Studio apartments on the way with new planning rules
In June 2015, Alan Kelly the Minister for the Environment, sent a small warning to Dublin City Council, telling it not to put any “unreasonable or excessive” requirements in the city development plan which could damage the commercial viability of housing.
Just the next month in July, the council published its proposals for changes to the apartment standards for the development plan due to come into force at the end of 2016. This new category would be known as a studio, reducing the numbers of dual-aspect apartments, but retaining the overall size of apartments.
The City Council didn’t exactly get the message, therefore the Minister Alan Kelly, and his department decided to simply give them easier instructions in the form of the “Planning Guidelines on Design Standards for New Apartments”. These are now mandatory and it reduced the minimum size of apartments which could be built in Dublin city by 10-20% per cent.
But what was the reasoning behind both the warning letter and the guidelines? We believe it was to bring down the cost of apartment construction, and according to Minister Kelly, “the upward spiral of new planning requirements being specified by some, but not all, local authorities”.
Changes are aimed at bringing down apartment construction costs
This should have made everything very clear, the Department of the Environment in the past few weeks published its reasonings for introducing the guidelines, and stated it was “not supportive” of the council’s floor areas.
But is it the size of apartments that’s making them too expensive to build?
The department’s analysis puts the cost of building apartments under the city council’s development plan standards, as opposed to the department’s guidelines, at an extra €22,000 for a one-bedroom unit, €15,500 for a two-bedroom flat and for €23,000 for a three-bedroom unit.
The department does not break down this cost, which takes in the full amount of differences between the council’s standards and the department’s standards, including “dual-aspect” requirements and “lift-core ratios”.
These two standards are interlinked. A dual-aspect apartment is one with windows on two walls. The cost associated with more windows is not really to do with the extra glass, but far more to do with the “lift-core ratio”. The greater the number of dual-aspect apartments, the fewer the number of apartments reached by each lift. This is because a dual-aspect apartment, unless it is on the corner of the building will typically run from the front to the back of a block, cutting off internal corridors and so limiting the number of apartments that can be serviced by each “core” – the part of the building where lifts and stairs are located.
Lifts and stairs
While not providing a breakdown of the additional €20,000-odd costs per apartment, the department says “lifts and stairs are very expensive components” and limiting the number of apartments a lift can serve can have “significant cost implications”. THe main point that they are stating is that “larger floor areas on their own are not major inflators of cost”.
Property Industry Ireland (PII), a division of Ibec, gives a more explicit breakdown of where costs lie. An analysis by its architecture, project management and cost management consultants put the council’s requirement for 85 per cent dual-aspect apartments as costing €16,000 regardless of apartment size.
The additional cost of larger floor areas would be €8,000 for a one-bed, €13,000 for a two-bed and back down to €10,000 for a three-bed, it said.
The PII analysis also takes into account differences in ceiling height, adding €4,000-€7,000, and larger balcony sizes costing €1,000-€4,000, depending on the number of bedrooms. When the total extra requirements are added up it could mean additional cost of €32,000 to build each one-bed unit, €38,000 each two-bed and €34,000 each three-bed.
For its part the builders’ representatives group, the Construction Industry Federation, sets even higher costs on the gap between the council and the department’s standards. It puts an additional cost of €34,000 on a one-bed, €42,000 for a two-bed and a staggering €46,000 on a three-bed. The CIF completes the picture by estimating the total construction costs for a one-bedroom apartment within the council’s additional regulations at €182,000 for a one-bed, €280,000 for a two-bed and €317,000 for a three-bed. It stresses these are baseline costs and do not include site, development contributions, VAT or professional fees.
Where the CIF does concur with the PII is on what the single highest cost is – the council’s dual-aspect requirement adding €16,000 per apartment regardless of size.
What no one has factored into their assessments is that this is the area where the council had proposed significant change. In the draft development plan, it had proposed reducing the requirement for dual-aspect apartments to 50 per cent, which would put it directly on a par with the department’s new guidelines.
This change would, the council said, allow the construction of six apartments per lift on each floor. In its analysis, the department said six was about the practical limit, due to separate requirements on distances from apartments to fire escapes.
Law in force
But we are where we are. The council’s draft development plan’s standards are no longer relevant; the department’s guidelines are now the law. The point of this whole row was to cut costs and increase supply, so will what the department has put forward have the desired effect?
The CIF is unwilling to be definitive on this, saying it was impossible to give specific numbers of what could be built, saying only the lower the costs of construction, the quicker will be the recovery in levels of production. But it emphasises other factors which have a bearing on viability, most notably the availability of finance for both builders and buyers.
But if the CIF is shy about saying whether there is money to be made in the construction of apartments, the department is not. Its analysis says that under its new guidelines, a developer building a block of 10 apartments at a cost of €2.2 million could make a puny profit of €15,400 – a return of slightly less than 0.7 per cent.