It’s Cheaper for the Council to Buy Homes Than Build Them, Consultants Tell Councillors

On average, Dublin City Council spends more than €500,000 to build a two-bedroom apartment on its own land, according to research drawn up for the council by Ronan Lyons, the Trinity College Dublin economics assistant professor and consultant.

That’s significantly more than housing charities or private developers, the research found.

The cheapest new-build social homes, it says, are the ones the council buys from private developers, under legislation known as “Part V”, which allows councils to buy homes at a discount to use as social housing.

During a presentation to councillors on the housing committee of Dublin City Council on 9 November, Lyons said that the council often uses higher-quality materials than private-sector developers, but that the main thing pushing up costs were the funding and procurement processes.

Together with Seán O’Riordáin, an independent consultant who advises on local government, Lyons analysed 12 Dublin City Council housing developments between 2019 and 2022.

They compared those to six schemes by approved housing bodies and 10 private developments.

“I’m not surprised by one conclusion and that is that public procurement policy is daft,” said Labour Party Councillor Dermot Lacey, who chairs the council’s housing committee. “That it doesn’t work, that it increases costs.”

The research was requested by councillors wanting to make sure the money spreads as far as possible, and struggling to understand why Dublin City Council is spending more than the Society of Chartered Surveyors says is the average build cost.

The Findings

The research examined Dublin City Council’s construction costs against housing charities, also known as approved housing bodies (AHBs) and against the private sector homes that the council purchases at a discount.

“In general, the all-in cost of a unit through AHB or Part V is lower than for one directly provided through Dublin City Council,” said Lyons, at the meeting.

Private sector homes purchased under Part V – which gives a discount on the land value – came in on average at around €250,000 for a one-bedroom or around €360,000 for a two-bedroom home.

AHBs spent on average €300,000 to build a one-bedroom and €420,000 for a two-bedroom.

For the 12 schemes looked at, Dublin City Council spent on average €320,000 to build a one-bedroom and €510,000 on construction of a two-bedroom home.

It is important to put that additional spending into context, said Lyons. Some council projects are regeneration developments, which means extra community consultation.

There is no straightforward like-for-like comparison , he said. Part V provides a discount to the council and that is borne by the new residents across the rest of that complex, he said.

O’Riordáin, the local government consultant, said the council’s direct-build homes are often of higher quality, with more dual-aspect apartments – meaning they have windows on more than one side. And councils often provide community facilities like playgrounds and open spaces, he said.

The council uses higher-quality materials than a private sector developer would because it isn’t walking away, he said. It will manage the homes and incur costs if things go wrong with them.

“I was expecting the gap to be somewhat greater,” said O’Riordáin. “Because of the range of influences that impact on the delivery of housing by Dublin City Council.”

O’Riordáin said that carrying out regeneration projects – when the council demolishes existing social housing complexes and rebuilds new homes on the same site – can add to complexity and so too to costs.

The bureaucratic nature of the system the council has to use to draw down money to build also contributes to costs, he said.

It takes the council, on average, more than two yearsto get approval for a housing development, despite the official timeline of a year.

All stakeholders should recognise that time is money. “There is great complexity associated with the current approvals process,” he said.

One-off procurement means councils can’t benefit from the ongoing commercial arrangements that the private sector can, he said.

Dublin City Council is undertaking an internal review of its own processes, he said, and it has a new internal information-management system that will allow further scrutiny of it.

Digging Deeper

Fine Gael Councillor Naoise Ó Muirí said that the terms of reference of the analysis were to examine the council’s construction costs against those of the private sector.

The Part V data is a good way of doing that, he said. He would like to see a pie chart with a breakdown of each of the costs that accumulate to cause the council’s additional spending.

Social Democrats Councillor Mary Callaghan queried whether there was a difference in quality and life-cycle costs between the council and an approved housing body.

Independent Councillor Cieran Perry said he would be interested in getting to the bottom of the additional costs relating to the four-stage approvals process, which means that the council has to go forward and back to the Department to get funding or a housing development. “To try and calculate what sort of extra costs that imposes,” he said.

Councillors said they were happy to spend more on better-quality public housing.

“I think we should continue to build high-quality public housing,” said Independent 4 Change Councillor Pat Dunne. Rolling out standard designs for social housing projects all over Ireland could provide savings while not compromising on quality, he said.

Lyons said the main difference wasn’t to do with quality though. All the homes included in the study were A rated and the Part V homes were bigger than the council ones, he said. “Generally the community facilities are quite a small amount.”

The Part V homes were on average part of larger developments, which reduces the costs per home, and Dublin City Council worked with sites that many private-sector developers wouldn’t, he said.

But the main reason the council spent more on construction than either private developers or housing charities appears to arise from the funding and procurement processes, said Lyons.