What can be done to bring down the cost of building homes?

On the O'Cualainn model. They do not in fact build houses very cheaply. They build with a big public subsidy and that is what keeps the sale costs down.

To far they have constructed 49 houses in Ballymum on half provided for 'free' by Dublin City Council, development levies were also waived on the site (ie. the Council paid the costs of electricity and sewage provision) and the council also provided road access. The extent of the subsidy provided here is not scaleable in my view which is why O'Cuallain have only provided 49 houses to date. That bears repeating 49 houses to date.

They won a tender from Fingal County Council to supply affordable housing at similarly low 'costs' to Ballymum but if you examine their website that scheme has now been quietly dropped. Apparently this is because they simply couldn't delivery at the costs proposed and FCC refused to cough up the huge additional subsidy demanded by O'C.
 
Protocol said:
Construction cost = 179k, this includes site works and site development
"Soft" costs = 192.5k
Total costs = 371k.

The soft costs include:

Land = 61k
Finance = 16.7k
Profit = 43k
VAT = 44k
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Thanks for sharing. That makes sense, I guess that model is basically looking for most of their soft costs to be 0, which are approximately half of the build price.

That said, that general idea does look like the quickest way to lower build 'costs'. Government provide land & finance, give up vat/levys/fess, and runs a tender. developer accepts lower margin (as much less risk).

similar really to this suggestion
Firefly said:
Could the government put out to tender, for example, the building of 500 houses on state owned land with a guarantee to rent them for say 100 years?
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I’ll see you 14% and raise you to 30%:


A “real life” example. Twins building similar houses in Offaly twelve months apart.
30% increase in the cost of materials.

As B&Q is close to me than Woodies I tend to buy what I need there, but I come out empty handed so many times.
Their timber aisle is been empty for months.
They’ve only random nuts and bolts. You’re very unlikely to get the size and length you want. I need a dozen short M12 hex bolts with acorn nuts.... forget it. The best I could do is get 120mm bolts and saw them down to size. Then use regular bolts instead. Off to the co-op tomorrow instead.

Any DIY jobs I’m planning on doing at home may be tempered by the lack of materials. It’s frustrating.
 
I scanned that article this morning. Its a bit sensationalist, and open to misinterpretation imo.

He says steel is up 30p.c. and he says his house will cost in total 30 percent more than his brothers (finished early 2020). But they don't even say if the house spec or size is the same!

The article I linked states materials are increasing from 13 to 14 percent of the sale price. I.e. they are only a small part of overall cost.

Although I think everyone agrees strongly that costs are increasing.
 
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Purple said:
Average material costs and labour costs are around the same per square metre so modular designs which use cheaper materials, have less waste and reduce labour input would seem o be the way to go.
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Have we not done that already though back in the 60s and 70s, Ballymun was that so were vast council flats from glasgow to london. That is modular , high volume construction , it was also done by the communists on a vast scale throughout Eastern Europe. Ballymun was demolished a decade ago along with many council blocks in the UK although the ones left in London are now sought after due to their location. Surely we need to learn from the mistakes of the past or maybe demolishing them was the real mistake especially now in the era of high building costs.
 
No, we haven't.
In Sweden 80% of single unit dwellings are factory built. is a bit of an overview.
When an Irish company is supplying factory built homes to the USA but can't sell them here due to our antiquated standards which were developed around 100 year old manufacturing methods then there's something seriously wrong.
 
One option would be for local authorities to actively facilitate development.

They would have CPO powers for site assembly and would provide fully-serviced sites for self-build.

Much simpler planning too. You'd be allowed to build what you like within certain dimensions.
 
We use 100 year old manufacturing methods which are highly labour intensive to build homes therefore they are very expensive and supply will be constrained by labour shortages.
That, added to the fact that investment money will find its way into housing no matter what we do so long as Bond yields are so low, means that supply will never meet demand unless we fix the real supply side problems and change the laws around property ownership in some way which gives tenants the right to buy a property they have rented for more than a given period of time while also giving then longer fixed tenancies with rent controls.
Those controls around rent should be set primarily with with yields in mind as what we really need to do ensure there is a desirable flow of capital into the sector as in a market with what is a semi permanent supply side constraint that's the real driver for purchase and rental prices.
 
It should be noted as well that modern houses are being built to a higher spec then some of the stuff that was thrown up in the Celtic Tiger era. for example, a small development of social housing was recently built about half a mile from my home. All of the houses have air heat pumps on the side. That's going to be great for those who will live in them as it will reduce the run costs and there is an environmental positive impact of doing this, but it's an additional cost to the build of perhaps €1500 that might not have been there 5 years ago. I would imagine the houses all have "nest" type controls as well. Little things like that all add to the cost, especially if the builder is sticking a margin on top of what the sub-contractor would charge.

So is one solution to build "simpler" houses?

