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Census Gives 5 Million Reasons Why Housing Is The Only Topic In Ireland

Figures published for the 2022 census from the Central Statistics Office on 30 May have confirmed what everyone knew: Ireland’s population is growing fast.

But how to house that expanding demographic has become a long-running political hot potato and data from the official census that Ireland's population has reached over 5 million people for the first time in 171 years only adds fuel to the debate.

The need for new homes is not in dispute. How many are required is.

The government’s Housing For All programme has pledged to build 33,000 units every year until 2030, with the latest figures from The Housing Agency showing 6,716 completions in Q1 2023. Taoiseach Leo Varadkar argued during Leaders Questions on 30 May that house prices are cooling and more young people are getting on the housing ladder.

Critics claim that new-home completions are barely half the number required and developers want more incentives to build, plus a more flexible planning environment.

The big question is whether the figures from the census have proved either side right.

Results from the Ireland Census 2022 have divided opinion over housing.

There were 5,149,139 people in the State on Sunday 3 April 2022, up 8% on April 2016. All counties showed population growth, from 5% in Donegal, Kilkenny and Tipperary, to 14% in Longford.

The average household size in Ireland remains at 2.74, a minor dip from 2.75 in 2016, but well above the European average of 2.2, according to property adviser Savills Ireland. That number has essentially stagnated because of the scarcity of new housing supply, according to the company.

There has been a “considerable shift” toward shared accommodation, with an additional 52,328 households living in some form of shared housing.

“This represents a staggering 32% increase since 2016, and this shift has directly influenced the average household size, effectively holding it steady since 2016. The lack of new housing on the market has been instrumental in causing this shift, underlining the pressing need for new residential development,” Savills said.

It calculated that 453,000 new homes would need to be delivered to bring Ireland in line with the European average and alleviate overcrowded households.

At the State’s new-build target rate, that would take nearly 14 years to achieve.

Housing Delivery And Demographics Timebomb

“The numbers also lay bare the consequences of sustained underdelivery of housing, with people being forced to squeeze in and share housing with other groups,” Savills Director of Research John Ring said.

The number of households renting privately increased by 6.7% nationally from 2016 and private rental tenants have been squeezed the hardest, while the proportion owning their own home continued to fall. According to Census 2022, there are now 330,632 homes rented from private landlords, and the proportion of owner-occupied homes has fallen from almost 70% to 66% over the 11 years to 2022.

The number of homes rented from local authorities increased by 7% to 153,192.

Among renters, those in the private sector have been impacted by rising costs, with average rents up by 37% in the six years to 2022, to an average of €272.91 per week, while 109,000 households were paying €300 a week or more — over double the 48,933 that were in 2016. There were nearly four times as many households paying €400 a week or more in 2022 than there were in 2016.

By contrast, those in local authority housing saw their rent increase by just 14% to average €77.92 per week.

“The narrative that we are building too much private rented stock at the expense of other forms of housing does not stand up to scrutiny. We know anecdotally that we have a particular shortage of one- and two bed-room units — unit sizes typically delivered for the private rented sector — and the census data backs up this assertion,” Ring said.

Employers say a shortage of housing has hampered recruitment in Dublin.

The number of people aged 65 and over increased by 22% between Census 2016 and 2022, while the population aged 15 and under increased by only 5%, highlighting an oncoming “demographic timebomb” that will potentially draw resources away from housing provision, Savills said.

“This will necessitate a prudent budgetary and policy approach and the government will have to tread carefully," Ring added. "In the meantime, the government would do well to focus its efforts on alleviating pressure in the housing market while it still has the flexibility to invest in this area of spending."    

Market Behaviour Does Not Support Shortage Theory

However, BNP Real Estate Director & Head of Research John McCartney said that the Dublin market is not showing the economic characteristics of an undersupplied market for either natural vacancy rates or price and rent rises.

“According to the 2022 Census the residential vacancy rate is 7.8% of stock, or 8.1% if we exclude holiday homes, which is well above Savills’ 2017 estimate of the natural vacancy rate of 5.77% for PRS in Ireland and also well in excess of what the government itself says is the natural rate,” McCartney said.

