Opening Remarks
I would like to thank you for the opportunity to address your conference today.
I have always had a strong affiliation with the construction sector. Prior to taking on my current role in Housing and Urban Renewal I was Minister for Skills, Research and Innovation from 2014 to 2016, working across the key Government Departments of Education and Enterprise, Jobs and Innovation where I met with many industry representatives from your sector.
I must say I am taken by the theme of this year’s event "Sustaining the Momentum". In many ways this echoes the objective of this Government. We need to quickly build on our hard-won gains in terms of employment, recovery of competitiveness and making Ireland an increasingly attractive place to live and work.
We have to “sustain the momentum of the recovery”. Ensuring that the country is planning ahead for the infrastructure, the roads, the commercial space and the housing it needs.
The Recent Past
The construction sector was very badly affected by the economic collapse and it is taking a long time to recover. I know personally and professionally the toll this has taken on people within the sector. While we have seen strong and welcome signs of recovery, the sector is not yet functioning as it should, particularly residential construction.
The Outlook
There is still much work to do, to build on what we have achieved as a country in recent years. However, we should be greatly encouraged by recent data illustrating the positive performance of the Irish economy.
· the Irish economy is growing at the fastest rate in Europe - with growth of 7.8 per cent recorded in 2015.
· the CSO's stats show the monthly unemployment rate for May 2016 was 7.8%, down from 9.6% in May 2015 with an associated increase of 9,500 new jobs in the construction sector.
· the 3 major credit ratings agencies have now given an A-Grade to Ireland's sovereign debt.
The crucial thing now is to build on this base so that we continue to grow and more and more people start to fully feel the benefit of that growth.
It is encouraging to see signs of recovery in the construction industry but there are a number of challenges and risks which are impacting on this recovery.
Significant concern still remains around resource levels in the industry. One of the key challenges, that I am very familiar with from my previous port-folio, is ensuring the economy has the right workforce skills and expertise. With the increasing output, skills shortages will manifest themselves and may take time to correct.
That is why the Programme for Government commits to doubling the number of apprenticeships by 2020. I would ask you all to do what you can to support the delivery of this objective.
As Minister for Housing and Urban Renewal, I am particularly interested in residential construction. I will talk about our plans for housing in a moment but I want to touch on the Governments overall Capital Plan first.
Capital Plan Investment
In order to sustain growth, we must invest. But we must invest in the right way. Under the Capital Plan Building on Recovery: Infrastructure and Capital Investment 2016-2021 we will make affordable, sustainable investments that boost the productive capacity of our economy, improve public services and lay the foundations for future growth.
In total, there is public sector investment of €42 billion planned – exchequer and non-exchequer investment by semi-state bodies – out to 2021.
The Plan prioritises spending on the areas of greatest need as the economy continues its strong recovery.
By working together, the State and the construction industry, will deliver key investments in housing, transport, education, health and enterprise across every part of the country, which will boost our competitiveness, create jobs, and upgrade our social infrastructure.
Housing
Turning to my new port-folio the residential sector of the industry has been very slow to recover and there is a very significant pent-up demand, particularly, in the major urban areas. The unmet demand is contributing to significant increases in rental costs and putting people at risk of homelessness.
The annual requirement for new residential units has been calculated at 25,000 but the industry output is currently well below this level.
Just over 12,600 housing units were completed last year, almost half of which were individual or “one off houses”.
Lack of supply of housing in the right locations is a critical factor underpinning the current crisis.
Furthermore, many of the active sites in the Dublin area are delivering housing at prices which are not affordable for the majority of first time buyers.
Put simply the housing situation is affecting every sector of Irish society and putting at risk our hard-won gains in terms of employment, recovery of competitiveness and the attractiveness of Ireland as a place to live and work.
Action Plan for Housing
In response to the problems in the Housing sector work is well underway on drafting the Action Plan for Housing as signalled in the Programme for Government.
As you will be aware, the special Oireachtas Committee on Housing and Homelessness was established to review the implications of the problems of housing and homelessness and to make recommendations in that regard.
I know that representatives from the construction industry were among the first to appear before the Committee and present their views.
The committee is due to publish its report shortly, which will feed into the Action Plan.
The Action Plan is being developed with input from all the key Government departments under the governance of a dedicated cabinet committee, chaired by the Taoiseach, which meets weekly.
The absolute focus of the initial actions in the Plan will be to boost all types of supply.
Local authorities and NAMA have already been asked for concrete proposals to boost supply in the short term, on land they control or influence, for all types of housing – both social housing and housing for the wider private market.
