Good afternoon, it is January 4th 2021 and here is your economic and market update from BlackBee.
Today’s focus:
- Social Housing could become the new darling of the property market.
- Argument that the state can build social housing cheaper than private developers is flawed; private turn-key home developments key to addressing housing crisis.
Cinderella assets such as social housing could become the new darlings of the property market. Social housing used to be considered as the sole responsibility of the public sector however with the ongoing housing crisis it has become clear that the state will require acquisitions of turn-key homes from the private sector to hit their housing targets and address the crisis. These developments are now being targeted by institutional investors. With the government under pressure to meet housing demands, a number of state agencies are providing funding to developers and approved housing bodies to build these new homes. The risk of speculative housing is reduced as the developer is assured that there is a good prospect for a quick sale. Reflecting on €1bn invested in the private rented sector in 2020, Hannah Dwyer of agents JLL said that they have received “a lot of enquiries recently about social housing and we expect continued interest in this sector in 2021”. (Source: Irish Independent).
The efforts to tackle the housing crisis in Ireland recently suffered a setback when Dublin City councillors rejected proposals to build new homes at Oscar Traynor road. The rejection attracted both scathing and favourable reactions. The analysis is flawed as many have used the commentary on the report by the Irish Government Economic Evaluation Service (IGEES) to justify their arguments that Dublin City Council were correct in their decision. This report examined the states social housing build programme and stated that it is cheaper for local authorities to directly build social housing in comparison to the private sector. However IGEES admitted that their analysis of comparative costs was lacking data and that it “can often be the case that the data is not recorded completely or accurately”. The analysis was based on an incomplete data set and therefore cannot be an accurate comparison of social housing delivery costs. Also the IGEES didn’t use comparable public and private models of housing delivery in their analysis. Higher density and higher cost “regeneration projects” are omitted from the public number but included in the private sector numbers. IGEES suggest a direct build from a local authority to cost €230,000 while a private sector build would cost €258,000. The state excluded more complex projects and if they were included there may be no difference at all or the private sector could build homes more cost effectively. To reach the government’s target of housing and effectively address the housing crisis the acquisition of turn-key housing from private developers is vital. Minister for Housing Daragh O’Brien provided additional insights in December in the Dáil that since January 2019 in Dublin City and Fingal, the cost of direct builds have been €382,000 while the cost of turn-key homes has been €373,000. (Source: Irish Times).
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