Local authorities’ housing plans underestimate the real scale of future needs

According to the AIB, local authorities’ housing plans grossly underestimate the need for construction in areas including in and around Dublin and will need to be revised to meet actual demand.

The bank’s latest real estate report calls for the abandonment of old assumptions about population growth and distribution in the Standard Housing Needs and Demand Model (HNDA) used by county councils.

It said estimates of housing demand, particularly in the Dublin area, have been revised upwards since the preliminary 2022 census results were released, meaning local authorities are increasing the number of housing being built in and around the capital , have to increase massively or are confronted with even worse bottlenecks .

“The challenges on the demand side of the housing market have been largely addressed by the authorities,” said Pat O’Sullivan, director of real estate research at AIB.

“It’s time to look at the supply side. This can be accomplished by incorporating more realistic demographic assumptions to underpin the planning framework, creating more effective and viable density solutions, reducing housing development costs, and providing a more transparent and efficient planning system.”

AIB argues that housing supply has been well below the estimated annual demand of 35,000 for years and local governments are struggling to close the gap due to poor modeling.

According to the report, the HNDA model’s assumptions, which county councils use to forecast the number of homes needed, are more ambitious in nature than based on actual demographic trends.

The main problem, according to the authors, is that while the model assumes balanced growth between East and West, the population of Dublin and surrounding counties is growing at twice the rate of other metropolitan areas such as Cork, Limerick and Galway.

The discrepancy in assumptions means land needs to be dezoned for 100,000 homes in the fastest growing areas.

For example, Fingal is estimated to need about the same number of new homes as Donegal under HNDA, despite being the third most populous parish area with the youngest population, leaving it severely underserved, according to the AIB.

In addition, building permits are now dominated by housing, which is becoming increasingly unprofitable due to cost inflation and a drop in rental income from 3.5 percent to just 1 percent.

That means if rents stop rising or, more likely, there are simply fewer housing starts next year, the NPV of homes could fall below development costs, leading to a decline in overall supply through 2024, AIB says.

https://www.independent.ie/news/local-authority-housing-plans-underestimate-real-scale-of-future-need-42240510.html Local authorities’ housing plans underestimate the real scale of future needs

Fry Electronics Team

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