The level of State investment in housing and subsidisation of the sector is not financially sustainable, particularly as the number of homes being built grows, the Department of Public Expenditure believes.
Officials told Minister for Public Expenditure Jack Chambers on his appointment last month that the scale of intervention “places greater risk on the State, potentially leading to resource diversion from other critical areas, or in some cases long-term liabilities”.
Separately in a stark outline of cost implications of the legally-binding climate action plan, officials also said “the step change in climate ambition is creating significant expenditure pressures across Government”.
Although all EU member states will struggle to meet demanding 2030 climate and energy targets, “none face the level of challenge as Ireland”, the department warned.
Chris Murphy emerges as a clear voice for Democrats countering Trump
Loneliness: ‘I usually say I’m fine, but the reality is, most days, I’m at home by myself with my memories’
SSE Airtricity misread Anne’s meter, overcharged her by thousands and won’t refund her
Newlyweds land job as caretakers of Great Blasket Island
It said that relying primarily on direct exchequer grants to deliver climate and energy targets was not sustainable in the long term.
The department said spending on housing by the Department of Housing had increased significantly in recent years, with expenditure of just under €3.7 billion recorded in 2023.
“The unprecedented level of subsidisation of the housing sector is not fiscally sustainable, especially given higher housing targets. There is a need for more sustainable and cost-effective State interventions to maintain value-for-money principles.”
The Department of Public Expenditure suggested housing completion figures for last year would be higher than the 30,330 figure recorded by the Central Statistics Office in recent weeks.
[ Housing completions fall short of 2024 Government target of 40,000 unitsOpens in new window ]
Officials said “overall supply of housing is increasing, and the completions in 2024 (ie, the combined public and private supply) are expected to exceed the target of 34,500 new units – which is the highest number in over a decade”.
The department said a number of structural issues continued to challenge housing supply, including planning, productivity and innovation of the construction sector, and high costs of construction.
It also said there was planning permission in place for about 50,000 apartments that had not yet been started in Dublin. “There are some significant factors are at play here, including the impact of the judicial review process, the complexity of large-scale apartment delivery as well as the cost of construction of apartment delivery.”
It said it was “not possible for the State to step in to close viability gaps”.
Officials said the €450 million Croí Cónaithe cities initiative, which was introduced in 2022 to address the viability gaps for apartments, to support the delivery of up to 5,000 units by 2025 was likely to have been “too small to address the scale of viability issues and a complex scheme design”. The briefing document noted only 640 units were on track for delivery.
The department also said the scheme to address the significant damage to homes by defective concrete blocks was now likely to cost up to €3.65 billion.
Officials also highlighted the implications of “climate inaction”. Failure to reduce carbon emissions in line with domestic and European targets could lead to reputational damage and significant compliance costs, they said.
[ Rents continue to rise as availability of properties worsens again, Daft saysOpens in new window ]
Even with full implementation of commitments, these targets will not be reached by 2030, they concluded.
Mr Chambers was advised the “very limited action on emissions reductions” by the agriculture sector posed real challenges.
“As other economic sectors take ever costlier measures to reduce emissions, the agriculture sector will come increasingly into focus for more cost-effective emission reduction measures.”
Officials said there was a need for greater balance between taxation, regulation and public expenditure to mobilise private investment and achieve climate objectives.
“A greater use of tapering down and removal of subsidies to incentivise early adopters should be considered.”
