Ireland’s new housing output is stagnating, and all the macro indications are that we will produce less housing over the next couple of years, not more, a new report has forecast from leading construction consultancy Mitchell McDermott has found which says housing output in 2025 could be as low as 32,000 units.
One of the key indicators of future output is planning permissions. The report found that planning permission was granted for 35,000 homes last year, one of the lowest figures over the last six years and down from 41,000 in 2023.
Paul Mitchell, one of the authors of the report, said unless drastic measures are introduced immediately there is little chance of the new government reaching its target of 300,000 new homes by 2030. In order to reach that target Ireland will need a 16% increase year-on-year on new houses and apartments and a 5% year-on-year increase on one off homes.
One of the key areas which he said needed to be addressed as a priority was the ‘high mortality rate’ of applications for housing schemes in our fast-track planning system.
“About fifty per-cent of housing permissions are delivered via fast-track schemes, so they clearly have a central role to play in meeting our housing needs. Our analysis shows that between 2018 and 2024, planning was submitted for just under 200,000 units in Strategic Housing Developments (SHDs) and Large-scale Residential Developments (LRDs).”
“Our figures show schemes accounting for almost 42,000 units (21%) were refused, a further 27,000 (13.5%) were subjected to judicial reviews and 11,000 (5.5%) are awaiting decision. In the end, schemes with just over 112,000 units or 56% of total applications received usable permissions. That figure is disappointingly low but even more disappointing is the fact that another 29% of these units have not been constructed or commenced construction. This means that only 40% of the original number of planning applications, 80,000 have been developed or are in the process of being developed.”
“Given the scale of our housing crisis, its vital we understand why the attrition rate is so high and address blockages in the system. It’s also clear we need to drive up the number of planning applications. Based on current ratios, if we want to build 50,000 units a year, we would need to have planning applications for 125,000 units submitted every year.”
“It’s important to say that the transition from SHDs to LRDs is a move in the right direction. Because the LRD system is a robust process and has won greater acceptance with the public, the number of judicial reviews has declined significantly. Whereas just over half of SHDs received usable planning applications, the figure for LRD’s is three quarters. While the overall output figures for 2024 are disappointing, both one-off housing and housing scheme figures are up over 4%. The issue is the decline in the delivery of apartments” Mr Mitchell said.
While 60,000 commencement notices were submitted in 2024, an 82% increase on the 33,000 submitted in 2023, the increase was largely attributed to developers rushing to meet deadlines for development levy waivers and water connection charge refunds.
Mr Mitchell believes that while the waivers may have unlocked some apartment schemes which were previously unviable, a misleading narrative was generated around the 60,000-commencement figure.
“That figure was quite widely reported on, and, on the surface, it did seem to indicate progress was being made. The reality is that while a developer may put in a commencement notice for 400 units, they might only commence 50 or 100. They wanted to ensure that they would be eligible for granted waivers for the maximum number of units they commenced, but there is no penalty if they commence less.”
“So, while that figure may have led people to believe that we had turned a corner and construction output was set to rise dramatically, the reality on the ground is sadly the opposite. Right now, the outlook is quite bleak. Instead of going forward, we have gone back to 2022 when housing output was also 30,000 and the number of planning permissions was 34,000, just one thousand less than 2024. The reality is that there is no momentum in residential construction and that’s why we are forecasting that output this year could be as low as 32,000 units.”
Blockages & Solutions
The latest CSO figures on housing completions show the main reason for the reduction to just over 30,000 units, was a fall of 24% in the number of apartments completed to 8,763.
Mitchell McDermott says this is part of a very worrying trend with just 14,000 planning permissions awarded for apartments last year. The previous year the figure was 21,000.
Mr Mitchell says the main reason apartment construction is heading south is largely due to previous government policy.
“The government changed regulations in December 2022 and as a result Build to Rent was no longer permitted as a category under planning. They did something similar to Shared Accommodation two years previously, which resulted in co-living being banned before it was given a chance to prove itself. The introduction of rent caps and the way they were introduced was the final straw for a lot of the international funds, who have taken their business elsewhere.”
“In 2023, the public sector stepped in when the private sector left. Without them between 10 to 15,000 units would not have been built. The LDA, local authorities and Approved Housing Bodies took the baton from the private funds, but as we can see they are running out of steam and money.”
“No plan was put in place to plug the finance gap left by the international funds and now we are seeing the effects of policy change. We need the support of overseas investment funds and international pension funds to finance the development of apartment schemes and help us construct the estimated 50,000 units we need to service our growing population. The way to win them back is to change government policy on build to rent and rent caps – the latter should be linked to individual leases not buildings – and give them the certainty they need to invest here.”
“While policy and finance are very important parts of the housing jigsaw, so also is infrastructure. Zoning land is no good on its own, it needs to be serviced, and this needs to be funded in a coordinated fashion with the ESB, Irish Water and Transport Infrastructure Ireland (TII) all working closely together.”
“In this regard, the failure to set up a Department of Infrastructure must be seen as a lost opportunity as we need someone at ministerial level to swiftly address blockages when they occur, whether they’re in infrastructure, planning or finance”.
Construction Inflation – steady but set to rise
Mitchell McDermott said that apartment construction inflation last year was 2.2%, while the figure for offices was 3.5%. While these figures are comparatively low, they still add to the bottom line. For example, the increase added between €4,000 to €5,000 to the construction costs of an apartment last year. Mr Mitchell also warned that further increases are on the way.
“While the rate of increase for most materials has settled down, concrete remains an outlier, with costs rising by 52% over the last 3 years. Feedback on the ground indicates that suppliers have issued quite a number of notifications for increases in 2025. As a result, we are guiding a 3% to 4% increase for construction inflation across the apartment and office sectors for 2025.”
