suitable accommodation for close to 50,000 Ukrainian refugees who have been forced to leave their country and a chronic undersupply of student accommodation.”

“This is putting unprecedented pressure on the rental market and that is why it is imperative that Government find ways of encouraging small landlords to stay in the market, not excuses for leaving; starting with the introduction of appropriate measures in Budget ’23. Adequate provision should also be made for increasing supervision and auditing of the rental market to ensure compliance and address short term lets that do not have the necessary permissions.”

Vacant units

According to the latest census there are 166,752 vacant properties in Ireland. While not all of these properties will be available long term, a high proportion of them will be and the SCSI believes a new more ambitious approach to bringing these properties back into use, including the setting of annual targets, should be a priority.

SCSI Chief Executive Shirley Coulter said that given the extent of the housing crisis it was imperative that Government address the issue of vacant and underutilised buildings.

“To successfully address a problem, you need to set targets and this is something we have failed to do with regard to vacant and derelict homes. Government needs to set a target and then set aside sufficient funding for the Department of Housing Local Government and Heritage in conjunction with the Department of Finance to ensure that target is hit.”

“We understand ten or more councils do not have full time vacant homes officers in place. We’re calling for officers to be appointed as a matter of urgency and for funding to be  made available to local authorities to recruit additional resources to support owners of vacant and derelict units so that they can be returned to habitable use as quickly as possible.”

“Later this year the SCSI will publish a report on the costs associated with renovating different categories of vacant and derelict units and we believe this could act as a helpful guide for setting adequate grant funding allocations for such an initiative within Budget 2023” Ms Coulter said.

The SCSI believes housing supply could also be increased by making greater use of existing, under-utilised buildings and derelict buildings. However, it warned that grant funding alone may not be sufficient to get units back to use and more urgent measures to address regulatory issues associated with renovating old units to current standards require consideration.

In their detailed submission the SCSI called for the extension of Help to Buy on a longer-term basis to provide confidence for the future to both consumers and home builders, for grant funding via Croí Cónaithe to be targeted at more affordable apartment developments ie those aimed at average income earners, the introduction of a land register to increase transparency on land sales and values, and a time bound reduction in Capital Gains Tax from 33% to 8% on development land for new housing.

The full budget submission is available on request or at www.scsi.ie

Ends.

*According to the CSO 86% of landlords own one or two properties.