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Introduction

^{As two young people in Ireland every day brings new worries towards our future. A huge issue currently in Ireland is housing. Briefly speaking there is a shortfall of housing units and therefore the costs of them are rising. We wanted our project to have a relevance in our lives and allow us to gain a deeper insight into what our futures will look like and what has shaped them into this. The continuous idea throughout this project was to question whether this issue is a problem of supply or demand. We looked at this question through numerous lenses including; the factors that affect each of them, the history of housing in Ireland and the role our government has played. This project examines how making small decisions can result in an entirely different future for the people living in the country.}

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What is supply and demand?

In short, demand refers to the market’s desire to purchase the good or service and supply refers to the market’s ability to produce a good or service. But the relationship between these two things is often more complex. The price of the good or service is determined by the relationship between supply and demand in a market. As a result, the price is called the equilibrium price and shows the connection between producers and consumers of the good or service because the quantity of the good supplied by producers is equal to the quantity demanded by consumers
If consumers want to purchase more of a good/service, the price will tend to rise and if they want to buy less the price will tend to fall. However, in general, lower prices will increase demand for a good/service as it appears more attractive.
The first graph shows a demand curve. This represents the relationship between the price of a good/service and the demand at a given time. Usually, as the price rises, the demand falls.
The second graph shows a supply curve. This represents the relationship between the cost of a good/service and the supply at a given time. Usually, as the price rises, the supply rises.

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The law of supply and demand

The law of supply and demand represents the relationship between the two and how a change in one causes a change in the other. When there is a higher demand for a good/service there is a rise in the supply of the good/service and vice versa. For example, the supply of housing being low and the demand being high, means the product is scarce and there is an insufficient supply to meet the demand. Therefore, this will lead to an increase in the price of housing.
The graph shows the law of supply and demand. The point of intersection is where equilibrium is reached.

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1. Affordability

Wages in Ireland increased 4.2% in December of 2022 over the same month in the previous year. Rising incomes means people have more to spend on housing. As a result, a rise in income increases the demand for housing.

This graph has the affordability index on the y axis and the year on the x axis. Afforadable is rated as 3.0 and under and a measure of 5.0 shows the measure of extremely unaffordable. The green represents Dublin and shows how rising wages are resulting in housing becoming more affordable- increasing the demand.

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2. Population Growth

The population in Census 2006 was 4,239,848 and Census 2011 was 4,588,252, the overall population increased by 348,404. There's a 1% annual change in the population of Ireland (2021). This means there’s increased pressure on the market to increase the number of houses being built, however a collapse in housebuilding took place despite continued growth in the population. This results in the demand being higher than the supply.

This chart shows that the growth in the population has exceeded the increase in the housing stock from the years 1996-2002 onwards. Between the years 2011-2016 the housing stock increases by 8,8000 whilst the population increases by almost 174,000.

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3. Confidence

^{Consumer confidence affects how many homes are demanded. Rising house prices generally encourage consumer spending as consumers are optimistic about the direction of the economy and the property market. This results in the demand increasing as consumers believe they will benefit from increased wealth.}

^{This graph illustrates how the house price to income ratio has changed throughout the years.}

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4. Interest Rates

The cost of mortgage interest repayments is significantly influenced by interest rates. The most noticeable change in interest rates is the sharp decline over previous years, for example, interest rates fell from 11.45% at the beginning of the 1990s to 4.57% in 2006. Due to the fact that so many borrowers base their purchasing decisions on the affordability of the loan, interest rates have a significant role in determining housing demand. However, Ireland doesn’t have control over its interest rate policy, which is established by the European Central Bank and ultimately determined by the Health of Core European Economies (ECB).
The graph shows The Bank of Ireland’s interest rates over the past.

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4. Interest rates

^{As interest rates have risen sharply, recently, fixed rates are currently lower than variable rate mortgages in Ireland. Mortgage rates have been at low levels for a few years now, but increases are on the way as the ECB has started raising interest rates again. The current lowest mortgage rate available from February 2023 for first time buyers who have a 10% deposit is 2.9% fixed for four years at Bank of Ireland. For properties with BER worse than B3 the lowest mortgage rate at 90% loan-to-value is from Haven or AIB at 3.15% variable. The ECB increased interest rates this year to stop inflation rising and this has resulted in borrowing and mortgage costs rising and making houses less affordable. Increasing interest rates decrease the demand for housing as it becomes more expensive to borrow money.}

^{The graph shows how the interest rate in the ECB Eurozone has changed over time.}

