Ms Orla Hegarty:

There is absolutely nothing wrong with private developers buying land and adding value to that land, and that being a legitimate business. We have no issue with that. It is a model we have used very properly in the past.

I would draw a distinction between such a model and an over-reliance on it, whereby it can serve, and function for, the private market. It tends to follow the ups and downs of the economy and a boom-and-bust cycle whereby the industry will produce a lot and then stall because conditions change. We will then see a decline in building, followed by an increase. That often involves a seven-year cycle.

An over-reliance on that model means the whole situation is precarious in terms of delivery. Traditionally, the public sector evened out that process by ramping up investment in the public sector in a downturn, which maintained employment in the construction industry and meant the State got keener prices when the market was good. When the private sector picked up again, the State could wind down its investment and construction workers and, importantly, skills could be retained because people would work through the cycle.

In principle, there is nothing wrong with the speculative market. However, we now have particular conditions whereby there is an over-reliance on this model and limited capacity. There has been no effort to build capacity in the residential construction sector since the crash. We have not rebuilt the native small builder sector. There have been high barriers to entry. It is been very difficult for such builders to get finance and land. That means it has been difficult for builders to start building.

The Deputy referred to smaller and more regional builders, turnkey operations, and the comment that houses would not be built if it was not for the State stepping in and buying them as turnkey properties. The reason they would not have been built is because smaller developers find it very difficult to get finance. That has been a barrier. In effect, rather than procuring housing through contracts which have mechanisms for dealing with inflation for builders and all of the things that traditionally would have been in place to help the current situation, the State has gone for a model whereby it will agree a fixed price at the beginning, be it on a Part V, turnkey or other such arrangement. That was all very well when the conditions were stable, but it is not working when they are not.

We need more sophisticated mechanisms to manage that because builders have real costs. Keeping people on their knees or putting them out of business is not the way to re-establish a national residential construction sector. The sector has to be supported to regrow and ensure people have good terms of employment, apprenticeships and skills training. Putting builders into high-risk situations with fixed-price contracts and tenders where the lowest price wins the bid is very damaging to the sector in terms of quality and employment. It is also risky in terms of how the cycles go because, as the Deputy can see from the feedback earlier, small builders are being pushed into very high-risk conditions due to the fact we do not have contracts for them which have the mechanisms to manage the situation.