Ireland Adopts Plan to Increase Housing Supply and Improve Housing Affordability


The government of Ireland has adopted a new policy (Rebuilding Ireland: Action Plan for Housing and Homelessness) intended to improve the quality of life and the national economy by making housing more affordable. In this regard, Ireland joins New Zealand (and Florida) in having recognized the disadvantages of overpriced housing and signaling reforms to alleviate the problem.

Background: The Great Recession in Ireland

Probably no nation suffered more during the housing bust induced Great Recession than Ireland. By 2007, the Irish economy had reached its peak, having achieved a gross domestic product (GDP) per capita, purchasing power adjusted, only 2.8 percent below that of the United States. This was an incredible accomplishment, given that as late as 1990 Ireland's GDP per capita was approximately 45 percent below that of the United States, Australia, Canada, the United Kingdom, New Zealand and Spain, which are shown on Figure 1.  .

However, as the overheated housing market tanked, Ireland's GDP per capita dropped 8.4 percent relative to that of the United States, despite own housing bust economic losses. Things were so bad that Ireland was forced to take a large loan from the European Union and the International Monetary Fund to help stabilize its economy.

Ireland's economic losses were even greater than that of Spain, which had a particularly severe housing bust and whose economy continues to languish. But Ireland has done much better. The EU loan has been repaid. According to World Bank data, Ireland has reached a new peak, reaching within 2.1 percent of the US GDP per capita (Figure 1).

The Housing Bubble and Bust

During the housing bubble,   Dublin and Cork became severely unaffordable, where the median multiples (median house price divided by median household income) reached 6.0 and 5.4, respectively. This was to be expected as demand increased, well beyond the supply permitted by Ireland's urban containment land-use regulations. As Dublin economist Colm McCarthy of  University College, put it: "Ireland passed its first major piece of land-use planning legislation in 1963, modeled on the UK's Town and Country Planning Act of 1947. The intentions were laudable, to restrict the construction of unwelcome developments and to empower local authorities to take a more active role in shaping the built environment. There was no desire to screw up the residential housing market, but that is eventually what happened."

As the economy get began to recover, house prices again began their rise simply because the reforms in   that would have prevented it were not implemented.

Rebuilding Ireland

The new housing policy announced July 20  is comprehensive, with strategies to reduce homelessness, improve the rental market and supply sufficient owned housing at affordable prices. Ireland has a high homeownership rate, at 68.6 percent and is important to the national economy.

As has occurred in the United Kingdom, Australia, New Zealand and some markets in Canada and the United States, large  house price increases relative to incomes were   experienced where urban containment policies were in effect. This is because urban fringe development prohibitions are associated with higher land prices inside urban containment boundaries (Figure 2). Indeed, this type of urban fringe regulation is present in virtually all major markets rated as severely unaffordable in the Demographia International Housing Affordability Survey, which rates 87 such markets in nine nations.

Rebuilding Ireland policy acknowledges the importance of the housing market the national economy. As has been typical under urban containment planning regimes, house construction has fallen significantly short of demand. Under this policy, the government intends to accelerate the release of land for new development, especially in making government owned land available for development.

Rebuilding Ireland is intended to double the rate of home building in Ireland over the period of 2017 to 2021. This will be aided by "Opening up land supply and low-cost State lands." This is important not only to meet the needs of Irish households, but also to diminish the potential for a highly volatile housing market that led to Ireland's financial distress in the Great Recession.

The government also intends to take action to support infrastructure development for new housing projects. A €200 million "Local Infrastructure Housing Activation Fund" will assist in "enabling infrastructure that opens up large sites for early development."

As in California, virtually all large new housing projects today are appealed on various grounds. In recognition of this, Ireland intends to speed up the development process by allowing larger developments to proceed directly to the national planning appeals board ("An Bord Pleanála") for approval. The intention is to "jumpstart" the development of new housing.

Defining Affordability

Unlike most governments, the government of Ireland has supplied a definition of housing affordability. Rebuilding Ireland will hold a competition to develop new housing that can be delivered for than €200,000 in construction costs.

Rebuilding Ireland also notes that land costs must be kept affordable and should add no more than €30,000 to €50,000 to the price of a new home. This would result in a "development ratio" of 15 percent to 20 percent (land price divided by total price including land). This development ratio is similar to US development ratios where urban containment policy has not been implemented and similar to development ratios in Australia and New Zealand before urban containment policy was adopted across those nations.

Moreover, based on Irish household incomes, housing that costs between €230,000 and €250,000 would be generally consistent with the median multiple of 3.0 or less that is rated by the Demographia International Housing Affordability Survey as affordable (new house prices are generally more expensive than those of existing housing).


The government is signaling the seriousness of its intentions, indicating that local authorities must strive in their statutory development plans for “affordable prices to meet the housing needs of each local authority area, across tenures and types as well as the social housing requirement."

This is a unique requirement in view of the fact that there has been virtually no serious attention to the issue of delivering housing affordability in other markets that have had strong urban containment policies.

Implementation will not be without challenges. In the longer run, the inertia of currently in vogue planning philosophy could well prevent achievement of the housing affordability goals of Rebuilding Ireland. Yet, as Rebuilding Ireland indicates, the stakes are high. Rebuilding Ireland notes that "Excessive housing costs have demographic impacts, including a tendency for households to defer important lifecycle choices in order to prioritise home purchase" (such as having children).

Further, as Rebuilding Ireland indicates: "Rising prices for residential accommodation impact adversely on competitiveness. The attractiveness of Ireland as a potential investment location and, of course, the cost base for existing businesses will be impaired should price inflation continue, as rising prices place upward pressure on wages, deter inward migration and impede the labour market."

This could be particularly important in light of Brexit (the exit of the United Kingdom from the European Union). To the extent that international businesses may decide to leave the United Kingdom to stay within the European Union, Ireland and especially Dublin could be attractive for relocation because of the dominance in the nation of the English language, which would be made more attractive by improved housing affordability.

Wendell Cox is principal of Demographia, an international pubilc policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

Photo: Custom House, Dublin by Peter Brown from Dublin, Ireland (The Custom House, Dublin) [CC BY 2.0], via Wikimedia Commons