Housing shortage threatening Ireland’s competitiveness, State body warns

The housing shortage is the most serious of several infrastructure issues undermining Ireland’s competitiveness, a new report warned, with one of the lowest rates of investment in the sector in Europe.

While the country’s overall fundamentals are strong, housing, a relative lack of spending in research and development, as well as increased costs are all rated as areas to improve on if the country is to maintain its attractiveness internationally, according to the National Competitiveness and Productivity Council’s (NCPC) competitiveness scorecard for 2023.

“Infrastructural constraints are undermining Ireland’s current competitiveness performance, with housing supply the most serious of several problem areas,” chairwoman, Dr Francis Ruane, wrote in the report. “For 2021, Ireland was the poorest performer in western Europe in terms of housing investment as a percentage of GNI*.”

“It is important that we recognise the risks posed by these constraints to Ireland’s competitiveness standing and the need to address them efficiently and effectively so that they do not undermine employment and living standards,” she added.

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The Government considers GNI*, a modified measure of gross national income, the best measure of the economic health of the nation as it strips out measures such as multinationals’ corporate profits moving through the country which have little impact on the real economy.

The NCPC, which reports to the Taoiseach through the Department of Enterprise, is the latest body to warn of the impact of the housing crisis on Ireland’s economy in recent weeks. Employers’ lobby group IBEC, as well as the American Chamber of Commerce Ireland, have both highlighted the lack of accommodation as a problem for the country, with rents at or near record highs.

The council also warns on the potential over-concentration of Ireland’s trade. Five companies accounted for more than 40 per cent of the country’s goods exports in 2020. That’s the highest level across the EU. Services exports are even more concentrated, with computer services making up 59 per cent of all such exports.

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“The concentrated nature of Ireland’s services trade leaves Ireland exposed to sector shocks, particularly in the computer services sector, as has been apparent since early 2023,” the council wrote.

“There remain important areas for improvement if Ireland is to maintain, or improve upon, its competitiveness position in the years ahead,” Dr Ruane wrote. “More needs to be done on meeting energy and environmental targets and significant action is required if 2030 targets on emissions and renewables are going to be met. Furthermore, while price levels have generally been high in Ireland, a lower rate of inflation when compared to competitors in the decade up to 2020 had previously helped in maintaining cost competitiveness. This is no longer the case,” she added.

Even so, Ireland retains a “competitive edge in terms of demographics relative to its international peers,” she wrote.

While public debt is high in nominal terms, the ratio of debt to national income is trending down. The country has the second highest share of working age population with third level education in the OECD and leads the EU in science, technology, engineering and maths graduates per 1,000 people aged 20 to 29. Since 2018, Ireland has “consistently ranked in the Top 20 across most indicators of business and Government efficiency,” it added.