“People will argue that the census overstates housing vacancy. But this takes us into the realm of making up your own statistics,” McCartney added.

“Nominal house prices rose by 3.9% year-on-year nationally and by 1.7% in Dublin in March. In real terms this translates into price declines of 3.5% and 5.5% respectively, year-on-year. Our rental data is lagging, but in the year to Q3 2022 they show that rents fell by 0.6% year-on-year nationally, and by 1.5% in Dublin,” he said.

That means the classic signs of an undersupplied market are not obviously in place, he said.

“This is not to say that we don’t have a housing problem, but the problem is high house prices and rents relative to incomes — which is the legacy of inflation caused by undersupply in the past. This may seem like splitting hairs, but it has important policy implications,” McCartney said.

“If real prices and rents are rising at the margin, and the market is undersupplied, the solution is to build more homes. If real prices and rents are falling, and you continue to turbocharge supply, the fall will accelerate, all else being equal.”

He also said that there are counterarguments to the view that the high housing costs that young people face has stopped household sizes declining to European norms.

“Why would we expect Ireland’s household size to converge with the European average when we have the highest proportion of persons under 20 in the EU [26% vs an EU average of 20% in 2021]? As children tend not to form one-person households, would we not expect our average household size to be structurally higher?” he said.

The Role Of The State

Others argue that the only body which can really push forward a building agenda is the State, and that it needs to reassess what the numbers are telling it.

Speaking at Bisnow’s Shaping The Future: Dublin’s Real Estate Outlook event in Dublin on 4 May, Trinity College Dublin Associate Professor in Economics Ronan Lyons stressed the need for the government to up its housebuilding targets.

“Supply is the main determinant of affordability, it matters. That’s the same picture for sale and rent,” he said.

“The typical tenancy takes three to four years to churn. We are talking about Dublin needing 60,000-70,000 new rentals built annually, barring a demand side shock. The solution [to the housing crisis] shouldn't be that ‘hopefully there's a catastrophe,’” he added.

“There’s certainly not a risk about building too many.”

Housing need remains the big debate in Dublin.

Lyons said there is particular concern about Dublin, where he believes the city has been building homes at a slower rate compared with the rest of the country. He also pointed to the long-term population projections and claimed that they have no basis in the way the country is actually evolving.

Lyons claimed that “it’s not forgivable in the 2020s that population projections are so far below reality".

“We should have been preparing for the higher numbers because cumulative net migration from 2018 has been way higher than projections,” he said.

Part of that has been a lack of recognition of demographic trends, he said, such as that fact that migrants are often of family-creating age and that typically has a secondary effect on demand 20 years later as their children seek homes.

“However, the housing policy targets are based on the population decreasing and so we're seeing younger generations drift in terms of when they leave the parental home, while the journey towards smaller households means you need more and smaller homes. Housing policy has never really got on top of this,” he said.

It is a view backed by an AIB report at the end of last year, which concluded that in an “era of a significant housing crisis in the Irish market”, more needs to be done to address supply, including “more realistic demographic assumptions” underpinning the planning framework, to create more effective and viable [housing] density solutions.

Completions Not Matching Permissions

AIB argued that the concentration of apartment unit planning permissions is most pronounced in Dublin, accounting for over 94% of all those granted in 2021. This has accelerated quite sharply since 2018, when apartments accounted for less than 60% of permissions granted.

“However, the viability of apartment development has been an ongoing challenge in Dublin," AIB said. "This has meant that a large proportion of these apartment unit planning permissions have not been converted into commencements or completions. In fact, we are concerned that there could be a significant decline over the next 12 to 24 months, to the point where new housing supply numbers could actually contract this year and in 2024.” 

The census figures should have gone some way to clarifying the situation but different readings of the data mean that while Dublin’s need for more residential units remains pressing, how many that should be is no nearer resolution.

However, employers have argued that housing availability has restricted their ability to recruit and conversion of some of Dublin’s excess commercial real estate might be one fix.

Just don’t expect anyone to agree on how many.