RDJ Housing Conference: Foundations 24

RDJ held its inaugural housing conference, Foundations 24, at Páirc Uí Chaoimh on 25 January 2024 with over 300 clients, colleagues and industry stakeholders in attendance.

Economist and keynote speaker for the event, David McWilliams opened the conference by reflecting on the critical link between Ireland’s economy and housing. McWilliams declared housing as the defining issue of our day, politically, socially and economically and one that “will frame this society for the next generation.” The healthy economy Ireland has built over the last number of years is imperilled if housing is not addressed. McWilliams challenged the audience to embrace unconventional thinking to meet the challenge of delivering on Ireland’s current housing needs – 60,000 homes per year. He reminded us that the people who build Europe's gothic cathedrals knew that they wouldn't be around to see them completed. They were building for people yet to be born. We need to adopt this same ‘cathedral thinking’, McWilliams said, in order to meet housing needs for the next generation.

McWilliams opening remarks were followed by two engaging panel discussions on significant challenges that still face the housing sector, upcoming developments and potential solutions to speed up delivery of social, affordable and private homes. We have provided key takeaways from the event below:

Panel 1 - Outlook for 2024

Partner and Head of RDJ’s Real Estate Group, Evin McCarthy was joined by Helen Moore, Oaklee Housing; Brian O’Callaghan, O’Callaghan Properties; Peter O’Meara, Savills and Phelim O’Neill, Land Development Agency (“LDA”) for a discussion on the progress made in 2023 in the housing market, expectations for 2024 and potential challenges and ideas for how to make a more efficient and sufficient housing market.

1. Market Outlook - 2023 was a difficult year with supply chain issues, build cost inflation and spiking interest rates leading to viability issues for developments. In particular, the cost rental market struggled. The panel reflected on how the residential Housing Market has been revitalised by public investment through government schemes in the last 12 – 18 months and this has had a positive effect in terms of new housing delivery. Examples of recent delivery can be seen in the docklands in Cork such as the O’Callaghan Properties development at Kennedy’s Quay– as a positive story in terms of residential development getting off the ground. The panel discussed some of the State initiatives which have assisted progress in delivery – Croí Connaithe and the Cost Rental schemes were noted in particular as measures which have stimulated delivery in 2023 and into 2024. The demand for private apartments is unquestionable given the forecasted population increase of 100,000 people by 2040 in Cork.
2. LDA Intervention - Bodies such as the LDA are performing an increasingly important role in the housing market, delivering social, affordable and cost rental units in partnership with developers. This involvement helps bridge the gap on viability for many residential developments. Project Tosaigh II is the largest intervention by the LDA with the ability to provide stage payments during the construction phase.
3. Collaboration with Approved Housing Bodies - a collaborative mindset between developers and AHBs is critical to enable the delivery of a mix of social and cost rental units. Developers can speed up the process when engaging with AHBs by having their Part V agreed, a full schedule of costings and project cashflows available to enable AHBS to quickly make an assessment as to the viability of proceeding with a development. AHBs and developers have a shared goal in delivering housing - developers have price certainty and AHBs can deliver the units backed by their public and private funding streams. Savills estate agents estimate that between 80-85% of developers are reliant on AHBs when submitting bids for development land
4. Intersection between Public and Private Market - The panellists highlighted that Government intervention on its own cannot solve supply issues. Both the private and public market will need to function together to deliver the required units per year. There must be room for institutional investors to support developers in addition to public funds. Last year interest rates exceeded the expected yields for private investors meaning that the 2023 market was unstable but signs of certainty are re-emerging which may bring investors back to the market.
5. ESG - The Green Premium- No longer “BER and Ignore”- The panellists noted that ESG is a huge focus for investors and is the first question financiers will ask when it comes to delivering a project. ESG requirements are a key focus for AHBs underwriting costs during both the construction and operational phases of buildings - looking at the carbon lifecycle of a development rather than simply its building phase. Consideration of the Home Performance Index and its metrics are also essential. For State projects ESG delivery must be the best in class – key considerations are for example, the cost for future tenants of heating and electricity. ESG is also a major factor in valuing buildings as there is now a green premium for energy efficient buildings. The panellists agreed on the importance of developing in areas of urban regeneration, where infrastructure may already be in place in meeting ESG goals and delivering on ’15 minute city’ ideals.
6. Wishlist for 2024 and Beyond

