Initiative Ireland (www.initiativeireland.ie) has released its annual housing report, entitled Housing 2019. The report provides a performance review on the supply of houses across the country and highlights key concerns regarding a mismatch in nationwide housing supply and demand, most notably within the greater Dublin area. Housing 2019 builds on the company’s inaugural report published last year.

Provision of lower-cost alternative finance loans to experienced developers

Initiative Ireland is a social impact finance firm, specialising in the provision of lower-cost alternative finance loans to experienced developers. The company founded in 2015 as a digital challenger within the Irish finance market, is headquartered at NovaUCD, the Centre for New Ventures and Entrepreneurs at University College Dublin. Padraig W Rushe, CEO, Initiative Ireland said, “2018 saw a significant increase in supply but coming from a low base, only meets 52 per cent of demand nationwide in terms of volume. If our goal was to simply hit numbers, we would need an increase in output of 2.8 times this year to offset the 2018 undersupply.” [caption id="attachment_48865" align="alignright" width="300"] Padraig W Rushe, CEO, Initiative Ireland[/caption] “Unfortunately, this isn’t simply a numbers game. We don’t require 40,000 new luxury homes in D4, we need a mix of housing types across the country to reflect the underlying demographics and sadly last year we saw a concerning mismatch between the types of houses built and the types of homes needed, with construction in the greater Dublin area seriously under-serving lower- to middle-income families.” The Housing 2019 report provides an overview of housing supply volumes by region compared to Initiative Ireland’s demand forecasts, which it has modelled based on population growth, employment and other data sources over the last 25 years.

Assessed for affordability of supply

On a pure numeric basis, the greater Dublin area (comprising of Dublin, Meath, Kildare and Wicklow) appears to perform best achieving 60 per cent of demand volume but when assessed for affordability of supply it performed worst nationwide. Ireland’s current average gross household income stands at €57,200. Even with the Government’s ‘Help-to-Buy’ Scheme and assuming a 90 per cent LTV Mortgage, Initiative Ireland’s analysis indicates that such households would have been able to access less than five per cent of the new housing stock delivered last year within the Greater Dublin Area, as highlighted in the report. By comparison the midlands region (comprised of Laois, Longford, Offaly and Westmeath) only delivered 30 per cent of new housing demand but 80 per cent of these homes were affordable by comparison. Rushe said: “Half of all Irish housing demand will fall within the greater Dublin area by 2031. We should see significant investment in affordable housing in the region based on demand, and yet because this is where the all-in cost of construction is highest, the minimum cost of delivering housing units is proving too close to, or falling below, the end purchase price.

'Focus on delivering housing to upper end of market'

“As a result, we see a focus on delivering housing to the upper end of the market, which is far less sustainable and compounds rental pressures for lower-income families.” Housing 2019 also raises concerns that the Central Bank’s 3.5x borrowing cap is disproportionately impacting lower-income families in the greater Dublin area, locking them out of ownership and into higher cost rents and/or social housing alternatives. While purchasing power is limited Housing 2019 shows that most households can afford to borrow and service larger mortgages at lower cost relative to rents and without committing more than 25% of their monthly income to rent/mortgage payments. As such, it suggests a more nuanced, staged borrowing model would better serve to stimulate the production of affordable housing and provide more security of tenure and reduce monthly outgoings for lower income families. “The 3.5x rule was designed to avoid over-heating of the market but it is proving too blunt an instrument, locking lower income houses into the rental market too soon in the cycle," said Rushe. "It also fails to factor in cost of credit, whether a mortgage is fixed or variable, the rate, the monthly cost and the underlying liquidity of the home and location.” “A more considered approach is needed which focuses on giving lower income families access to the ownership market recognising that the alternative costs these families more and only results in an overheating of the rental market.” The Housing 2019 Report is available via https://www.initiativeireland.ie/media.