Few people will look fondly on 2021. In construction, there is a little hope that the past year will be the start of a ‘decade of delivery’ where our industry is responding to Ireland’s needs. housing, infrastructure and climate change.
Three government strategies – Housing for All, the National Development Plan and the National Renovation Program – involving hundreds of billions of euros have defined at least a generation of work for our industry and could end the volatile cycle of expansion and downturn that has hit the industry in the past.
The government has moved mountains nationwide to put these strategies in place. But, as Albert Reynolds said, âIt’s the little things. . . “This will prove revealing in the end. If the government cannot make the relatively minor changes to the system at the local level, state agencies and utilities, their housing, infrastructure and climate change strategies will falter.
The message from construction companies, on the front lines of implementing these strategies, is that this is not the case.
Throughout this pandemic, the construction industry has proven to be extremely adaptable. Tens of thousands of workers and hundreds of companies have adopted new procedures to keep sites open and safe for the duration of the pandemic.
The Taoiseach recently acknowledged that shutting down the industry was one of his biggest regrets during his tenure as it reduced the supply of housing. The fact that this stop was unprofitable in terms of Covid prevention because of the measures taken on the sites makes it doubly regrettable.
It is heartwarming to hear Minister Darragh O’Brien swear that the construction industry will not be shut down even though further restrictions are needed; each week of closure removed around 800 homes from production in 2021.
What was remarkable about 2021 was how quickly our industry has regained lost ground, so housing production will likely hit around 21,000. Euroconstruct, an EU consultancy, estimates that production in 2021 is 2.7% higher than in 2020 in terms of volume.
As we move into 2022, systemic inertia, not the pandemic, is now the biggest challenge to delivering action on housing, infrastructure and climate change.
In 2021, the government launched Housing for All, the National Development Plan and the National Renovation Strategies. All are important for the future of Irish society and its economy and, indeed, of every citizen. The ministers concerned correctly identified the capacity of the construction industry as a critical success factor when they launched these ambitious strategies.
The biggest challenges
Despite this, labor and input costs are consistently cited as the biggest challenges facing the provision of housing and infrastructure in Ireland.
On the labor side, the Irish Tax Advisory Board estimated that the construction industry should increase the number of employees in the sector to 180,000 to provide the required housing and the national renovation program.
The Future Skills Expert Panel estimates that the industry would need to recruit an additional 11,000 people per year until 2030 to meet government commitments on housing and infrastructure. Recruitment of labor will be easier with the certainty that these strategies offer over the next decade.
The other challenge facing the industry over the past year was rapidly rising input costs and, in some cases, significant shortages.
The cost increases have the potential to erode the significant investments made by the government until 2030. These increases are expected to continue strongly throughout 2022 and the Minister of Public Expenditure and Reform has already asked departments to prioritize infrastructure projects – meaning some are “less important”. projects will be on hold indefinitely.
To compensate for cost increases, the industry is continuing its path towards digitalization with significant steps taken to improve productivity. The government recently announced the establishment of its first (and long overdue) construction technology center to increase innovation in the industry.
In our view, these labor and cost issues are surmountable as activity increases over the next decade. However, our view from the front line of delivery is that delays and costs generated by inefficiencies are a greater threat to solving housing issues and building large-scale projects.
Irish home builders can build a house in around 16 weeks on larger sites. Over the past year, that deadline has passed 22 weeks due to inefficiencies in the way state utilities engage with the sector.
Irish Water’s new operating protocols mean home builders must cover â¬ 5,000 per planned home before construction even begins.
The need for funding to rebuild Ireland’s crumbling water infrastructure is evident every year and connections to housing are a valuable source of income. However, taking these fees off the home builder adds huge financial costs and in some cases makes the business cases unsustainable for projects on the margins. The impact means less housing in the medium term.
In general, while the central government and the political system are aware of the urgent need for housing and infrastructure, their agencies, utilities and local government counterparts do not share this sense of urgency. Construction companies report the same delays and frustrations that were evident before the launch of Housing for All, the National Development Plan and the Climate Strategy continue.
Nowhere is this more evident than in the planning system. Several reviews are underway in the planning system, including a critical review on forensic reviews. This has the potential to protect individual rights while allowing a sustainable level of construction essential for the public good to advance.
Another system that has long been inadequate and obsolete is procurement. Faced with the opportunity offered by the Covid, it should now be reformed.
In 2004, Charlie McCreevy introduced the fixed price / lump sum contract, which meant that all risks and costs would be placed on contractors in public sector projects. This, combined with a legal obligation to select the lowest priced bid, is at the heart of the problems with public sector projects.
Covid has required huge changes and has forced us all to work in new ways. Unfortunately, deeper changes are needed in the state apparatus to streamline the provision of housing and infrastructure.
Unless it happens quickly, strategies like Housing for All and the National Renovation Program will only collect dust on the office shelves of future ministers who are still struggling to fix housing and tackle climate change. .
Tom Parlon is General Manager of the Construction Industry Federation