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Housing output 'could be as low as 32,000' this year - Mitchell McDermott

The firm forecasts housing output this year could be as low as 32,000
The firm forecasts housing output this year could be as low as 32,000

The delivery of housing is forecast to stagnate and fall well short of targets, according to a report by construction consultancy Mitchell McDermott.

The firm expects fewer houses will be built over the next two to three years than in 2023, and predicts housing output this year could be as low as 32,000.

The forecast follows last week's CSO figures which showed housing output last year was a disappointing 30,330 - well short of the 40,000 predicted by government.

One of the key indicators of future output is planning permissions.

The report found that planning permission was granted for 35,000 homes last year, which is one of the lowest figures over the last six years and down from 41,000 in 2023.

Paul Mitchell, one of the authors of the report, said unless drastic measures are introduced immediately there is little chance of the new government reaching its target of 300,000 new homes by 2030.

One of the key areas which he said needed to be addressed as a priority was, what he called, the "high mortality rate" of applications for housing schemes in the fast-track planning system.

About 50% of housing permissions are delivered via fast-track schemes, which help meet housing needs.

"Our analysis shows that between 2018 and 2024, planning was submitted for just under 200,000 units in Strategic Housing Developments (SHDs) and Large-scale Residential Developments (LRDs)."

"Our figures show schemes accounting for almost 42,000 units (21%) were refused, a further 27,000 (13.5%) were subjected to judicial reviews and 11,000 (5.5%) are awaiting decision.

In the end, schemes with just over 112,000 units or 56% of total applications received usable permissions.

Mr Mitchell said that figure is disappointingly low, "but even more disappointing is the fact that another 29% of these units have not been constructed or commenced construction".

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This means that only 40% of the original number of planning applications, 80,000 have been developed or are in the process of being developed.

"Given the scale of our housing crisis, its vital we understand why the attrition rate is so high and address blockages in the system.

He said, based on current ratios, if we want to build 50,000 units a year, we would need to have planning applications for 125,000 units submitted every year.

While 60,000 commencement notices were submitted in 2024, an 82% increase on the 33,000 submitted in 2023, the increase was largely attributed to developers rushing to meet deadlines for development levy waivers and water connection charge refunds.

Mr Mitchell believes that while the waivers may have unlocked some apartment schemes which were previously unviable, a misleading narrative was generated around the 60,000-commencement figure.

"That figure was quite widely reported on, and, on the surface, it did seem to indicate progress was being made," he said.

"The reality is that while a developer may put in a commencement notice for 400 units, they might only commence 50 or 100. They wanted to ensure that they would be eligible for granted waivers for the maximum number of units they commenced, but there is no penalty if they commence less."

Blockages & Solutions

The latest CSO figures on housing completions show the main reason for the reduction to just over 30,000 units, was a fall of 24% in the number of apartments completed to 8,845.

Mitchell McDermott says this is part of a very worrying trend with just 14,000 planning permissions awarded for apartments last year. The previous year the figure was 21,000.

Mr Mitchell says the main reason apartment construction is heading south is largely due to previous government policy.

"The government changed regulations in Dec 2022 and as a result Build to Rent was no longer permitted as a category under planning.

"They did something similar to Shared Accommodation two years previously, which resulted in co-living being banned before it was given a chance to prove itself," he said.

"The introduction of rent caps and the way they were introduced was the final straw for a lot of the international funds, who have taken their business elsewhere."

The report states that in 2023, the public sector stepped in when the private sector left. Without them between 10 to 15,000 units would not have been built.

"The LDA, local authorities and Approved Housing Bodies took the baton from the private funds, but as we can see they are running out of steam and money."

"No plan was put in place to plug the finance gap left by the international funds and now we are seeing the effects of policy change.

He said Ireland needs the support of overseas investment funds and international pension funds to finance the development of apartment schemes to help construct the estimated 50,000 units needed to service our growing population.

"The way to win them back is to change government policy on build to rent and rent caps – the latter should be linked to individual leases not buildings - and give them the certainty they need to invest here."

"While policy and finance are very important parts of the housing jigsaw, so also is infrastructure. Zoning land is no good on its own, it needs to be serviced, and this needs to be funded in a coordinated fashion with the ESB, Irish Water and Transport Infrastructure Ireland (TII) all working closely together."