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5. Mortgage availability

^{The willingness of banks to make mortgage loans is another factor that affects the demand for homes. Mortgages with higher income multiples from banks result in a higher demand for homes. Depending on how well the interbank lending market is doing, banks' willingness to lend mortgage money may vary. Due to the 2008 credit crisis, interbank lending costs have increased significantly, and home financing options have decreased.}
^{Since several mortgage packages have been discontinued, it is now more challenging for prospective homeowners to go up the property ladder. For instance, 100% and 125% mortgages have been discontinued and before making a mortgage loan, banks are requesting larger deposits. First-time buyers can borrow up to 4 times their gross income. Second & subsequent buyers can borrow up to 3.5 times their gross income. Loan-to-value for first-time buyers will remain at 90%.}
^{As seen in the graph mortgage rates in Ireland are at a historic low however are rising again as the ECB started to raise interest rates in 2022. When the ECB rate was zero it meant that some people on low tracker mortgages were only paying 0.5%. The banks are no longer offering trackers to new customers.}

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6. Cost of renting

The demand for housing in Ireland can be significantly impacted by the cost of renting. Rent prices that are too high make it more difficult for people and families to afford housing, which reduces the demand for rental homes. However, if rent is affordable, more people will be able to rent, which leads to a rise in demand. Particularly in major locations like Dublin, the cost of renting has increased recently in Ireland. Due to this, many people have found it challenging to locate cheap housing, which has led to a rise in homelessness and housing instability.
People may be more inclined to explore alternative housing options, such as buying a property or relocating with family or friends, when rental expenses are high. The demand for rental houses may decline as a result, especially in the short term. But, long term, high rental rates can stimulate housing demand as people may be more inclined to save money for their own house. As a result, there may be a short-term drop in demand for rental properties, followed by a long-term rise.
The diagram shows how rent prices vary amongst counties and are highest in urban areas where the demand for housing is also at a high.

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7. Growth in the labour force

^{As you can see in the chart Ireland's labour force participation rate dropped from 64.70 percent in the third quarter of 2022 to 64.50 percent in the fourth quarter. This means that there has been an increase in the number of people unemployed.}
^{Unemployment can lead to decreased economic activity, which can affect the housing market in numerous ways. For example, businesses may close or downsize, leading to a decrease in demand for commercial property, which could in turn lead to a decrease in demand for residential property in the same area. On the other hand, if unemployment is concentrated in specific industries or regions, it may not have as significant an impact on housing demand. For example, if job losses are primarily in the manufacturing sector, it may not affect demand for housing in urban areas where manufacturing is not a significant source of employment.}
^{Overall, a decrease in the number of people employed can have a negative}^{impact on housing demand in Ireland}

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8. High immigration

Compared to native-born people, immigrants frequently require rental houses or smaller residences for their housing needs. As a result, there may be a change in the sorts of housing that are in demand, with apartments and smaller houses becoming more popular.
Also, the demand for housing in particular areas or neighbourhoods might be impacted by immigration. As a result, there may be a greater demand for housing in urban areas and places where there are already immigrant communities.
However, the effect of immigration on the housing market is complicated and can vary depending on several variables, such as the total number of immigrants, their rate of immigration, and how they are dispersed throughout the various geographic and socioeconomic groups.
Particularly from Eastern Europe, immigration to Ireland has significantly increased in recent years. In urban places like Dublin, this has led to a rise in housing demand.
The graph shows how the intake of immigrants to Ireland has increased in most years.

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9. Government policies

The demand for housing in Ireland can be significantly impacted by government policies. Housing demand may rise in response to policies that encourage home ownership, such as tax breaks or subsidies, while it may fall in response to measures that restrict or deter home ownership, such as high property taxes or limitations on mortgage financing.
For instance, to make it simpler for people to buy a home, the Irish government introduced the Help to Buy programme, which offers a tax discount to first-time purchasers, this has raised demand for housing. Similar to this, measures that encourage the development of new housing, such as funding for developers or modifications to zoning regulations, can raise the supply of housing and lower demand by lowering housing costs.
On the other hand, laws that deter home ownership, like exorbitant real estate taxes or limitations on mortgage lending, may result in a decline in the demand for housing. For instance, by making it more challenging for some people to get a mortgage, the Central Bank of Ireland's mortgage lending limits, which restrict how much money people may borrow to buy a property, have reduced demand for housing.
Government policies may also have an impact on how housing demand is distributed among various socioeconomic categories and geographic areas. For instance, policies that stimulate urbanisation or assist the development of regions, may result in higher housing demand in those regions, whereas policies that restrict development or support rural living may result in lower housing demand in urban areas.
Housing for All is a new initiative launched by the government with the goal of building over 300,000 new homes by the year 2030. This goal includes 18,000 cost-effective rental homes and 36,000 affordable purchase homes. A B2 or Cost Optimum BER standard will also be retrofitted into 500,000 homes by 2030, according to the plan.
Examples of government policies affecting housing demand can be seen in Budget 2023:

Rent Tax Credit

If you are paying for private rented accommodation, you can claim a new Rent Tax Credit of €500 a year for 2022 and subsequent years. This tax credit applies to each tenant rather than each tenancy. For rent you pay in 2022, you will be able to claim this credit early in 2023.

