The cost of the government’s key housing project could soar to €6 billion a year, a leading developer has warned

It will cost taxpayers 5 to 6 billion euros a year to get the government’s urban housing program in Croí Cónaithe up and running, a leading developer said.

Announced earlier this month, the scheme will provide €450m in government funding to build up to 5,000 freehold properties in Dublin, Cork, Galway, Waterford and Limerick. Subsidies of up to 144,000 euros per apartment are disputed.

But Glenveagh Properties chief executive Stephen Garvey said rising costs are making it “unviable” for developers, particularly outside Dublin.

“In order for us to move there, the land has to be available, the services have to be available, and then the incentives have to be put in place for profitability to work,” he told the Urban Land Institute (ULI). Annual Conference in Dublin on Thursday.

“In the not too distant future, I see a point in time when apartments will cost between 450,000 and 500,000 euros. This is priceless for people. It’s unprofitable for developers.”

Housing Secretary Darragh O’Brien said at the same conference there had been “significant interest” in the program from property developers.

He insisted that the benefits from the proposed subsidy accrue to the buyer, not the developers, by lowering the purchase price.

Speaking in the Dáil on Wednesday, Sinn Féin finance spokesman Pearse Doherty called the program “crazy” and “insane” and said he had a “secret” document proving the program was failing to increase the purchase price of homes to €250,000 as promised would lower .

Property developer Michael O’Flynn also commented on the plan, saying the builders “couldn’t produce the necessary supply”.

“With all due respect, I admire initiatives that we have taken in government. Croí Cónaithe, as outlined so far, will not work. I can’t see how it will work. I think we have to face the fact that it needs a huge adjustment,” said O’Flynn Group CEO.

He also pointed to the impact of rising VAT on construction prices, which have risen to 13.5 percent from 3 percent 40 years ago.

Kevin Nowlan, CEO of developer Hibernia, said local authorities are using new planning rules to hold back zoning of land for housing.

“There isn’t much reality in terms of the land stock available and as a result we will end up not delivering any land,” Mr Nowlan said.

Research conducted for the conference revealed that the wrong types of housing are being built in the wrong areas for young professionals trying to climb the real estate ladder.

The study – by the ULI Young Leaders group – found that suburban apartments are not being built in the suburbs, rather than city apartments or maisonettes, despite the fact that this is the least preferred housing option.

The conference also heard that unaffordability due to rising prices was the top concern of the younger generation, followed by unaffordability due to mortgage lending rules.