The State will need to build 54,000 homes a year for 25 years to meet the current housing shortfall, writes Craig Hughes.

The Oireachtas Housing Committee will be told of the “costly” impacts of failing to ramp up housing output to meet the level of demand.

Figures for 2024 show that just 30,300 new homes were built.

The Central Bank is predicting 35,000 new homes will be built this year while the ESRI are predicting 34,000.

Robert Kelly, director of economics and statistics at the Central Bank, will tell the committee a “structural shortfall in housing stock” has built up due to a over decade of under supply.

Mr Kelly will say that failing to address the housing shortfall will have multiple knock-on effects.

“Beyond the high social cost, inadequate housing supply will lead to rising rents and house prices," he will tell the committee.

“This, in turn, will drive up living costs, reduce disposable incomes, and intensify wage pressures, undermining our competitiveness as a small open economy,” Mr Kelly will point to issues with critical infrastructure as barriers to ramping up housing development.

“Delivering homes at scale requires investment in essential infrastructure like water, energy, and transport networks.

“Without these, development cannot proceed,” he will say.

An analysis by the Central Bank shows that “delays in infrastructure planning or execution lead to long wait times, causing a permanent reduction in private sector participation and resulting in poor value for money”.

In relation to planning, Mr Kelly will say that decision times have “significantly decreased” and that early results from the Large Scale Residential Development model "are promising", with a 50% increase in usable permissions.

The committee will also be joined by representatives from the Economic Social Economic and Research Institute (ESRI).

Associate research professor at the ESRI, Dr Conor O’Toole, will tell the committee that the cost and availability of land, labour costs, materials and inputs costs, the cost of financing and price developments are the central barriers to development.

In particular, Dr O’Toole will point to a need for “supply-side reforms that can support housing production” such as reform of the land market.

Dr O’Toole will suggest greater use of activation measures to make more land available for development, with the Residential Zoned Land Tax (RZLT) cited as a mechanism to achieve this quickly.

The RZLT is a tax, charged at 3% of market rate of the site, that is zoned for residential use but not being developed for housing.

The ESRI will also point to infrastructural issues such as the “provision of services and utilities such as water, wastewater and electricity connections” as being at the fore of inhibiting housing development.

Dr O’Toole will say that financing for home building will require financing from both the State and private sector to deliver the required mix of housing tenure.

“This will require private financing from bank lending, domestic and international equity and other sources such as European funds where available,” he will tell politicians.

Dr O’Toole will tell the committee that productivity in the small domestic construction sector compared to international companies is inhibiting greater housing output.

“This lack of productivity is likely to be inhibiting activity in the sector. Productivity could be enhanced through economies of scale with larger firms.

“The second productivity enhancing step is a movement towards modern methods of construction (pre-fabrication etc) which can help standardise production, lower costs and increase timeframes,” he will remark.