Vacant Homes Tax

A Vacant Homes Tax will be introduced in 2023. It will apply to residential properties that are occupied for less than 30 days a year. The tax charged will be three times the amount of the Local Property Tax rate for the property.

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10. Demographic trends

The demand for housing in Ireland may be significantly impacted by demographic trends. The types of housing that are in demand as well as the areas where people wish to live might change as a result of changes in the population's age, income, and family size.
A younger population might be more interested in starter homes or apartments, whereas an older population may result in higher demand for retirement homes or assisted living facilities. A rise in single-person families could raise the need for smaller houses or apartments.
Population trends may have an impact on housing demand in particular areas or communities. For instance, a rise in the number of young families may result in higher demand for property in suburban regions with access to amenities and good schools.
Generally, the demand for housing in Ireland is significantly influenced by population trends. By understanding how these patterns are changing and how they impact the housing market, policymakers and developers may better prepare for future housing demands and ensure that there is a sufficient supply of housing to meet demand.
The graph shows the population density of each county in Ireland, which is heavily influenced by demographic trends.

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11. Urbanisation

As more people move into cities, the demand for housing could rise as a result of their need for accommodation. With more people living in apartments and smaller homes, the types of housing that are in demand could also change. This is due to the fact that space is scarcer in urban areas due to the higher population density.
The demand for housing in particular areas or neighbourhoods might be impacted by urbanisation. Those who relocate to urban areas could look for neighbourhoods that provide convenient access to facilities like public transportation, schools and shops.
However, if the supply of housing in urban areas fails to meet the demand it can result in housing scarcity and overcrowding.
As you can see in the chart urbanisation in Ireland has been gradually rising from 2011 onwards showing Ireland has a large amount of its population living in an urbanised setting. This figure will only continue to rise as more and more apartments and houses are being built.

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Annual housing demand

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1. Government Policies

The availability of housing in Ireland can be significantly impacted by governmental regulations. Government policy may have the following effects on housing supply:
Planning regulations: By dictating where and how new residences can be built, planning regulations can affect the supply of housing. Planning laws are put in place in Ireland to regulate the positioning, style, and building of new homes. The minimum size of new homes or the types of materials that must be used in their construction.
Building codes are a collection of requirements that contractors must adhere to when creating new homes. Building codes address things like structural integrity, energy efficiency, and safety. Building codes are used in Ireland to guarantee that new homes are secure and conform to requirements. These codes may affect the price and difficulty of building new homes, which may have an impact on the housing supply.
Zoning Regulations: Zoning regulations specify the allowed uses of property in a specific area. Zoning regulations are used in Ireland to allocate land for residential, commercial, industrial, and other purposes. By regulating the locations where new residences can be built, zoning rules can affect the housing supply.

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1. Government Policies

^4.^Taxes:^{By impacting the cost of development and the profitability of building, government taxes can have an impact on the supply of housing. For instance, developers could be less inclined to build new homes or to rent them out if there are significant taxes on rental income or new development. On the other hand, tax breaks for developers can promote additional building and boost the housing supply.}

^5.^{Government housing assistance programmes:}^{The demand for rental housing might rise if large subsidies or tax credits are made available to low-income renters. This might then motivate builders to construct more rental homes, increasing the housing supply.}

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2. Availability of Land

The availability of land may affect the supply of housing in several ways:

Land restrictions: Ireland has a certain amount of land that can be developed for housing, especially in urban areas. This may make it challenging for developers to construct brand-new residences and increase the housing supply.
Costs of Land: The cost of constructing new homes can be influenced by the price of land, which in turn can be influenced by the availability of land. It may become more expensive for developers to buy property and construct new homes if land is in short supply and in high demand.
Urban sprawl is when housing developments extend away from urban areas due to a lack of land accessible for housing development. This may have an influence on people’s lives by raising the cost of infrastructure and services like transportation and water delivery.
Development Regulations: The regulations governing housing development may be impacted by the availability of land. For instance, there can be greater restrictions on the kinds and sizes of homes that can be built if there is a shortage of suitable land.
Infrastructure: The availability of infrastructure, such as roads, water supplies, and electricity, can be impacted by the availability of land. If there isn't enough land for housing development, that can affect the availability of infrastructure, which might then affect the housing supply.

