Surge in Housing Commencement Notices Raises Questions About Actual Construction Outcomes
In April, the construction industry in Ireland saw a significant rise in housing commencement notices, with over 17,000 notices issued. This surge was largely driven by developers rushing to benefit from levy waivers that were initially set to expire. However, the government has since extended the waiver on water connection charges and development fees for new homes, with the water charges rebate now ending in September and the development levy in December.
Developers are required to notify the Housing Authority at least 14 days but no more than 28 days before beginning work on a site. Once a project is validated by the authority, construction must commence within 28 days.
Housing Minister Darragh O’Brien recently highlighted the high levels of housing commencement notices in a letter to Taoiseach Simon Harris. “The dramatic acceleration of building means so far this year we have 29,000 homes under construction,” O’Brien stated. “That is 337 homes starting on site every single working day this year.”
Despite these optimistic figures, Goodbody chief economist Dermot O’Leary expressed scepticism about the actual impact of the rise in commencements. In a note to investors, O’Leary suggested that the spike in commencement notices might not accurately reflect real construction activity, adding uncertainty to the expected number of completions in the coming quarters. “To sustainably get to above 50,000 units per annum requires further improvements in funding, industry scale, and land availability,” he said.
O’Leary acknowledged that the levy waivers had indeed led to increased building activity across all regions, with a notable spike in daily commencement notices just before the waiver was initially set to expire. “The Government announced an extension of the levy waiver and water charges rebate, but this was not known until very close to the initially proposed end date. Therefore, builders effectively had a ‘free option’ to issue the commencement notice on a site to ensure they took advantage of the incentive,” he explained.
The total number of commencement notices in the 12 months leading up to April reached 52,500, surpassing the government’s proposed new target of 50,000 units per annum. However, O’Leary remains doubtful that these commencements will translate into 50,000 annual completions, noting that there was little downside for builders to issue commencement notices.
Under the terms of the waiver and rebate, the units must be completed by the end of 2026. In his letter to the Taoiseach, O’Brien criticised Sinn Féin for opposing his plan to introduce a development levy and water connection charge waiver. “I know you share my concerns at the fact the party espouses policies which do cause uncertainty for both home builders and home buyers and at the fact that despite various requests they have failed to publish an alternative housing plan,” he wrote.
The ongoing debate over housing policies and the actual impact of commencement notices on housing supply highlights the complexities facing Ireland’s construction industry. As the government continues to navigate these challenges, the effectiveness of policy measures and their implementation will be crucial in addressing the housing crisis.
