LAST UPDATE | 28 Jul 2022

THE MINSTER FOR Housing has said a plan is to be developed to help owners of Celtic Tiger-era apartments and duplexes with construction defects, following the publication of a working group report today.

The working group was established by the Department of Housing in February last year. It was tasked with examining the scale of fire safety and structural safety defects in apartments and duplexes built between 1991 and 2013 and report to the minister on costs associated with repairs. 

Although the most prominent defects relate to fire safety, some complexes also have water ingress, which causes damp issues in homes and adds thousands of euro to owners’ repair bills.

According to the report, the cost of remedial works ranges from €1.56 to €2.5 billion and as many as 100,000 homes are estimated to be impacted. The working group has recommended that a State-funded remediation scheme be “fully considered from a policy and cost perspective”.

The group concluded that there was no single cause for the defects.  

“They tend to arise due to a variety of design, product, supervision, inspection and workmanship issues, occurring either in isolation or in various combinations. This position was replicated throughout the country,” the report notes.

The group assessed the concept of imposing penalties on certain construction firms who were responsible for the defects. However its final report states that it is “not feasible to retrospectively impose a penalty on individual firms”.

Minister for Housing Darragh O’Brien welcomed the publication of the report and said it will be given full consideration in developing a plan to address the situation “that many homeowners find themselves in through no fault of their own”.

“Upon my appointment as minister I said that this was a nettle we had to grasp and I am very much committed to helping those whose lives have been impacted by this issue,” he said. “I believe this report will help us do just that.”

Retrospective support

Fire safety defects referenced in the report include inadequate escape routes, ineffective fire stopping and inappropriate external cladding systems.

Examples of significant structural safety defects were also given in the report, such as significant cracks,  movement in foundations, insufficient tying (which reduces the resistance of a multi-storey building to disproportionate collapse) and inadequate balcony design.

Homeowners who have spoken to The Journal have received bills of between €15,000 and €20,000, with some complaining they were given a short period of time to come up with large lump sums.

Those who could not or refused to pay faced what some described as “frightening” legal threats from their Owners’ Management Companies, even, in some cases, after they had made offers of alternative pay arrangements.

It is estimated that remedial works have already been completed in 12,000 apartments or duplexes and may have begun in up to 34,000 properties. 

The working group considered the “potential of a moral hazard” arising should a support scheme exclude those developments that have already begun or completed their works. 

Its report states that there is a risk that necessary safety works could be delayed or deferred to ensure the availability of any potential support scheme that might come into effect. 

“Such a scenario might give rise to unnecessary risk to health and safety arising from
the deferral of important works or where necessary works have only partially been completed within a development,” the report notes.

“The working group considered that the inclusion of a relief for retrospective expenditure on remedying defects could mitigate the risk of such a moral hazard materialising.”

Industry levy

The working group report presented a wider industry levy as one of a number of options, but it pointed to several potential issues with this approach.

It advises that legal issues may arise in relation to imposing a financial burden on construction firms and that there may be a wider impact on construction costs.

A general levy, the report notes, would also target “those who did not contribute to the problem” and it said the government should consider the perceived fairness of this option for both the industry and homeowners. 

Although the report points to a number of problems with imposing an industry-wide levy, it notes that the government is already considering a proposal to introduce a levy on the construction industry in relation to the defective blocks (mica) issue. The aim of this levy would be to raise around €80 million per year.

Minister for Public Expenditure Michael McGrath recently told RTÉ News that the financial burden of repairing these defects cannot solely fall on the State and that “the industry will have to step up to the mark as well in order to meet the overall costs”.

The Construction Defects Alliance, which represents owners impacted by this issue, described the report as “a very welcome landmark”. 

Spokesperson Pat Montague said access to retrospective financial assistance “has to be provided for” in Budget 2023. 

“Any delay in doing so will, unfortunately, lead to the very unnecessary risks to health and safety the working group is warning about,” he said.

He said the Construction Defects Alliance has proposed that the government introduce refundable tax credits for the full value of defects levies paid for owner-occupiers, grants to housing associations and extended tax reliefs for landlords in Budget 2023.

“The working group has set out a number of options for financing remediation works for government to consider,” he said.

“It’s clear from its analysis that loans are fraught with practical difficulties, so the focus will need to be on grants to owners’ management companies (OMCs) to undertake remediation works or the State directly commissioning such works. In this regard, government should look at transforming the Pyrite Remediation Board into a Defective Homes Board to oversee and manage the remediation scheme here.”

In addition, Montague said a levy on the construction sector will need to be put in place.

“A 1% levy on the industry’s output could raise around €5 billion over a 10-year period and assist greatly with the combined bill for mica and apartment defects, which will probably exceed €7 billion,” he said.