When I look at some of the once off "mcMansions" thrown up around the country, I've little sympathy if someone is struggling to pay for it. Do they need all that space?
 
NoRegretsCoyote said:
And watch landlords head for the door in even greater numbers.

The Law of Unintended Consequences would be huge here.
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There are fewer but larger landlords. That's not necessarily a bad thing.
What we are seeing now is a return to the sort of property ownership profile that hasn't been seen since Daniel O'Connell was in short pants.
 
@Purple but you didn't address my question about the modular high volume construction that was done in ballymun and throughout UK ? Surely if we are to go down this route we need to find out the problems encountered before. I don't think the solution is modular one off houses as they are really only for the country. They suit dry cold big countries like the US and Scandinavia where wood rot is not as big an issue.

I'm not dismissing it as of course it is the only way to deliver high volume, however in the urban areas and to achieve densification and stop the urban sprawl we need to 're examine the ballymun construction model. Afterall that was novel and was a Scandinavian innovation in the sixties. We obviously encountered big social problems with it subsequently. Therefore we need to look at the problems with this rather than dismissing them and pretending that we won't encounter them again because the Scandinavians have a new construction technique
 
The problem with much of the public housing constructed in the 60's and 70's was the people who lived in them. That said I'm not talking about public housing. I'm talking about all housing. We should build houses which look the same as they do now, in the same places as they are now, but use different construction methods. Houses should be manufactured and assembled, not built. We'd get a vastly superior product for a much lower price.
Toyota, the best built cars in the world, are built in a factory by robots. The VW factory in Wolfsburg is the biggest factory in Europe. It's full of robots and assembly lines. Hand built cars are rubbish by comparison. Houses, just like everything else, can be built cheaper and better using capital intensive methods which reduce labour inputs.
 
Purple said:
The problem with much of the public housing constructed in the 60's and 70's was the people who lived in them.
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Yeah, I know a few people who grew up in Ballymun and they talk of how much nicer the 'flats' there were compared to the alternatives. The problems stemmed from lack of opportunities and facilities.
 
Leo said:
Yeah, I know a few people who grew up in Ballymun and they talk of how much nicer the 'flats' there were compared to the alternatives. The problems stemmed from lack of opportunities and facilities.
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I work with a few people from the area who lived in the flats.
A colleague from the area with 3 daughters said that there was nowhere else in the country with as much free services for children. His girls did Karate, Drama and sports, learned musical instruments and did cookery classes all provided for free (by the taxpayer). He now lives in a nice house which was given to him at a very low rent which he subsequently bought for a discounted price. He previously lived in the flats. His daughters are in, or through, college, also provided for free ( by the taxpayer).
 
Reactions: Leo
Protocol said:
The land costs for a 114 sqm house in Dublin in 2020 are 60,823.

In my opinion this is way too high, it needs to fall to 10k-20k per house/apt.
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I really doubt you would get land prices to fall to 10 – 20 k per house. There is only a fixed amount of suitable land available.

But if land costs are too high, simply bring back ground rents and spread the cost of a percentage of the price over a long period. . Allow for say 1/5 to 1/3 of the cost of land to be financed via a ground rent. So the cost of a new house is reduced by that amount and the rest paid over the duration of the ground rent.

For example, you could calculate and fix ground rents at time of purchase at say X% over the ECB's interest rate and with a duration of e.g. 99 years. The idea is the ground rent is set so the average purchaser ends up paying for example about 800 a year, i.e. about the same as a Sky Sports subscription. So it's not a great imposition. This is the key point - the ground rent should not be significantly different from consumer subscription charges voluntarily entered. So the purchaser knows how much the ground rent will be. If incentives are needed on the supply side, you could e.g. allow ground rent receipts to be tax free but charge CGT where ground rents are traded., etc. There are many ways a new ground rent scheme could be developed - all we need is creative thinking.
 
Protocol said:
Land = 61k
Finance = 16.7k
Profit = 43k
VAT = 44k
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presumably govt. VAT receipts from housing have been fairly modest for the last 15 years.
Could VAT be waived on houses priced below a certain threshold?

Coupled with govt-backed finance that's maybe 55K right there.

re: land costs - did the zoning windfall tax ever come into force?

also, and this is an unpopular suggestion in many circles, more needs to be done to encourage older homeowners to downsize. I live on a street of 4-bed houses, I'd say 75% are occupied by empty-nest retirees. There are similar streets all across Dublin, that's a lot of empty bedrooms and that's before you even get to the houses that are completely empty as a result of Fair Deal.

Tax incentives have been very effective at driving the development of student accommodation, something similar for retirement-village type developments might be worth looking into, along with appropriate financing packages to make it more practical to downsize (currently tricky from a finance and tax perspective I believe).
 
The market sets the price. As long as there's a capacity constraint any efforts to reduce costs will just increase profits. We need to increase capacity before we reduce prices.
 
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