Construction Industry Warns of "Serious Viability Issue" for 40,000 Apartments
Construction industry figures warn of a "serious viability issue" for building 40,000 new apartments, despite government reforms to reduce costs. Developers cite inflation and the high-risk nature of apartment projects as barriers. Experts argue current incentives inflate land values, worsening affordability and failing to address root market dysfunctions.
Construction industry figures are raising alarms about the viability of building tens of thousands of new apartments, despite approximately 40,000 units having dormant planning permissions. A 2024 decline in apartment planning applications prompted government reforms in March, aiming to reduce construction costs by €50,000 to €100,000 per unit through smaller designs and fewer windows/balconies. This is part of Housing Minister James Browne's goal to deliver 300,000 new homes.
However, developers like Michael O’Flynn of O’Flynn Group, operating in Dublin and Cork, state that projects often remain unviable. O’Flynn noted that inflation, intensified by the war in Iran, significantly increases costs, posing a “serious viability issue” and risking housing supply in the short and medium term. He warned Ireland is “really behind” its housing targets, with the Department of Finance's Future Forty report projecting demand won't be met until 2040.
Michael Broderick, head of the First Home Scheme, acknowledged state support but cautioned that urban apartment development carries “materially higher risk” than other housing types. This is because entire apartment blocks must be completed before units can be sold, unlike phased sales in housing estates which aid financing. Conor O’Connell, CIF director, echoed this, stating developers must be “all in” and cannot sell units until the entire project is built, making it a difficult investment. Many apartments completed last year required state support to be viable.
Assistant Professor Orla Hegarty of UCD criticized government incentives, such as VAT cuts and reduced standards, arguing they inflate land values and exacerbate affordability issues. She stated that these measures fail to address root causes like land speculation and market dysfunction, leading to higher housing costs and reduced affordability for future generations. Hegarty emphasized that housing affordability and capacity building are the “real challenges,” not just supply targets.