• Planning: there are major issues with delays caused by planning appeals. There is a critical need to allocate more resources to An Bord Pleanala to deal with judicial reviews that are causing delays to developments. A more streamlined process is required and the disparity between national and local authorities needs to be addressed. It is clear that, currently, planning is acting as a disincentive to private developers and public bodies alike. Panellists expressed hope that the Planning and Development Bill will address some of these issues but it is likely to take some years for the bill to have a practical effect.
• Infrastructure: there is a need for a more focussed short and long term plan with regard to infrastructure needs and the requirement for serviced land plots.

Panel 2- A Better Way Forward

The second panel discussion included David Caffery, Glenveagh Properties plc; Yvonne Harris, Uisce Éireann; Peter Horgan, Lugus Capital/Grayling Properties; and Evan Lonergan, Knight Frank. The speakers shared practical insights and personal perspectives on how we can map a better way forward and speed up the delivery of social, affordable and private homes in Ireland.

1. Conversion of Existing Stock and Density - The panellists discussed the “15 Minute City” and driving density in development as a key means of sustainably delivering volume in housing. They were critical of past government decisions to eradicate co-living, disincentivising Build to Rent and restricting the number of 1 bed units. There is currently overzoning for commercial spaces in the City Centre and we need to shift the balance back to residential to meet demand with a focus on density. Looking at our EU neighbours, and Paris in particular, the footprint of Irish apartments are on average 41sqm whereas in Paris it is 25sqm and it is seen as a thriving example of city centre living. The panellists discussed how city centres are not viable for people to live at the moment and this is having knock on effects on business and the vibrancy of these spaces. All were in agreement that there are opportunities for developers in terms of the conversion of office space and revitalising existing buildings which may be missed without necessary policy interventions. In suburban settings, the Compact Growth Guidelines implemented by the Government in 2024 will focus on re-thinking and optimising private open space, re-imagining public open space functionality and reducing the size of back gardens.
2. Infrastructure – it was suggested that capacity registers should be made available to developers making decisions on development locations so they can readily see where there is existing capacity. There is also a need for a more pro-active approach with regards to priority growth areas, with an opportunity for infrastructure bodies to collaborate better with Local Authorities and developers. Uisce Éireann for example must currently have a customer before they can service a site. Where there are a number of developers with planning permission in an area of high priority growth, infrastructure bodies should reach out to the regulator to allow high priority sites to be serviced in advance of developments commencing. This would mirror the Australian model where infrastructure bodies are directed by a national body as to locations to be serviced. Furthermore, we need to ensure that existing infrastructure capacity in high growth areas is being fully utilised before new infrastructure projects are commenced.
3. Ideas for 2024 and Beyond-

• Supply issues - need to address physical supply chain issues and high level skills shortage. There should be a focus on pre-manufacturing materials off site e.g. timber frames.
• Standardisation - developers are hindered in delivering standardised units across the country due to each Local Authority having their own set of guidelines. If there was national standardisation, this would bring certainty and efficiency through repetition together with cost savings.
• Planning - planning was traditionally an 18 month process but can now take 4-5 years for a final grant to issue. Overhauling the existing planning regime with a view to reducing time periods for grants to issue would encourage stakeholders to acquire land at all stages of development not just when it is subject to exist planning.
• Zoning - Ireland is currently the 144^th least populated country in the world. There is a lack of zoned land and we need to promote the re-zoning of land for residential purposes.

View photos from the conference here.

For more information on any of the topics discussed above, please contact:

• Evin McCarthy, Partner and Head of RDJ’s Real Estate Group | E. evin.mccarthy@rdj.ie

To learn more about RDJ’s Real Estate Group or contact a member of our team click here.