This Government wants to achieve a dramatic change in circumstances around the housing market as quickly as we can. That is why we will listen to the industry and other stakeholders and take on board practical ideas, that will work, and that represent the best value for money for the Exchequer.
I want you all to know here that my door is always open to anyone with good suggestions on how to boost supply and I would welcome any thoughts or suggestions that you might have.
My Department will be organising stakeholder consultation events on the Action Plan and your participation and input would be very welcome.
Actions already taken
It’s important to recognise what’s already been done and the Action Plan will build on the actions already taken on:
- development contributions;
- the vacant site levy;
- Part V;
- apartment guidelines;
- finance, and,
- Planning and Strategic Development Zones.
It is estimated that the measures taken to reduce input costs have decreased the cost of building new residential units by between €20,000 and €40,000, depending on whether apartments or houses are being constructed.
The measures should make more housing developments viable at more affordable prices.
In addition, NAMA is aiming to deliver 20,000 residential units before the end of 2020, with 90% of these units to be in the greater Dublin area.
Finance and Funding
Importantly, in line with Government policy, the ISIF has been engaged in a number of important initiatives which cumulatively can make a contribution to increased housing output.
Activate Capital is a new €500 million non-bank fund which has been established by ISIF and global investment group KKR. Activate, has been successful in closing deals and is already funding a number of residential developments in the Greater Dublin Area.
In 2016 already, Activate has thus far provided site and working capital finance for the delivery of over 800 homes. Activate’s pipeline for new home construction funding is strong.
In addition, ISIF is also working closely with Ardstone Capital, a residential equity investment fund which is focused on delivering residential units to the market over the short- to medium-term.
Indeed, these activities will be complemented by ISIF’s deepening engagement in the area of regional development and urban regeneration. I look forward to further success for ISIF in this area.
In support of delivering more houses, the Government has committed to making funding available for social housing and for infrastructure to facilitate the development of all types of housing.
We are also committed to examining all aspects of the “viability equation” particularly input costs, to help ensure that housing is intrinsically affordable, to bring on stream, whether for buyers or providers.
We are looking at all aspects of the house delivery process, from land availability to financing, planning to procurement, to ensure that an appropriate balance is struck in increasing supply on the one hand but avoiding another property boom on the other.
Social Housing
In terms of delivery social units the Government has also outlined its commitment in the Programme for Government to accelerate the delivery of the €3.8 billion Social Housing Strategy.
To date, a number of approvals sees local authorities and approved housing bodies with a strong pipeline of construction, turnkey and acquisition projects, which will deliver some 3,900 homes, with approved budget costs totalling some €680 million.
Building Control
While increasing supply is a major priority ensuring the quality and standard of the new supply is just as important. The Government and the construction industry have a responsibility to work together to ensure that the failures we have seen and their consequences for consumers cannot recur.
As you are aware we have taken measures that will foster a greater emphasis on competence, professionalism and quality in our construction industry into the future thereby ensuring that homeowners and clients can rely on getting the high quality homes and buildings they expect and deserve.
Such measures provide for greater accountability in relation to compliance with Building Regulations.
Complementary to these measures, the Construction Industry Register Ireland has been established as a voluntary register of builders, contractors and specialist trade persons by the Construction Industry Federation.
The Government has signalled its commitment to placing the register on a statutory footing. This is seen as an additional essential consumer protection measure giving consumers who engage a registered builder the assurance that they are dealing with a competent and compliant operator.
Legislative proposals in this regard are currently being prepared by my Department with a view to their being presented to Government for consideration in the near future.
Closing remarks
The housing situation presents an opportunity as well as a challenge.
In increasing the supply of housing we must see proper planning, not just building houses but creating places that people will be proud to call their homes. We must see strategic thinking and action, infrastructure and amenities going in before or as places are developed.
We have learned the lessons from our recent property and debt fuelled economic crash and the new financial model must be sustainable for builders and buyers.
Given the gravity of the situation we are thinking radically and are prepared to do whatever it takes to mend the housing system in Ireland.
Once the Government takes action it will be very important that the construction sector responds and I will seek assurances that if we deliver, you will too.
The construction sector has been hit hard in recent years but evidence exists to show that there are shoots of growth. There is no doubt that the sector has a vital role to play in the recovery of the economy and I see good potential for the sector to rebuild to a sustainable level, but it needs to change the way it does business and it needs to adapt to today’s circumstances.
The Government will actively play its part and Minister Coveney and I want to assure you, we will continue to address the challenges in the sector in a targeted and meaningful way.
Finally I wish you well with the day and that you find it useful and stimulating.