New apartment standards will help address housing supply problem

The Housing Agency leads with the catch cry of "affordable, affordable, affordable" instead of the auctioneers' mantra of "location, location, location".

There is no point in having more housing if it is not affordable. More houses that are out of reach of ordinary pay packets will just bring more misery.

People will be tempted to overspend and become overstretched – again. Overstretched people demand higher wages – and the cycle of inflating prices and inflating wages will begin that financially fatal merry-go-round – again.

Affordable housing is a critical success factor for small, open economies, such as Ireland’s, that need to stay competitive. Achieving affordability is difficult because housing is a complex issue with many interlocking parts that must all be unpicked to make progress. These include the costs of materials, labour, land, finance and profit; and of meeting planning and building requirements.

Ireland is beginning the slow recovery from the terrible housing crash of 2007. Housebuilding is beginning again and all of the many players are starting to take stock – nervously trying to catch up with the re-emerging demand for housing.

It is probably safe to say everyone is anxious to avoid the mistakes of the past. So we are making haste slowly. This involves making adjustments to try to address the problems of the past.

Lending limits

The Central Bank’s lending limits seem to have already made a good start. They have provided certainty and security to ensure lending becomes firmly linked to repayment capacity. With increasing regularity, media headlines are beginning to report that the steep recovery in house prices is making a transition towards a plateau.

Now that credit-related price inflators have been dealt with, the next task is to reduce other inflators. These include some inflexible and impractical regulatory aspirations that have added greatly to the price of housing by reducing the yield from each site and by requiring the inclusion of elements such as excessive provision of lifts, car parking and stairs.

The revised guidelines on design standards for new apartments, published this week, address problems identified by everyone in the sector and propose a set of national standards. Without an adjustment to the development standards put in place by the Department of the Environment the supply of new apartments could be severely constrained.

Making changes such as this is both necessary and risky. The risk lies in avoiding surrender to the demands for less regulation by profit-hungry developers while maintaining hard-won standards to avoid a return to the worst of the “shoebox” developments. The guidelines represent a good start by addressing the role of regulation in affordability.

It would be a pity if attention focused only, or excessively, on the issue of the minimum standard required for the development of studio apartments. These address a big requirement in the market – but not the whole market.

Having a single set of standards is essential in any developed country. What we must now focus on is delivering good- quality, affordable apartments in towns and cities to meet the needs of our society.

Choice and variety are the key to unlocking viability and quality. Everyone wins when a site is used to its full potential. We all win when better use is made of expensive, publicly funded streets, transport systems and public services.

Higher-density development delivers this increased use and better payback on investment of public funds. The resultant increased footfall produces more viable local shops, creches, cafes and sport clubs. We get better, more viable neighbourhoods – of a higher quality. The developer gets better economic viability and is more likely to build more, and to be able to sell them more affordably. Everyone wins.

Demographic realities

There is more work ahead.

Planners

, developers, bankers and auctioneers have to wake up to new demographic realities. Many people are astonished to learn that almost a third of occupied households in Dublin city are apartments. This is only going to increase because of population growth, a move towards smaller average household size, an ageing population and a greater proportion of households in the rented sector (in 2011, three-quarters of all occupied apartments were rented).

There is a residential accommodation crisis in Ireland, especially in our cities. It affects quality of life, our ability to attract investment and the sustainable development of our cities as attractive places to live and raise children. Given the time it will take to deliver development, the problem will exist for at least another three years as stock is built.

The solution that has to be developed to kick-start the provision of apartments must be based on two guiding principles. First, there must be economic viability of building for the provider and there must be affordability (to rent or buy) for the resident. We must also address the issues of economic viability and affordability for those renting or buying. Having sensible apartment standards aimed at providing good-quality, affordable dwellings is a step in the right direction. Conor Skehan is chairman of the Housing Agency