Mr. James Benson:

I thank the committee for the opportunity to talk about the general scheme of the Land Development Agency Bill 2019. I sit as the housing director representing the federation and the Irish Home Builders Association. I am joined by Mr. Seán O’Neill, vice-chairman of the Irish Home Builders Association, today.

Most commentators agree that Ireland needs an annual housing output of between 25,000 and 45,000 homes. This year, the CIF expects output to reach approximately 22,000. Of these, up to 40% could be one-off homes outside the parameters in Project Ireland 2040.

The CIF welcomes the Land Development Agency and acknowledges it has a significant part to play in ensuring the correct level of social and affordable housing for the State is delivered. It also has a role to enable development in regions, towns and communities identified as key in Project Ireland 2040.

If the LDA is calibrated correctly, it could become another part of an effective suite of measures, including Home Building Finance Ireland, the local infrastructure housing activation fund and the help-to-buy scheme that are starting to address the market failure in finance in home building. It could play a major role in addressing several affordability gaps stymieing efforts to increase supply currently.

Our analysis has identified a significant affordability gap for young couples. At the current average house prices, a couple earning under €93,000 combined will have to save for four years, even with the help-to-buy scheme, to save a deposit for the average Dublin home. A couple in Meath or Kildare would have to save for 15 years. This affordability gap is consigning couples to rental purgatory, and we are suggesting that the Government adopt a shared equity scheme, similar to that in operation in the UK, to help bridge this affordability gap. The CIF believes that this affordability gap will only expand over the coming years as construction costs increase, demand remains tight and regulation continues to increase the cost of home building.

As the committee will be aware, a functioning market requires people who can purchase, builders who can build and banks that can lend. Where prices are below the cost of construction, builders cannot secure finance to build, meaning potential purchasers are excluded from the market. This is the reason home building outside the greater Dublin area, GDA, has remained depressed. The LDA has the potential to license State lands to home builders in these areas, essentially removing land prices from construction costs. In this case, the Land Development Agency is intervening in areas where house building is restricted by the current financial model. This is an essential role, in the context of Project Ireland 2040, where cities, towns and communities outside the greater Dublin area must grow at twice the rate of the capital over the next 25 years.

The CIF is downgrading its estimates for housing completions in 2019 to just under 22,000. Social and affordable new builds are likely, due to the market dynamics, to be only a fraction of this output, with viability and availability of infrastructure key constraints in this.

The industry believes that the LDA is best placed to enable the delivery of social and affordable housing by license where it is simply not viable for home builders to secure finance to deliver units. In addition, if the LDA identifies the correct State lands for development, it would result in increasing the development potential for adjacent lands owned by home builders that are currently unviable. For example, connecting a State-owned site to infrastructure and utilities could conceivably mean other surrounding sites would then also become viable for development. This will require transparent and effective collaboration between national and local government and the private sector. This blended approach will prevent a counterproductive situation whereby the LDA effectively replaces the SME home builder while only marginally increasing the level of housing output. The principle of additionality should be applied in consideration of the selection of State lands to develop.

It is critical for a fully functioning market that the LDA provides full transparency in terms of the landbanks being prioritised for development, and with timescales. An approach similar to the Government's national development plan infrastructure tracker could be adopted for the LDA's portfolio, where a clear pipeline of projects has been identified and updated in real time. The agency will also require, in our opinion, greater powers to obtain critical State lands in a speedy manner to begin developments as soon as possible in the face of increasing construction, land and labour costs that can erode value where developments are delayed.

As specialists in the area and the market, home builders and developers are well placed to provide advice to the LDA on development issues, typologies and timeframes, and as such should partner with the agency. As part of this process, we believe that the LDA should only issue performance specifications as to what is required for tender to developers. This will allow developers apply their expertise within the regulatory regime to deliver quality homes. We would suggest the LDA also completes preparatory work for site pre-development for maximum efficiency.

Finally, the SME home building sector has undergone a traumatic decade. The LDA should ensure that its qualification requirements do not effectively exclude SMEs from securing licences in the future.