There is a throwaway line in a recent Davy report on the economy that concludes that if Ireland‘s population continues to grow at its current rate, and we want to reach European levels of housing supply we would need to build 122,000 new homes each year until 2030.
“This would be close to a quadrupling of current housing output, which seems unlikely to be feasible,” the author observes rather drily.
It is something of a mic drop. The takeaway is that the housing shortage is intractable, and for the foreseeable future we could be condemned to live in some sort of housing purgatory, never to enter affordable housing heaven.
Davy’s pessimism seems well grounded. The State’s current housing target, set out in the revised National Planning Framework published in April, calls for the construction of 50,000 homes a year.
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It is based on population projections from the State-funded independent think tank, the Economic and Social Research Institute (ESRI). The ESRI used the 2022 census data to model future population growth and estimate it will reach 5.53 million by 2027 and 5.67 million in 2030.
The Central Statistics Office (CSO), which conducted the census, has its own projections. They estimate that the population will reach between 5.49 million and 5.58 million by 2027 depending on migration and 5.59 million and 5.75 million in 2030.
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But both official estimates – which it must be remembered underpin the national housing strategy – already seem to have wildly underestimated the impact of migration on population growth.
Last month, the CSO released a separate estimate based on people’s interactions with the State via services such as social welfare and education. This estimate found that the population had already hit 5.45 million in 2023, some two years before the CSO and ESRI modelling predicted it would happen.
Clearly someone is wrong, or, in the case of the CSO, wrong and right.
There is little reason to believe that population growth is not continuing to outstrip the CSO and the ESRI’s estimates, says Davy’s chief economist Kevin Timoney. “The biggest mistake is to assume population growth will slow,” he says.
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The last significant wave of migration into Ireland in the 2000s was driven by a combination of cyclical economic factors and the accession of Poland and other central and eastern European states to the European Union.
Ireland, unlike other member states, did not impose temporary immigration controls.
The current wave, Timoney believes, is more structural than cyclical and is driven by factors such as Brexit, wars and climate change. It will be mostly “south to north”, with migrants drawn by our relative economic wealth compared with their country of origin. There is also the inconvenient truth that we need to attract migrants to underpin economic growth.
Davy expects the population to hit 5.9 million by 2030 and to reach European levels of housing provision by that date would be an almost impossible task.
Timoney believes that building 70,000 houses year is the best that we can hope for, and even that would require a big increase in productivity. The best year on record for house building was in 2006, when 88,500 houses were completed. There were roughly 2,000 building firms operating in the State but the largest only built 1,000 homes.
There are far fewer builders now and the sector is dominated by two large home builders who have around 15 per cent of the market.
They have the potential to scale up production through greater use of technologies such as off-site manufacturing but much more would be required to hit 70,000 homes a year, including significant investment by the Government into social housing.
It is obvious that the gap between the Government target of 50,000 homes and Davy’s projected requirement of 120,000 is simply unbridgeable given that we only built 33,000 homes last year.
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The Government has an unpalatable choice. It can stick its head in the sand and cleave to the increasingly dubious prediction that 50,000 houses per year is a both achievable in the short term and sufficient. The alternative is to say that it may have underestimated migration and needs to revise its figures.
It’s not a good look, but the planning framework did flag the possibility that the numbers may have to be revised to account for higher net immigration. Their problem is that whatever new housing target they produce will stretch credulity even further than the current 50,000.
The correct but pretty much politically impossible thing to do is to level with the electorate that fixing the problem is going to take far longer than anyone is prepared to admit. And it will probably never be fixed if the definition of fixed is that we achieve European levels of housing provision.
