Here's What Hines, Round Hill And Union Think Will Get Residential Development Flying Again

Handwringing over how to build more homes in Ireland dominated the last parliament and when the new government was finally signed in, the clock was already ticking.

Proposals to reform residential rent caps in Ireland were floated as early as June and crystallised into a policy package seeking to balance tenant protections with incentives to encourage desperately needed new supply.

New rules have been met with cautious optimism by the real estate industry. But the government has levers it can pull to solve a housing crisis that still dominates the discourse in Ireland, some of the world's biggest investors told Bisnow.

“So how do you get to that output? The issue comes back to land and where the infrastructure is for it,” Hines Real Estate Senior Managing Director Brian Moran said. “If we were in a Chinese city and we needed 250,000 houses next year, they'd be built. They would just designate that land for housing, run a rail spur into it, put in 10 stations and then build them. So, it is absolutely solvable.”

There is little time to waste. While the Central Bank of Ireland has revised its predictions for housing completions for 2025 down to around 32,500, the Economic & Social Research Institute in its autumn 2025 commentary lifted its projections to circa 35,500 units. Both fall way short of the 50,000-60,000 units per annum that many commentators believe necessary.

JLL's most recent forecasts indicate a second consecutive year of declining apartment completions in Dublin, down 40% from peak 2023 levels and 17.8% from 2024 levels. Housing completions are projected to rebound in 2026 and 2027, largely thanks to a surge in apartment construction starts in 2024, when developers accelerated projects to capitalise on levy waivers.

However, JLL said these higher completion rates will still fall short of meeting the lower end of Housing Commission estimates that between 19,600 and 36,400 new apartments are needed annually to satisfy demand. 

The government signalled a nationwide extension of Rent Pressure Zones, preserving the 2% cap for existing tenancies, and crucially it also promised to allow newly built units to be let at market rents before being subject to inflation-linked increases.

Implementation is anticipated in the new year, though the recalibration to kickstart Ireland’s residential build programme is politically fraught. 

While the government has also issued a mandate to local authorities for more residential zoning, Moran described the results as “hit and miss” and said that he would like to see a ministerial order to set a target for each council, with a backstop that the Land Development Agency or another government agency could step in if necessary.

“The land would be designated on rail spurs [in Dublin], where they're investing hundreds of millions in upgrades, and there’s the capacity for half a million homes. And if we needed to issue an infrastructure bond tomorrow morning, the Irish state could do it,” he said.

“Then effectively the government needs to pass the land out to developers to get on with it.”

Viability remains another key challenge and while Moran said the housing being produced in Ireland is best in class, more flexibility is required.

“We levy everything with more levies, and we levy levies. By the time you add it up, it's cost half a million euros to build a two-bedroom apartment, but 35% of that is going straight to the government as tax,” Moran said.

He sees a solution via taxation. Moran argues that lower income people will still need state provided rents and affordable housing, while higher income residents are affluent enough to support themselves. It is middle income earners who are being squeezed and need tax support to rent or buy and if tax relief helps completions then it is self-supporting because the additional homes built would not have been factored into the state's financial calculations.

Round Hill Capital Senior Vice President Niamh Harrington said the “cloud hanging over the residential market” is liquidity and viability.

She said three things need to be addressed: planning reform to make development simpler, faster and determinations clearer; viability through mechanisms such as VAT, stamp duty and tax levy reliefs; and policy flexibility.

“Right now, it is nearly impossible to invest with any confidence and although the rent cap reforms proposals are a step in the right direction, it already feels like the goalposts are moving,” Harrington said. “You can’t underwrite a five-year business plan without certainty.”

Across the six markets in which Round Hill is invested, it looks to the likes of Germany and The Netherlands, where there are rental controls but it is possible to get an uplift through refurbishment and improving the properties, which also benefits tenants.

The situation in Ireland doesn’t encourage that approach, she said, and that suits nobody.

While she said she believes that rent reforms as they are proposed would make a difference, Harrington said investors need to see them implemented and feel confident that they will be kept in place.

Being able to increase rents after a tenant leaves will have a relatively limited impact on current landlords because tenant fluctuation in the market is only around 10% per annum, but it will hopefully attract new investment in development, she added. 

Union Investment Real Estate Head of Investment Management Residential Friedrich Warmbold said he sees the proposals as a mixed bag. 

“From our perspective as an institutional investor, we are looking at what will help to close the viability gap,” he said. “Because our issue is that we are not finding the right product, even to forward fund or forward purchase, to meet our return requirements.”

He said that is largely because of construction costs, so the reduction of VAT could be significant in allowing developers to build more cost-effectively. He also said there is value in the proposed changes in planning, which mirror similar adjustments in Germany that have helped developers start units.

But Warmbold said he sees rent cap proposals “a little bit critically.”

Union Investment as a long-term holder closely looks at affordability, and he noted that with Irish rents having risen dramatically over recent years, that is an issue.

“We wouldn't feel too comfortable to underwrite, I don't know, 5% uplifts because that's not sustainable for tenants within the business plan,” he said. “The best way is to bring down construction costs or land costs.”

He points to other countries, including Germany, where residential developers can access cheaper financing if a scheme meets certain requirements. Investment support, for example in the UK with its affordable home scheme, can also move the needle.

He said that while Union Investment remains convinced of Dublin’s fundamentals, it will look to other markets if these issues remain unaddressed.

For Warmbold the priority is balance, as plateaued interest rates means the company needs to be able to deliver returns for its funds against conservative growth.

“We are long-term holders, so we want less churn and happy tenants and we wouldn't want to underwrite crazy growth, because that's not our nature,” he said.

Underpinning it all, the mindset over demand also needs to be addressed, according to Moran, who said the government is being pulled in different directions by alternative interpretations of demographics, immigration and long-term housing requirements.

“There's a cohort of strong academic voices who say the industry is lobbying for more houses. But why not experiment? We're currently experimenting with undersupply, why don't we experiment with oversupply for a year or two?” he said. “We can always dial it down afterward.”