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3. Construction Costs

Building new homes becomes more expensive when material costs rise, which may result in a decline in the availability of housing. The following are some ways that construction costs may affect Ireland's housing supply:

Capital Availability: More money is needed to create new homes, construction becoming more expensive means developers might not be able to afford to build new homes as funding is difficult to obtain which can reduce the availability of housing.

Labour Costs: The availability of qualified personnel and the wages they demand can have an impact on labour expenses, which make up a sizeable portion of construction costs. Developers may be less inclined to construct new homes if labour costs are high.

Materials Costs: The price of building supplies has an impact on construction costs as well. The supply of homes may be hindered, and construction costs may rise if raw materials are expensive.

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3. Construction Costs

Regulations: By demanding specific building standards, including energy efficiency or safety features, regulations can have an impact on construction costs. While these rules may result in better-quality housing, they may also raise construction costs and hence reduce the availability of housing.

According to research by the Irish Times, 86% of construction companies anticipate significant cost hikes this year despite 96% reporting a rise in the cost of building supplies.
According to the CIF's economic prognosis, the main issue for businesses over the following three to six months is the rising cost of building materials. The capacity to generate a "good profit margin" on construction projects and the price of gasoline are the next two industry concerns mentioned by 72% of the firms questioned.
Availability to skilled labour and labour prices are ranked second and third, respectively. The challenges these businesses encounter demonstrate how challenging it can be to deliver houses, particularly when employing the correct materials.

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4. Economic Conditions

The availability of homes in Ireland can be significantly impacted by the state of the economy. This can occur in a variety of ways, including:

Economic Growth: Economic growth tends to raise housing demand, which may therefore result in more housing supply. More individuals have employment and income while the economy is expanding, which makes it simpler for them to purchase housing. To fulfil the increased demand, this might motivate developers to construct more homes.

Interest Rates: Borrowing money to construct new housing projects might be more affordable for developers when interest rates are low. This may inspire builders to construct additional houses, increasing the housing supply. However, interest rates rise, fewer developers may choose to build new homes, hence reducing the supply of housing.

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5. Demographic Trends

The availability of homes in Ireland can be significantly impacted by demographic patterns. The following are some ways that demographic patterns impact the housing supply:

Population Growth: A rise in the population may raise housing demand, which may increase the housing supply. If the population is rising, developers may build additional homes to match the demand. Urban areas, where population growth may be higher than in rural ones, are particularly crucial in this regard.

Ageing Population: The availability of homes may also be impacted by an ageing population. People may need different kinds of accommodation as they age, such as smaller homes or retirement communities. This could result in a decrease in the demand for larger family houses and an increase in the demand for these kinds of accommodation. More retirement communities or smaller residences could be built by developers in response to this trend.

Household Size: Alterations in household size can have an impact on the housing market. There can be a higher demand for smaller housing, like apartments or townhouses, if households are increasing smaller. This might boost the availability of these kinds of homes. On the other hand, if households are growing, there can be a higher demand for bigger homes.

Migration: Migration trends may have an impact on the housing market. A location may experience a huge inflow of residents, which may raise housing demand and boost housing supply. On the other hand, if a region has a large amount of emigration, the demand for housing may decline and the supply of housing may rise.

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Timeline of key events and developments in the housing sector in Ireland from 1990 onwards:

1990s:

The Celtic Tiger economic boom in the late 1990s leads to a surge in construction activity and housing development.
The government introduces tax incentives for property investment, which contributes to the growth in the construction industry.
The introduction of the Planning and Development Act 2000 aims to streamline the planning process and speed up the delivery of new housing.

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...

2000s:

Housing prices continue to rise rapidly, peaking in 2007 before the global financial crisis.
A housing shortage emerges in urban areas, leading to a rise in homelessness and increased demand for social housing.
The government introduces the Affordable Homes Partnership in 2005, which aims to make homeownership more accessible for low- and middle-income households.
The government introduces the Rental Accommodation Scheme (RAS) in 2004 to provide social housing through the private rental sector.

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...

2010s:

The global financial crisis leads to a crash in the property market and a reduction in construction activity.
The government introduces the Mortgage to Rent Scheme in 2012 to help households at risk of losing their homes to stay in their properties by becoming social housing tenants.
The government introduces the Rebuilding Ireland Plan in 2016, which sets out a strategy to address the housing crisis, including the delivery of 50,000 social housing units by 2021.
The housing crisis continues, with rising homelessness, high rents, and a shortage of affordable homes.

