RISING COSTS OF building materials are putting homes “further and further out of reach” of people who need them, the Irish Home Builders Association (IHBA) will tell TDs later today.
In their opening statement to the Joint Oireachtas Committee on Housing, Heritage and Local Government, Director of the IHBA James Benson will tell TDs and Senators that recent increases in material costs are not helping with the affordability of housing.
“Affordability remains challenging and recent extraordinary increases in the costs and availability of materials do not help. Supply is not meeting demand,” Benson will tell politicians.
“With mounting construction costs home builders are challenged to bring new homes to the market at a level that average income earners can afford.
“Residential material costs are going up on daily basis and putting homes further out of reach of those who so desperately need them.”
Benson will say that the situation is getting worse on a weekly basis and that if this increased cost of delivery isn’t added to the purchase price of a home, the pre-tax profit margins drop and builders will not meet the criteria to finance the development.
He will add that where this price is added to the purchase price of a home, it diminishes the ability of a consumer to secure a mortgage and “those currently ‘locked out’ of the market are further restricted”.
The group will also tell TDs and Senators that half of the cost of bringing a new house to the market is made up of so-called ‘soft costs’, including VAT, taxes, land costs and professional fees.
“These costs are often incurred over years in advance of commencement. There is potential to streamline those costs, deliver homes sooner, reduce costs and make homes more affordable,” Benson will say.
“There is a difference between construction costs and development costs and asking the new home purchaser to pay for all these soft costs is inequitable when compared to the second-hand home market.”
The Society of Chartered Surveyors Ireland (SCSI) are also set to tell the Joint Committee that the increased construction costs are due to both the current levels of inflation as well as price volatility for building materials.
Earlier this month, it was announced that the Government would be paying up to 70% of inflation-related costs on State projects, with Public Expenditure Minister Michael McGrath saying it was due to the threat of projects not being completed.
According to the SCSI, these are particularly insulation, cement, plasterboard, metals and fuel, alongside labour shortages and high demand for housing projects.
“In respect of the first half of 2022, it’s clear Russia’s invasion of Ukraine is having an impact on the price of materials previously sourced from the region especially steel and base metals while it has also led to a dramatic increase in fuel and energy costs,” the SCSI will tell TDs.
While the SCSI will say there is no single solution to the rising costs, it will require a “proactive and cohesive” response from the Government, while suggesting that local authorities are resourced to allow for faster processing times.
Labour shortage
The IHBA are also set to raise concerns about the labour shortage within the construction industry, saying that 27,000 more workers are needed within the residential construction industry to meet Government targets.
“While we are already witnessing greater numbers enter the sector across the various professions and trades, we need to continue to make the sector attractive to new entrants and remove current blockages,” Benson will say
“Work permits for those coming from outside the EU are currently taking 16 weeks, this is too long to expect someone to wait when we badly need workers,” adding that additional resources are set to be implemented within the Department of Enterprise.
The IHBA will also call for an improved trade traineeship model that would range from six to 18 months, depending on the type of work.
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