RISE in the cost of building materials is making homes “increasingly out of reach” for people who need them, the Irish Home Builders Association (IHBA) will say later today.
In his opening statement to the Oireachtas Joint Committee on Housing, Heritage and Local Government, IHBA Director James Benson will tell TDs and Senators that recent increases in material costs will not not help with housing affordability.
“Affordability remains challenging and recent extraordinary increases in material costs and availability are not helping. Supply does not meet demand,” Benson would tell politicians.
“As construction costs rise, homebuilders are challenged to bring new homes to market at a level that middle-income earners can afford.
“Residential material costs are rising day by day and are putting homes further and further out of reach for those who desperately need them.”
Benson will say that the situation is getting worse week by week and that if this increased cost of delivery is not added to the purchase price of a home, pre-tax profit margins plummet and builders will not do not meet the criteria for financing development.
He will add that when this price is added to the purchase price of a home, it diminishes a consumer’s ability to obtain a mortgage and “those who are currently ‘excluded’ from the market are further restricted.”
The group will also tell TDs and senators that half the cost of bringing a new home to market is “soft costs,” including VAT, taxes, land costs and professional fees.
“These costs are often incurred for years before the start. There are opportunities to streamline those costs, deliver homes earlier, reduce costs and make homes more affordable,” Benson will say.
“There is a difference between construction costs and development costs and asking the buyer of a new home to pay all these ancillary costs is unfair compared to the second-hand home market.”
The Society of Chartered Surveyors Ireland (SCSI) is also expected to tell the Joint Committee that the rise in construction costs is due to both current levels of inflation and volatility in building material prices.
Earlier this month it was announced that the government would pay up to 70% of inflation-linked costs on state projects, with Public Expenditure Minister Michael McGrath saying this was due to the threatens that projects will not be completed.
According to SCSI, these include insulation, cement, plasterboard, metals and fuel, in addition to labor shortages and high demand for housing projects.
“As for the first half of 2022, it is clear that Russia’s invasion of Ukraine is impacting the price of materials previously sourced from the region, particularly steel and base metals, while driving up fuel and power costs dramatically,” SCSI will tell TDs.
While SCSI will say there is no one-size-fits-all solution to rising costs, it will require a ‘proactive and consistent’ response from government, while suggesting local authorities have resources to allow for processing delays faster.
No news, bad news
Support the review
Your contributions will help us continue to deliver the stories that matter to you
Support us now
The IHBA should also be concerned about labor shortages in the construction industry, saying an additional 27,000 workers are needed in the residential construction industry to meet government targets.
“While we are already seeing more entry into the sector across the various professions and trades, we must continue to make the sector attractive to new entrants and remove current bottlenecks,” Benson said.
“Work permits for those coming from outside the EU currently take 16 weeks, that’s too long to expect anyone to wait when we badly need workers,” adding that additional resources should be implemented within the Ministry of Enterprise.
The IHBA will also call for an improved model of trades internships that would last from six to 18 months, depending on the type of work.