‘In an emergency you take radical action and housing is an emergency’
Paul Mitchell – co-founder of construction consultancy Mitchell McDermott – does not mince his words when it comes to his solution to Ireland’s housing crisis.
he Government must declare a three-year housing emergency to bridge a supply gap that is about to get worse, says Mitchell, who in recent years, has worked on many of the biggest construction projects in the country, including major housing, apartment and student accommodation schemes.
“It’s an emergency and in an emergency you take dramatic action.
“For the next three years we are going to have reduced output of housing so we need to do dramatic things to build a bridge across it.”
Rising construction costs, rising interest rates, major planning holdups and a pull back from Ireland by big international funds who had ambitions to build thousands of apartments here have created a perfect storm for the housing market, he says.
The cost of building a two-room suburban apartment has now risen to €460,000, up 9.6pc last year alone
Mitchell McDermott has just published its annual set of info cards on the construction sector – which provides a snapshot of where things are at on everything from planning delays to inflation to delivery numbers – and it makes for grim reading.
It reveals that the cost of building a two-room suburban apartment has now risen to €460,000, up 9.6pc last year alone, pushing affordability beyond the grasp of many people.
It also reveals that close to 60,000 proposed housing units – about two years of supply at current building rates – are either being held up by delays in the planning system or by legal challenge. A further 30,000 units have planning permission but have not commenced, the firm has said. It all adds up to a looming supply crunch instead of the ramping up of delivery that is so badly needed, says Mitchell.
“There is a huge issue with planning. It is in a really bad place. But the difficulties are fixable. To have a whole year’s worth of supply sitting awaiting a planning decision is absolutely crazy, with another year’s supply held up by judicial review. Planning consultants should be drafted in from abroad to clear the planning backlog and existing planning staff should get bonus incentives.”
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About 60,000 proposed housing units are either being held up by delays in the planning system or by legal challenge, he says. Photo: Stock/Getty Images
His solution to fix the viability and affordability issues in the market are even more dramatic. He is calling for a three-year emergency period of zero per cent VAT on new homes, zero stamp duty and zero planning contributions for five years. He also wants to see an 8pc VAT rebate for five years for apartments and new five-year tax incentive schemes for apartments and student accommodation.
“People are not going to be comfortable with some of this but they weren’t comfortable with the things we had to do for Covid either,” he says.
Of course, Mitchell knows well that when someone in the construction industry calls for government help it is met with scepticism.
“People will say ‘he would say that, he works in the construction industry and they’re looking for a bailout’. But, fundamentally, we need houses.”
Without this type of radical action he fears that projects that are currently on site will be finished out but new schemes – particularly apartments – will not get started.
“So while we’ll still see numbers this year, it will tail off in the next three years.
Mitchell wants a three-year emergency period of zero per cent VAT on new homes, zero stamp duty and zero planning contributions for five years.
“It will recover but the danger is it will take another two or three years after that to get going again.”
The problem for his clients – the developers and contractors who have to decide whether or not to break ground on a site – is it takes about four years to go from site purchase to handing over the keys on a block of 150 apartments, excluding any planning delays.
“It’s like a tanker at sea being asked to change direction – it takes a long time. Take build-to-rent for example. I believe we need to pick a direction and stick with it.”
The new Dublin City Development Plan insists that 40pc of apartments in a scheme must be sold rather than rented. It is a popular measure but one that Mitchell says is problematic.
“Building apartments to sell at the moment is not viable because of rising costs. So that means all you’re doing is taking that cost and putting it on to the renters. And the renters are subsidising the owners.”
Construction is in Mitchell’s blood. His mother and father moved to Birmingham in the late 1960s as part of a wave of Irish emigrants attracted by jobs on English building sites.
“It was a difficult road for them and all the Irish people like them over there in the 70s. I was born there but as children we were spared that.”
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‘Rising construction costs, rising interest rates, major planning holdups and a pull back from Ireland by big international funds have created a perfect storm for the market,’ says Mitchell. Stock/Getty Images
In 1979, when he was six, the family moved back home from urban Birmingham to rural Mayo to take over the family farm.
“There was myself and my older sister and it was a perfect time to move back because we didn’t know any different. We had been back and forward all the time and spent the summers here but I did still come back with a touch of a Brummie accent.”
At school in Castlebar, Mitchell focused on maths, physics and engineering. He moved to Dublin in 1992 to study Construction Economics and Quantity Surveying in DIT Bolton Street (now TU Dublin).
“A bunch of us from home moved to Dublin and after some difficulty, moved into a flat over a butcher shop on James Street. We learned to fend for ourselves. But you were going home at weekends with your washing and you were still being Mammyed.”
During college he spent his summers working on construction sites in Manhattan, the Bronx, Nantucket Island and on an apartment development on Liffey Street in Dublin.
Mitchell knows well that when someone in the construction industry calls for government help it is met with scepticism
“For a while I was a scaffolder but gravity was not my friend.
