Project Ireland 2040- can it be delivered and is it enough?
On Wednesday, May 16th I spoke at the Infrastructure Ireland 2018 conference organised by Eolas. Presentation is here
Two questions hang over the new national development plan Project Ireland 2040; (i) can it be delivered and (ii) is it sufficient? While there is a lot of heat and light about the total spend, in reality the cumulative additional spend is modest and well within the fiscal rules. Of concern are the cyclical, political and operational risks- almost 60% of the spend is backloaded 2023-2027- that is at least two governments away.
More importantly, is there is sufficient construction capacity to deliver? I talk about some of the structural issues within the industry that will significantly inhibit labour supply into the sector. All too often the focus is on State supports to apprenticeships and training. The industry also needs to reflect on the impact of sub contracting processes and the offer of little or no direct employment on the future supply of construction workers.
Lastly, we believe Project 2040 underestimates future housing demand. We explore the concept of of unmet housing demand- i.e. that household formation rates have remained stable between census 2011 and census 2016 not because people want to live in big households but because they can’t afford to live on their own.
Housing economics suggest that there will be no dramatic reduction in house prices anytime soon. The concept of thousands of houses flooding onto the market to depress house prices is highly unlikely to happen because of who controls land supply. There is a significant generational issue here- younger workers on average wages face a major affordability issue. The most cost effective option is that the State develops the land it owns rather than parcels it off for sale. The State’s new Regeneration agency offers some ground for hope; coordination of zoned residential land for development and a focus on the necessary infrastructure to service it. The agency should adopt the lessons from our neighbours, the Dutch and the Scottish and take on a third function; development of the land itself.