Tom McEnaney: Builders of the world – this country needs you
Attracting back the estimated 100,000 builders who left the trade or the country after Covid and the boom, must be front and centre to any policy to end the emergency
The critical issue impacting the number of houses that can be built in Ireland is the number of builders.
The Government can make money available to incentivise house building, can lower the cost of building by measures including abolishing levies, and can reform the planning system to make it easier to get permission to build homes.
But without addressing the labour-supply constraints in the building sector not one additional home can be built in any one year.
We need to immediately and significantly increase the number of builders in Ireland if we are to have any hope of addressing the housing crisis, of completing the national development plan, and of meeting the Government’s retrofitting targets.
Specifically, we need to target those who left the industry after the boom and during the Covid-19 pandemic either to work in other professions or to work abroad.
One idea that would have an immediate effect would be for the Government to immediately introduce a special tax relief of €10,000/year for all new builders in areas where there are established shortages.
A €10,000 relief would be only €3,350 per person, per year plus marketing costs
For maximum impact on the provision of housing, this should only be applied to those new employees working on new homes or on the refurbishment of derelict homes.
The Government might also decide to extend it to workers on the National Retrofit Plan and the National Development Plan, although this would naturally dilute its effect on the provision of new housing.
According to the report on the ‘Analysis of Skills for Residential Construction & Retrofitting, 2023 to 2030’, commissioned by the Department of Further and Higher Education, Research, Innovation and Science, there is a significant shortage of builders at all levels.
It states that: “To deliver the Government’s targets in housing and retrofitting and to continue to engage in general repair and maintenance, it is estimated that 50,831 new entrants will have to be recruited in managerial, professional, skilled, and semi-skilled occupations over the period 2023-2030.”
This is just the additional construction workers needed for housing and retrofitting and does not include the additional 81,000 construction jobs per year the Government has estimated are necessary to complete the National Development Plan.
This report merely looks at the shortages of tradespeople. The Government report ‘Build 2040’ makes it clear the shortages are also at a professional level.
It states: “The CIF [Construction Industry Federation] has stated that their members are reporting difficulties in sourcing civil engineers and people with skills in “wet trades” (bricklayers, painters and plasterers).”
The ‘mammy factor’ is critical to success. We need the mothers of Ireland onside
According to the CSO, there are currently 163,300 construction workers in the Irish labour force, accounting for 6.4pc of the workforce. This is small compared to the 236,000 construction workers employed at the height of the Celtic Tiger years.
According to recent surveys of executives in large building companies, the situation is likely to get worse rather than better in the short to medium term.
A survey by Autodesk Construction Cloud concluded: “It’s [the skills shortage in the construction sector] a situation that many believe will worsen over the next decade, particularly when it comes to traditional trade skills.”
According to the Central Bank report, ‘Where are Ireland’s Construction Workers?’ most have moved abroad or into other professions in Ireland.
Although it is critical for government housing policy, retrofitting policy, and the National Development Plan to have significantly more construction workers available immediately and over the next four years, there exists no initiative in place to achieve this end.
Nor has there been any concrete proposal to address this issue by any political party, government body or other agency.
The aim of the tax-relief proposal is to attract the over 100,000 construction workers who have moved to other professions or have moved to other jurisdictions.
The initiative is simple, easy to understand, inexpensive, and politically attractive as it is a tax incentive aimed at ordinary construction workers earning at average €37,107 per year rather than developers or firms.
In order to be effective the builders’ relief initiative must be accompanied by an extensive marketing plan within and without Ireland. This plan should have a particular emphasis on social media. A well-developed PR plan for Irish and foreign media would also be useful.
As previous initiatives aimed at bringing Irish workers back home have established, the “mammy factor” is critical to success. We need the mothers of Ireland onside.
The cost to the Exchequer in income-tax forgone would be only €167m
The cost of the proposal is relatively modest. Income tax on €37,107 is at 20pc and amounts to €7,421. Assuming a single person aged 30 with no dependents, we can subtract personal tax credits of €3,550 to give us a net tax liability of €3,871, not including PRSI (€1,484) and Universal Social Charge (€917).
So a €10,000 relief would be only €3,350 per person, per year plus marketing costs.
If the scheme attracts 50,000 new construction workers, which would be a game-changer for the sector and an inestimable boon to the Irish economy, the cost to the Exchequer in income-tax forgone would be only €167m.
If we assume half of those attracted come from abroad, this would be offset by €23m in new Universal Social Charges, giving a net cost of €144m plus marketing.
But this assumes the builders’ relief scheme is a runaway success. It would also be a significant success were it to attract in 5,000 new workers. The cost in this case would be €12.25m plus marketing.
The scheme, to be effective in attracting workers from abroad must be for a minimum of five years, must exclude those who were working in the construction sector at the time the initiative is announced, and must be accompanied by a significant marketing campaign. Irrespective of its ultimate success, the scheme’s eye-catching nature has significant political advantages.
Once we accept the principle that we need to attract a lot more builders immediately the only question is how.
Government reports on the subject focus on apprenticeship schemes. While these are all very well, the most optimistic estimates suggest they would have a limited effect over a very long time. We need initiatives that work now or in the very short term.
The builders’ relief is one such proposal. We might also throw is a tools grant or other such incentive.
We can throw money at home buyers or at construction firms. We can improve the planning system and have any number of policy interventions. But without finding innovative and effective ways of attracting more building workers it is hard to see how those initiatives can generate more than a handful of new homes.
Tom McEnaney is a qualified civil engineer and a media consultant.