“But it was great experience to see the business for real.”
After college he took a job with PKS, an old established quantity surveying firm that had been around for over 130 years. He was assigned to high-profile jobs at Dublin Airport, DCU, schools and hospitals before a stint in San Francisco with its US partner Davis Langdon.
When he returned to PKS in Dublin he was made partner and it was there, in 2007, that he first met Anthony McDermott, also a quantity surveyor who had just returned after five years in Australia.
“Talk about timing. None of us had a clue what was coming around the corner later that year.
“But myself and Anthony hit it off and worked together hand in glove.
“As the crash unfolded, the business went from 150 people down to 40 over six months of rolling redundancies. In 2009 we merged with Davis Langdon. So instead of being one of six partners I was now one of 72.”
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Planning consultants should be drafted in from abroad to clear the planning backlog and existing planning staff should get bonus incentives
The newly merged company was then bought out by a big American corporate.
“I was doing projects in the UK, the Middle East, India, Chile. It was incredibly interesting.
“But I found being in a very large corporate very different to the type of smaller partnership that I had come up in. I was 41 and I said I can either comfortably stay where I am, and expand my role or do something new.”
McDermott was having similar thoughts and in 2014 the pair decided to give it a try and got a small office over a shop on Baggot Street.
“Timing was everything.
“We had some fantastic conversations with people, some old clients, some connections, and the work just started to flow from housing, apartments and offices.”
An old contact brought them a €40m pharmaceutical job out of the blue and a big data centre job followed. After a year, the firm needed to move to a much bigger office to accommodate 40 people. It now employs 65, last year being ranked as Ireland’s best place to work.
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The cost of building a two-room suburban apartment has now risen to €460,000, up 9.6pc last year alone. Photo: Stock/Getty Images
“People saw us as a small business but we were landing these big jobs.”
It specialises in doing three key things, says Mitchell: quantity surveying, project management and acting as project monitors for banks and funding institutions.
“If a bank is funding a development they will ask us to make sure that when they are lending €5m a month to a project that the €5m is showing up in the ground.”
To date, the company has been involved in the delivery of 16,500 residential units, 6,000 student beds, 3,100 hotel keys, over 200 megawatts worth of data centres, a million square feet of retail, 1,500 nursing home beds, as well as a number of pharma projects.
While he is confident that business can continue to grow, Mitchell says there is definitely change in the air.
“Across the sector, consultants, architects, engineers, quantity surveyors are seeing projects stall and slow down at the moment.
“But the impact of that has not hit the contractors yet,” he says.
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‘Building apartments to sell at the moment is not viable because of rising costs, says Mitchell. Photo: Stock/Getty
Times have changed, he says, since the financial crash decimated the sector here and he is confident major construction firms can weather the storm, not least because most of them now have significant work abroad.
He believes the Government can play a part in ensuring that the sector remains healthy by using its resources to ensure that badly needed housing schemes and infrastructure get built.
“About 90pc of our work is in the private sector but we have recently got more involved with the public sector.”
The firm has just submitted planning for a large scheme of 600 apartments for a local authority cost rental scheme, which he says is the type of scheme that can help alleviate the crisis.
Instead of a slump, build a bridge for the next three years, get to the other side, and then take the stabilisers off the bike again, and we’ll be able to cycle
“In years gone by when a recession happened, the Government didn’t have money to do anything about it,” Mitchell says.
“This time we are having a slowing down in the market but we’re running a budget surplus.
“We should use it. Instead of a slump, build a bridge for the next three years, get to the other side, and then take the stabilisers off the bike again, and we’ll be able to cycle.”
Curriculum vitae
Name
Paul Mitchell
Age
49
Position
Co-founder and director of Mitchell
McDermott
Family
Married to Diana with two daughters,
Millie (19) and Charlotte (17)
Education
Bachelor of Science in Construction
Economics from DIT Bolton Street; Post-graduate diploma in Construction Law from Trinity College
Hobbies
Plays squash and walks to keep fit and loves to go skiing each year with family
Favourite book
The Tipping Point: How Little Things
Can Make a Big Difference, by Malcolm Gladwell
Favourite movie:
Trainspotting
Business Lessons
The State has been forced to foot the bill for billions of euro worth of repairs to Celtic Tiger-era apartments. Should those who built them be named and shamed?
The truth is a lot of them aren’t around any more. But there is a legacy there.
There was a lack of oversight and experience. But remember we were churning out 90,000 houses a year at the peak of the boom compared to 28,000 today, and there was a lack of a building control system – and I don’t think you can go too far with that.
It’s welcome and the industry has responded well to it.
Our standards are so much higher now. Ireland is now regarded as having some of the best building control and health and safety standards. That is great but it does mean a high cost base.
https://www.independent.ie/business/irish/in-an-emergency-you-take-radical-action-and-housing-is-an-emergency-42317285.html ‘In an emergency you take radical action and housing is an emergency’