Tánaiste and Minister for Foreign Affairs Simon Harris said the Government had gotten to a point with housing where there was a “significant increase” in supply over the last number of years but now it has “plateaued”.
His comments come as the Central Bank has revised its forecast regarding the amount of homes that will be built in Ireland between now and 2027 down.
Speaking on RTÉ’s Today with Claire Byrne, the Tánaiste said they are working “day in day out” on getting that momentum back.
“The commitment in the Programme for Government is clear – over 300,000 new homes by the end of 2030. That’s the north star, that’s where we have to get to. We’re making a series of decisions to try and get momentum back,” he said.
“I fully expect every single one of those decisions to be critiqued. Many of those decisions might be deemed unpopular. All of those decisions, looked at in isolation, will miss the point here – it’s about putting together all of the pieces of the jigsaw to be able to ramp up supply.
“I’m somewhat encouraged that some of the measures we’ve taken in recent days will make a real difference.”
The Tánaiste said some of the focus now must be on the blocks to speeding up housing construction, such as the planning system and water infrastructure.
“Water, wastewater, energy and zoned land “are some of the biggest constraints”, he said.
“Now is the time for big, brave, bold decisions, there’s no doubt about that. Frankly, there’s no alternative, and that’s why we made decisions this week on the Rent Pressure Zones, which are not without criticism.”
“The rental market in and of itself – there’s complexity to this. This isn’t about magic wand solutions, this is about actually having to look at how you take a balanced approach,” he added.
Central Bank expecting Government to miss targets
The Central Bank expects 32,500 to be finished this year, a reduction of 1,500 on its previous forecast last March.
It says 37,500 will be completed next year, down 2,500 from its last projection, and 41,500 will completed in 2027, down 2,500.
It would mean the Government would miss its targets for house completions for each year.
The Central Bank says the reasons for the downward revision is that completions of homes are below expectations in the first three months of the year, while commencements “dropped sharply”.
The housing projections are “subject to considerable downside risk given the current bottlenecks in housing supply and infrastructure,” according to the bank.
The Central Bank highlights a lack of water and electricity connections and a shortfall of construction workers as key challenges for increasing construction.
It says increasing productivity in the sector is “essential to enable it to fulfil the increasing demand for housing”.
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The bank is also downgrading its forecast for growth for the domestic economy for this year and next year due to US tariffs.
It expects the growth, as measured by modified domestic demand, will be 2% this year, a drop 0.6 percentage points on the previous projection.
It has reduced its forecast for next year by 0.4 percentage points to 2.1%.
While the outlook for the domestic economy is down, the expectations for gross domestic product, which includes the impact of multinationals, is being raised due to a surge in exports to the US ahead tariffs being imposed by the Trump administration.
This is largely being driven by a rise in the export of weight loss and diabetics drugs produced by the pharmaceutical sector in Ireland.
Loss of momentum
Director of Economics and Statistics at the Central Bank Robert Kelly says that a loss of momentum is the main reason for the downward revision of housing targets.
“If we look at what happened in Q1 of this year compared to last year, there was about 2% growth. You play that through to the year, you don’t break 31,000 units,” he said on RTÉ’s Morning Ireland.
“Now, we do expect it to be higher, at 32,500. But really what we’re talking about here are capacity constraints and they feature in a number of ways.”
Mr Kelly cited infrastructure and the labour market as contributors to the aforementioned loss of momentum.
“You could point to infrastructure and the enablers needed to deliver housing, and when we took a view of how they’d scale up with the additional needs and commencements in the system, we’re not seeing that to the same extent. So, we’re revising it down,” he said.
“We were expecting some labour to transfer from the commercial real estate sector into housing. We have seen that and that has taken place. But we’ve actually seen limited amounts of that going into new dwellings, and quite a lot of that labour going into home improvements.
“This is all needed, but these all reflect in our lower figures,” he added.
New rent regulations will protect renters – Browne
Minister for Housing James Browne said rents may go up, but that the Government’s plan is to get them down by increasing housing supply.
Speaking on RTÉ’s Morning Ireland, he said that new regulations around rent would hand more protection back to renters.
“Rents may go up in certain cases. I certainly hope they don’t. Our aim is to get rents down by increasing the level of supply. That’s what we need to see happen,” he said.
“Rents are going up at the moment anyway, especially in those areas that are not covered by Rent Pressure Zones.
“The only way you can get rents down is to increase supply and that’s by having a certain system in place for tenants, for landlords and investors. The current system is clearly not working,” he added.
Mr Browne said that tenants in new builds would have protection “by way of an inflationary cap”.
“Properties commencing from the date of the Government decision just over a week ago, it will certainly take some time for them to come on to the market. They will have a tenant protection by way of an inflationary cap,” he said.
“The 2%, if you like, that exists on current properties, we won’t apply to new properties and that’s to get the investment into the country.
“We need to go from 30,000 to 50,000 or 60,000 homes. We can’t. The Government is already delivering 50% of all homes in this country, we want to deliver more social, affordable homes. But to get those extra 20,000 or 30,000 thousand homes per year, we need the private sector and that means significant investment and how we can activate that,” he added.
‘Absolute certainty’ rents will go up – Cullinane
Sinn Féin TD David Cullinane has said it is an absolute certainty that rents will go up under the Government’s rent reform plans.
“It will hurt tens of thousands of people every year,” he told the Dáil.
He also asked Tánaiste Simon Harris to correct the record of the Dáil and to confirm that students will not be protected under the changes.
The Central Bank has now formed the view that the changes would hurt renters, Mr Cullinane said.
Mr Harris insisted that 11 counties will benefit from the extension of the Rent Pressure Zones which is being passed by the Oireachtas this week.
He said that the Central Bank report had found that the rent reforms would increase the supply of housing.
Next month there will be a significant investment in energy and water to enable more homes to be built, he said.
Mr Harris vowed that Government did “have students’ back” and would introduce further measures to support them in the Budget.
He said that Sinn Féin would have abolished Rent Pressure Zones and replaced them with reference rents which was “not a good idea.”
He also claimed that the party were the biggest property owners in Leinster House, with a portfolio of up to 40 properties.
Housing department to require additional funding, officials say
Meanwhile, housing officials have told politicians their Department will require more funding on top of an additional €715m provided by Government earlier this year.
At a hearing of the Public Accounts Committee, senior official Paul Benson said: “We have made Government aware additional funding will be required.
“But it is not required immediately. It is required later in the year.”
He said that Government “recognises that there are funding challenges arising from the last NDP (National Development Plan)”.
He was responding to questions from Fianna Fáil TD Séamus McGrath.
Mr McGrath asked if projects are being held up due to funding problems.
“No, we are approving every day,” said Mr Benson.
“There are a couple of held up for other reasons and nothing to do with funding”.