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...

2020s:

The COVID-19 pandemic has led to a temporary slowdown in construction activity and increased uncertainty in the housing market.
The government introduces the Housing for All Plan in 2021, which aims to deliver 300,000 new homes by 2030, increase social housing provision, and improve affordability and security for renters.
In summary, the housing sector in Ireland has experienced significant ups and downs since 1990, with periods of rapid growth and a subsequent crash, followed by a persistent housing crisis in recent years. The government has introduced various policies and initiatives to address the housing shortage and improve affordability and accessibility, but the issue remains a major challenge.

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The Government and the housing crisis

The government housing crisis in Ireland refers to the ongoing shortage of affordable and social housing, which has led to a significant increase in homelessness, high rents, and a lack of affordable homes for many households. The crisis has been ongoing for several years and has been attributed to a range of factors, including:

Insufficient supply of housing: There has been a significant shortfall in the supply of new housing in recent years, particularly in urban areas where demand is highest. This has been caused by a range of factors, including a lack of funding for housing construction, delays in the planning process, and a shortage of skilled workers in the construction industry.

High levels of demand: The demand for housing has continued to increase in recent years, driven by population growth, migration, and rising incomes. This has put additional pressure on an already constrained housing market, leading to higher rents, longer waiting lists for social housing, and increased homelessness.

Housing affordability: The cost of housing in Ireland has increased significantly in recent years, making it difficult for many households to access affordable homes. This has been driven by a range of factors, including a shortage of affordable homes, high levels of demand, and a lack of government intervention to control housing prices.

Weaknesses in the social housing system: The social housing system in Ireland has been criticized for its slow delivery of new homes, long waiting lists, and inadequate funding. There has been a significant backlog in the provision of social housing, with many households having to wait for years to access affordable homes.

The government has introduced a range of policies and initiatives to address the housing crisis in recent years, including the Rebuilding Ireland Plan and the Housing for All Plan. These initiatives aim to increase the supply of new homes, improve affordability and security for renters, and increase social housing provision. However, the housing crisis remains a significant challenge, and the government's response has been criticized by some as inadequate to address the scale of the problem.

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How has the Ukrainian crisis affected housing in Ireland

The Ukrainian crisis has had limited direct impact on the housing sector in Ireland. However, it has indirectly affected the housing market in a few ways:

Global Economic Uncertainty: The crisis has created uncertainty in global financial markets, which can impact the overall economy, including the housing market. Economic uncertainty can lead to a reduction in consumer confidence and a slowdown in economic activity, which can affect the demand for housing and property investment.

Foreign Investment: Some investors may look to move their money out of countries affected by the Ukrainian crisis and into safer, more stable markets. Ireland has been a popular destination for foreign investment in recent years, including in the housing market. Any reduction in foreign investment could have an impact on the availability of funding for property development and housing construction.

Migration: The Ukrainian crisis has led to a significant number of Ukrainians leaving the country and seeking asylum or work in other countries, including Ireland. This has contributed to an increase in population growth in some areas of Ireland and may affect the demand for housing in those areas.

Overall, while the Ukrainian crisis has not had a direct impact on the housing sector in Ireland, it has created some uncertainty and instability in the global economy, which can indirectly affect the housing market.

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Sustainable Development Goal 11

Sustainable Development Goal (SDG) 11 - Sustainable Cities and Communities
SDG 11 aims to "make cities and human settlements inclusive, safe, resilient, and sustainable" by addressing a range of issues related to urban development, including housing.
Target 11.1- By 2030, ensure access for all to adequate, safe and affordable housing and basic services and upgrade slums.
Target 11.3- By 2030, enhance inclusive and sustainable urbanization and capacity for participatory, integrated and sustainable human settlement planning and management in all countries.

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Conclusion

In conclusion Housing in Ireland is currently both a supply and demand issue.

On the demand side, there is a growing population, increasing numbers of households, and a high level of net migration, all of which have contributed to a rising demand for housing. This demand is also being driven by a shortage of social housing and affordable housing, which has led to increased competition for limited rental and sale properties, and a rise in homelessness.

On the supply side, there has been a lack of new housing construction over the past decade, resulting in a significant shortfall of available housing units. This lack of supply has been due to a combination of factors, including a slow planning and development process, strict building regulations, a lack of investment in new housing projects, and a shortage of skilled workers in the construction industry.

Therefore, to address the housing crisis in Ireland, both supply-side and demand-side solutions need to be implemented, including increased investment in new housing construction, more efficient planning and approval processes, and policies to support the provision of social and affordable housing.

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