IRELAND NEEDS AROUND 40,000 more people employed in the construction sector if the government wants to reach targets of 50,000 new homes a year, according to an economic forecast from the ESRI. 

Additionally, if the government intends to fulfil promises made in its National Development Plan (NDP), which includes building the infrastructure needed for new housing developments, another 40,000 workers would be needed.

The ESRI’s latest Quarterly Economic Commentary reiterates previous concerns about capacity constraints in infrastructure delivery, adding that a hoped-for transfer of from non-residential construction to home building has not happened.  

As cost of buying and renting homes continues to rise, so too does the demand for housing. Meanwhile, many public infrastructure projects that would serve new homes have been beset by delays.

Infrastructure shortcomings are creating a bottleneck in the delivery of new residential buildings because the services required are simply not yet in place in many cases. 

At the same time, Ireland has nearly full employment, so finding 80,000 workers to address the seemingly perpetual housing crisis looks like a daunting task, if not an impossible one, the ESRI suggests. 

“We raise this issue of labour constraint on housing provision in part as a reminder of just how challenging it will be to reach a target of 50,000 housing completions or more in the current context of full employment, ” the report states. 

Last year, the government missed its housing target by roughly 10,000 units, with 30,330 new homes built. On top of that, housing completion targets over the next two years will be missed by around 9,000, according to the Banking & Payments Federation Ireland.

“We’re seeking to achieve that increase in housing output, while at the same time trying to deliver on an enormously ambitious National Development Plan. And again, all of these things are very laudable,”the ESRI’s Alan Barrett told reporters in a briefing on the economic forecast. 

However, the issue with trying to reach that 50,000 goal, and the completion of the NDP, is workforce capacity. 

While the government tends to set annual housing targets, the NDP covers infrastructure investment over a ten-year period up until 2030.

“If you were to get housing up from about 30,000 up to about 50,000 about 20,000 increase, you could require about 40,000 additional construction employees.

“It is simply, for us, inconceivable, or at least extremely difficult to conceive how such increases in labour can actually be attained over the short run and even the medium run,” Barrett said.

Barrett explained that the situation has led the ESRI to be “cautious” about the overall capacity of the economy to deliver the required infrastructural expansion. 

The ESRI’s Conor O’Toole said that “capacity issues in infrastructure and housing are likely to constrain long-term growth and need continued emphasis in terms of public expenditure”.

All this means that the government needs to carefully prioritise the NDP projects in order to keep up with demand for services that come with new housing development.

“For many, many years in Ireland, the constraint on development was a budget constraint,” said Barrett.

“But I think you can now say, in a full employment context, the constraint is actually a labour constraint, whereby ministers still have to make difficult decisions, even if the cash is very, very plentiful,” he said. 

Asked where he sees an additional 80,000 workers coming from, Barrett said: “The answer is, I can’t.”

Barrett and O’Toole did offer some possible ways to address the labour shortage though.

Related Reads

Tax breaks for developers? Harris 'remains to be convinced' it's the best tool to boost supply

Plans to tie rents for new build apartments to inflation rate being brought to Cabinet

Dereliction in Ireland: 'Something is rotten in the Irish property industry'

One of the ways to get more people working in the required roles is through immigration, although that’s “not guaranteed”, according to O’Toole. 

Similarly, the economists suggested that Ireland could benefit from having some large-scale international development companies doing business here.

O’Toole also said that modernising construction techniques and using new technology may also help to speed up construction and therefore free up workers earlier. 

But overall, O’Toole said the ESRI remains “pessimistic” about housing construction this year and into next year. 

“We’re just in and around 33,000 units for this year, which is 1000 shy of our previous forecast, and we’ve held next year’s forecast at about 37,000 units.”  

In response to the ESRI’s assessment, the Construction Industry Federation’s director of housing and planning Conor O’Connell said: “Labour capacity is simply not an issue.”

He described the claim as “completely misguided” and put the failure to meet housing targets down to “significant and ongoing infrastructural capacity and planning capacity issues that housebuilders are facing”.

“The construction industry has the workforce, skills and proven ability to scale up to deliver on housing and infrastructure. What’s lacking currently is certainty and confidence in a reliable pipeline of work,” O’Connell said.

“The government needs to urgently unlock land, increase planning efficiency and provide multiannual funding for critical infrastructure to enable housing and growth.”