Housing Crisis | Industry reacts to CIF pre-budget submissions

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(CIF delegation pre-budget delegation: image CIF Construction magazine)

28 September 2015

One area overlooked in recent house crisis media coverage and industry debate has been the extraordinary costs added by BC(A)R SI.9 Building Control Regulations since implementation in March 2014 to multi-unit developments. Some industry commentators have suggested that SI.9 may be responsible for adding over €30,000 to the cost of a typical apartment, for little consumer benefit. The Regulations were already changed this month (for once-off houses and extensions) because Ministers acknowledged that SI.9 was too expensive for once-off houses and was impacting this sector of house-building.

A Construction Industry Federation (CIF) delegation recently presented its pre-budget submission during a meeting with Minister for Finance, Michael Noonan TD and Minister for Public Expenditure and Reform, Brendan Howlin TD in the Department of Finance recently in the run up to Budget 2016.

The CIF are looking for the government (read tax payer) to take an equity share in new homes to bridge the gap between what the borrower can borrow and what the developer wants them to pay. Amounts of up to 20% (€60,000) have been suggested (see article  here)

“Key priorities set out by the CIF in advance of the meeting with the two Ministers are outlined in a detailed CIF pre-budget submission, including:

  • Introduce a ‘Help to Buy Scheme’ to assist first time home buyers.
  • Introduce a tax incentivised savings scheme for future purchasers of new homes.
  • Reduce development costs for housing, including development levies.
  • Introduce a temporary VAT rate of 9% for residential construction for a two year period.
  • Restoration of 100% tax deduction on the interest expense incurred on loans to investors in residential property.
  • Reduction of Capital Gains tax to 20%.
  • Facilitate renewal of construction related jobs and support for apprenticeship training.

Tom Parlon concluded by saying: “The proposals from the CIF which will be discussed with Minister Noonan and Minister Howlin are measures that the Government can easily implement in the upcoming budget. The construction industry has returned to growth and jobs are being created, but now is the time for assistance from the Government to ensure that the gains are not lost.”

  • Meanwhile in RTE’s “The Business” from Saturday 19 September on RTÉ Radio 1, Conor Skehan, Chairman of the Housing Agency (listen here) has suggested:

“Much of the noise is being made by traditional Irish builders. International operators have seen the opportunities and are off and running….the Irish construction sector is being left behind ”

“Using NAMA as a development agency is a brilliant idea…we are never going to built a private sector estate again…it’s much more complex and NAMA is the ideal unifying factor to start the move”.

[He confirmed that] “NAMA built over half the houses built in Ireland last year, they are very experienced and… know the complexities…We need innovation in Ireland”.

“Everybody’s response to housing need is to build more houses – Dublin has 7% vacant…so there is 2-3 years OF supply available…we need to encourage people to put houses on the market or offer them for rent”

  • Tom Parlon Director of the CIF joined Tony Foley senior economics Lecturer DCU on Today with Sean O’Rourke from Monday 21 September on RTÉ Radio 1 for a discussion on the housing crisis (listen here).

In the programme Tom Parlon (CIF) suggests that government VAT, stamp-duty, local authority contributions, part V contributions, PAYE, PRSI etc. adds up of €100k on a €300k house price. Mr Parlon was a self-builder and availed of a 10% “first time buyer” grant himself.

He suggested a system similar to that in operation in the UK, the “help to buy scheme”, where the government holds equity share in a house purchase (up to 20%) interest free for first 5 years.

During this discussion, Mr Parlon admitted that the basis of CIF figures for a typical €300,000 first time buyers house includes 15% developer profit, a staggering €45,000 for every house. The industry norm for developer’s profit for financing purposes is a minimum of 20%.

Tony Foley, senior DCU economics lecturer noted “people will never able to accumulate deposit… it’s significant amount of money”… In protecting banking system the Central Bank introduced “too much too quickly” When asked was CB intervention to calm markets Mr Foley confirms that “they were absolutely right”.

Mr Foley noted Society of Chartered Surveyors of Ireland (SCSI) had produced construction cost figures for a typical 3 bed house of €226k excluding land cost. When average site costs were factored-in this figure increased up to 300k. He acknowledged that there was a supply problem at the lower end of the range, the €250-300k figure. He agreed a temporary reduction in vat may help the lower end of the market. Others have suggested that all of the costs need to be reviewed, including the burden of ineffective regulation.

Other posts of interest:

Regulations add up to €60k to house cost | Karl Deeter

Housing Crisis | Can the private sector deliver 75% of Government housing targets?

‘Construction Data vs Actual Building Output’ | Constantin Gurdgiev

Irish Examiner | “Local Authorities should be setting the standard”- Minister Paudie Coffey

SI 365 of 2015: A good start | Collins + O’Cofaigh

Housing Crisis is not going away… | Mick Wallace Independent TD

Building Failures – Is the consumer protected?

Housing Completions Slump… only 5,625 new homes built in Q1+2 of 2015

You can still buy a non-compliant home…and it’s all perfectly legal | SI.9 Loopholes

Speculative Residential Costs and Sales prices | Look back 12

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