Rising building material costs are the biggest concern and challenge facing builders, an Oireachtas committee said.
Ames Benson, director of housing, planning and development services at the Construction Industry Federation (CIF), warned that the housing affordability gap is widening and making it more difficult to access loans mortgages.
He told the Oireachtas Committee on Housing that development costs were rising whether it was private or public housing.
The committee met to discuss the impact of rising inflation on the construction sector.
Benson said CIF traveled around the country and held a series of workshops with builders, and discussed ongoing issues in the industry.
“Without a doubt, material inflation is probably at the top of the list of concerns of the challenges imposed on these builders,” he said.
“Last year, in May 2021, we conducted a survey of all of our members which looked at material inflation for each cost item in a typical three-bedroom semi-detached house.
“At the time of May 2021, it added something in the region of 17,000 (euros) per unit. The impact of this means your pre-tax profit margin has dropped by almost half, from 10% to 5%. The builders, if they didn’t add the costs, wouldn’t meet the criteria for financing, wouldn’t get the financing, and never could have started the projects.
“Where they added it to the price of the house, the affordability gap was even worse than it was and people couldn’t access mortgages.”
Mr Benson has called for a comprehensive review of all housing development costs.
“So not just input costs, not construction costs, all development costs. Regardless of the delivery model, regardless of the builder of the houses, whether public, private or otherwise, there are development costs in every development,” he added.
Not only can they not guarantee that the cost will be retained, but they also cannot guarantee the availability of these materials.James Benson, Construction Industry Federation
“Unfortunately, we cannot give you a figure for the last 12 months, because each time we carry out the same survey again, our members are informed weekly by the suppliers that the costs are increasing.
“Not only can they not guarantee that the cost will be retained, but they also cannot guarantee the availability of these materials.
“So that unfortunately puts the industry in a very difficult position, and that unfortunately puts the consumer at a disadvantage because they don’t know what real estate prices are going to come to market.”
Eddie Taaffe, program coordinator for the Office of Housing Delivery and Coordination, said he’s seen inflation rates of around 5% to 15% in new developments.
He told the committee that it was possible to cut costs by using more modern construction methods and more off-site fabrication.
Reacting to rising inflation rates, Sinn Fein’s Eoin O Broin said: “Obviously this is going to put enormous pressure because, unlike the private sector, if you have a 10 or 15 per cent increase in construction costs, this has a much greater impact in terms of public spending.
“So that’s obviously going to have a huge impact on achieving affordable social housing targets, if that happens by the end of the year.”