Chartered Surveyors call for adoption of long-term planning to drive down costs of new housing
In its pre-budget submission, the SCSI:
- Warns that the introduction of a concrete levy is counterproductive and will drive up costs
- Calls for the abolition of local authority fees and development levies
- Supports the introduction of further taxation measures to encourage landlords to remain in the market
- Says the residential rental market requires a dedicated department to deal with disputes
- Calls for resources to be made available to attract, retain and upskill local authority staff to facilitate delivery of social housing projects
- Recommends that Capital Gains Tax on development land for new housing be reduced from 33% to 8%
Friday 8th September 2023: The Society of Chartered Surveyors Ireland (SCSI) has said the Government needs to adopt a longer-term planning approach across several budgets if the construction costs of new housing are to be driven down thereby facilitating the supply of more affordable homes.
The SCSI says the viability gap which exists between the construction cost and the market price for new home buyers is at unsustainable levels in many parts of the country. For example, a recent study by the SCSI found the gap between what a Wicklow couple on average salaries could borrow and the price of a new 3-bed-semi in the county to be €83,000. In Kildare the gap was €32,000.
Kevin Hollingsworth, Vice President of the SCSI says increased costs are causing significant uncertainty in the construction sector and in many instances, projects are being paused or cancelled as they are no longer financially viable.
“This is happening at a time when we need to be increasing the number of houses we are building, far in excess of the current targets which the European Commission has said need to be ‘substantially’ revised upwards. We believe the best approach, is to tackle the costs which are within our control, chiefly soft costs such as development levies, high road closure fees and local authority licensing fees and other duties. While the removal of development levies and Uisce Eireann connection costs until March 2024 is a positive, there are still significant delays with electricity and water connections that are hindering the completion of projects. These are having a knock-on effect on the financing of developments and negatively impacting the cash flow of companies.”
“Steps need to be taken to resolve long delays with electricity, water and wastewater connections and to establish a more efficient and streamlined service. We believe Uisce Eireann requires further financial resources to attract and retain skilled staff, many of whom would have worked previously for the water departments within local authorities. And local authorities themselves require further financial resources to be made available to them to attract and retain appropriate skilled staff to deliver social housing. These are the areas Government and local authorities need to focus on if we want to reduce the costs of delivering new homes and increase the number of affordable and social homes we are building to meet demand.”
The SCSI disagrees with the introduction of a 5% concrete levy earlier this month, describing the move as counterproductive. The Government decided to introduce the levy following the publication of a redress scheme for those impacted by defective concrete products ie mica.
Kevin Hollingsworth said that while the Government’s announcement earlier this week that the levy will not now apply to precast products was welcome – the levy will undoubtedly contribute to higher construction costs.
“While we understand that the Government wants to seek a contribution from relevant stakeholders to the cost of remediating defective homes, the introduction of a levy on concrete blocks and concrete pouring other than in precast products will further challenge the viability and affordability of new homes including apartments at a time when it should be doing everything possible to drive down costs and increase the output of new homes.”
The SCSI’s budget submission which focused largely on the residential property market, also calls for the introduction of a feasibility grant to ensure grants made for the renovation of vacant units were allocated to viable projects and for grant payments to be made available earlier in tranche payments rather than as they currently are at the conclusion of the project.
The SCSI says two of the main issues affecting the rental market are the fact rental income is taxed at the marginal rate and the length of time it takes for disputes between tenants and landlords to be adjudicated by the Residential Tenancies Board. In its submission it supports the introduction of new taxation measures for small landlords and describes the current adjudication process as time consuming and inefficient.
With regard to the latter, Kevin Hollingsworth says the SCSI’s view is that tenants have inadequate security of tenure while landlords have inadequate supports to address issues with tenants not abiding by their rental agreement.
“The SCSI is calling for the establishment of a dedicated department within the RTB whose sole responsibility will be overseeing and managing the dispute and adjudication process. In addition, the RTB requires considerable investment in technology and human resources to enable it to respond to the growing and changing needs of the market. A responsive registration and complaints-handling process are crucial to improving the landlord/tenant customer relationship and to instilling more trust in the regulations.”
“The RTB also requires additional funding if it is to be in a position to monitor the wider rental market and ensure compliance with regulations, for example people renting properties on short-term lets without the necessary permissions. The aim here would be to increase the number of units available for rent. Increased auditing of the rental market would also ensure greater compliance with regulations – for example with regard to safety standards – and enhance accountability among landlords and tenants.”
“With more and more people living in Multi-Unit Developments its clear the number of Owner Management Companies (OMCs) is also going to increase. These are the elected representatives which effectively manage developments on behalf of apartment owners. Many of these OMCs have had to deal with legacy issues going back to the property crash, or construction defect issues or governance issues. The SCSI is recommending the establishment of a national authority to oversee OMCs and to provide them with the guidance and support they need to operate efficiently and effectively. We believe the establishment of such an authority would be timely ahead of the launch of the redress scheme for apartment defects.”
Land costs are one of the reasons soft costs are so high in Ireland. The SCSI believes the tax treatment of development land as well as the lack of transparency around land sales are two factors which inhibit land sales and the supply of land for development purposes. The CEO of the SCSI, Shirley Coulter says addressing these two issues would free up more land and contribute to more efficient land management.
“The SCSI is recommending the introduction of a rebate that lowers the Capital Gains Tax rate to 8% specifically for development land utilised in the construction of new housing. Reducing the CGT rate would incentivise developers and investors to engage in the construction of new housing, address the ongoing shortage of supply and contribute to improved affordability /accessibility. It would also improve our ability to attract both domestic and international investors which would result in increased capital inflows to Ireland.”
“We are also advocating the establishment of a land price register, similar to the property price register, to promote transparency, support evidence-based decision-making and ensure fairness in land transactions and policy development. This would contribute to efficient land management practices, improved urban planning and a more sustainable and equitable approach to the use of land resources.” Ms Coulter said.
For further information
Contact Kieran Garry