Ireland is overdependent on apartment development

Irish Times

2 days ago

Ireland is making its
housing crisis
worse by persisting with housing density policies which, in practice, mean that most new urban housing units are apartments or semi-detached homes. These cost too much to be suitable as standard starter homes for small households.
Last autumn, a report on development costs in the Greater Dublin area, prepared for the Department of Housing by
Mitchell McDermott
, put total costs per square metre at €4,100 for a semi and between €6,040 and €6,500 for an apartment.
If we assume cost per square metre for other types of conventional house is similar to that for semis, a two-bedroom, 80 square metre apartment would cost €150,000 to €190,000 more than a terrace house of the same size. On the same assumption, a typical three-bedroom semi with 35 square metres more floor space than a two-bedroom house would cost €140,000 more.
We have been locked into over-dependence on apartments and semis by national housing density policies since 2009, and by the way builders react to them. Current (2024) policies require most new suburban housing estates to have a density of 40-80 units per hectare in Dublin and Cork, and 35-50 in the other cities.
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Semis are profitable and reliable sellers, but they are typically built at around 25 per hectare, so they need to be combined with a higher-density component to comply. If this is in apartment blocks, the proportion of the site they occupy is minimised, leaving more of it available for semis.
First-time buyers would be conscious of how much help they were getting, encouraging builders to compete on price
Apartments have an important role on substantial brownfield or infill sites in inner city and inner suburban areas, or close to high quality, high frequency public transport. But expecting apartment output to expand in line with the doubling of housing output to the 50,000 or 60,000 units a year currently needed is unrealistic.
Market demand for new apartments is largely limited to well-paid young professionals who are happy to rent. Unless very well-located and designed, they are not good value for money for owner-occupiers, and may not even be viable.
These limitations can be overcome by generous State subsidies or if they are bought outright for social housing, but increasing the scale of this support in line with projected need is unlikely to be sustainable.
Successive governments have backed apartment development by or for international investors to fund the required volume of new housing, as well as to promote compact city objectives, but have been slow to recognise its volatility and unreliability.
After apartment completions rose from 5,100 in 2021 to 11,500 in 2023, the abrupt drop to 8,700 in 2024 was treated as an unforeseeable disaster, rather than the natural consequence of the four percentage point increase in interest rates between July 2022 and September 2023.
If, as claimed, apartment output will only recover if the rental cap is removed at a time when average rents are already €2,000 a month and there is freedom to set initial rents above this, such investors are clearly difficult to satisfy.
We have been locked into over-dependence on apartments and semis by national housing density policies since 2009, and by the way builders react to them
Favourable market conditions for increased apartment construction may return and we should take advantage of them if they do. However, it is unwise to treat a permanently high level of apartment output as a 'must have', because it implies the State will rescue those who pay more for apartment sites than can be recovered by developing them and selling on the open market – a speculator's guarantee.
Housing guidelines should be revised to reflect construction cost realities. One quick way of doing this would be to allow local authorities amend their development plans, so small terrace houses count for more per unit than apartments in density calculations, in locations they consider appropriate. Weighting could reassure developers that substituting terrace houses for apartments as the higher density component on a suburban site need not reduce the number of semis on the rest of it.
Households often outgrow two-bedroom units, whether in apartment or house form, or find storage space in them inadequate, but this is easier to remedy in a house, providing it has a pitched roof supported by purlins rather than conventional trusses, and is designed to allow future conversion of the attic for living space or easily accessed storage.
Extendability could be incorporated into a weighting system, so an extendable house of, say, 65-90 square metres was the equivalent of 1½ or 1¾ apartments. Terrace houses would be easier to market if extendable.
The lower cost involved in terrace houses would be a necessary condition for lower prices and rents, but not a sufficient one. In the current sellers' market, lower costs might merely increase profit margins. However, there several ways in which this risk could be reduced.
Firstly, where the State or a local authority is the developer, they control prices, and can pass on savings to occupiers of cost rental, shared equity or other affordable housing. Their housing outlays should go further, if more are spent on terrace houses.
Secondly, the revision of the Help to Buy scheme promised in the Programme for Government could inversely relate the 'help' to unit size and cost, so it benefits smaller, lower cost units most, and tapers off as these increase.
First-time buyers would be conscious of how much help they were getting, encouraging builders to compete on price.
Favourable market conditions for increased apartment construction may return and we should take advantage of them if they do
Thirdly, the Land Development Agency (LDA) could help finance lower cost housing by allowing small builders to develop on its land under licence, paying for sites as houses were sold. Target sale prices for their houses could be agreed, with surcharges on site prices if sale prices were higher, and rebates if lower.
This approach would be less dependent on international investment funds. On the supply side, average unit costs would be lower, so overall financial needs would be less. More small builders would also develop if they did not have to come up with land costs upfront.
On the demand side, the borrowing capacity of households which could afford a new terrace house, but not the extra €150,000 needed for a new apartment or semi, would be mobilised.
Nicholas Mansergh was a senior planner with Cork County Council until his retirement in 2015, and lectures on planning in UCC. He is the author of The Irish Construction 1970-2023: Policies and Escape Routes, published by Eastwood Books in 2024.