The Kitchen Sink (and other cost savings)

Episode Transcript
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Rick Larkin (00:26):
One of the questions I get asked a lot by
anyone sane enough to notinvolve themselves in the
construction industry is whydoes it cost so much to build
housing?
There are many answers to thisquestion and, like everything,
the answers are a little bitmore complicated than we wish
them to be.
There is no shortage of people,however, who will tell you that
there is a simple answer or aquick fix, but those people are
either lying or just don't knowwhat they're talking about.

(00:48):
My guest today, on the otherhand, does know what he's
talking about.
Paul Mitchell is the co-founderof Mitchell McDermott, a firm
that specializes in constructionconsultancy and quantity
surveying.
Paul not only helps run thatfirm with his co-founder, but he
also donates his time to workon various reports setting out
the state of the constructionindustry, including sitting on
the working group of the housingcommission.

(01:09):
He doesn't have any quick fixes, because nobody does.
I hope you enjoy ourconversation.
If I was five years old, howwould you explain what a
quantity surveyor is?

Paul Mitchell (01:24):
Scary people with abacuses, because I suppose, in
simple terms, a quantity isvery.
There's two types.
There's one that works forclients and there's one that
works for a contractor.
And there are two completelydifferent jobs.
The one that works for a clientis like their financial
guardian for construction.
Their job is to give you theanswer before you start and to

(01:48):
make sure that you keep to thatanswer through the development
period.
When you come to me and you sayyou have a site and you say I'm
thinking of putting Resi on it,I will say what type?
And I will say well, here isthe different types and here's
how much they cost from abenchmark point of view.
So data is huge.
We will go through, we willwork with you and the architects

(02:11):
to say here's an efficientdesign, here's how you should be
doing it.
And then, because as a quantitysurveyor acting for a client,
that is where you have yourbiggest impact.
You're saving the millionsupfront, at concept stage, and
then, as you move through sketchdesign and detailed design,
you're saving the hundreds ofthousands.
And then, by the time you getto the construction stage, then

(02:33):
you're dealing with thecontractors countries there on
the other side, because youliterally are opposite ends of
the table and you're negotiatingwith that contractor.
As you move through all thetime, you're keeping to the
client's original plan, which atthis stage is three or four
years old.
So forecasting and startingwith the end in mind is the key

(02:54):
part of a PQS referred to whenthey work for a client and then,
as part of all of that, yousurvey quantities, you measure.
Correct.
Yeah, so I suppose that thetechnical part of the job it's a
mix.
When I did quantity when Iintend to quantity surveying and
I was either going to be aquantity surveyor or an engineer
, an engineer is a deep diveright.

(03:15):
They know the detail and haveto do everything to exacting
standards and with quantitiessurveying.
What I found when I did thecourse there's like 12 different
subjects, so there was businesssubjects, technical subjects
and financial subjects.
So when you were doing physicsyou were doing maths, you were
doing tech, drawing andmeasurement, right, but at the

(03:38):
same time you were doingaccounting and economics and
then you were doing the businessmanagement subjects, which is
fantastic because when you go inyou're going to get a wide
range of skills that you use,because as a PQS advising a
client, it's not just aboutmeasuring.
I can't remember if I've beeninterviewed when I was in my.
I was the first year at acollege working for PQS and I

(04:01):
got interviewed for what my jobwas and the title was not just a
matter of accounting bricks Along time ago now.
But so the measurement part isthe technical bit, but I think
the strategic advice that you'regiven a client and where to go
to is the most important bit.
So and then, if you're workingfor a contractor, you're very
much dealing with subcontractors, you are dealing with a lot of

(04:22):
measurement and you're typicallybased on site.
So two very different roles, tobe honest, even though both the
countries have errors.

So in your role, say, for Mitchell McDermott,
you're a full service firm right, so you could act for somebody
like me as a developer.
You could act for a bank youcould, but you wouldn't
typically work for a contractor,for a main contractor.

So actually we have it as a rule that we don't
ever work for a contractor justsimply because we end up in a
conflict of interest.
So like you can't be paying meone day and the following day
I'm sitting in a room with younegotiating from my client.
So that's a rule that we hadfrom day one.
But our business is basicallywe do three things.
About 45% of our work isproject management, About the

(05:10):
same is quantity surveying andwe have a bit that waxes and
wanes between 5% to 10% in themiddle which is acting for banks
in a due diligence and projectmanagement.

So it's part of the project management, then and I
know I don't want to spend allday talking about this because
we have a lot of stuff to getthrough, but the project
management end of that, that'swhere, like, a developer would
come to you who's a little bitlight, maybe on expertise, right
, so they're more of a promoteror a landowner and they say,
well, I want to get planningpermission for this and I want

(05:40):
to build it, but don'tnecessarily have any experience
doing that.
They come to you and you'd say,well, we can do that, we can
oversee it, we can oversee thetendering process for the main
contractor, we can oversee thequantity surveying services,
drawdowns from the bank, allthis stuff.
And you can do that all underthe one roof, correct?

yeah, and a lot of our projects will be
delivered.
Like our clients are overseas,so they have no boots on the
ground here at all.
So we will take it from aconcept right through to the end
to hand over and the defectsliability period at the end.
So you're still dealing withprojects that are finished.

Okay, so you then have a must have very broad
range of staff, like down toguys, maybe, who are starting
out, who are doing the actualmeasurement and saying there's a
million bricks and there'smeant to be 1.2 million, all the
way up to the guy who'sactually making the big decision
and saying, well, you know,don't use that.

or yeah, and it is a good mix.
We have 70 volunteers as wecurrently stand, and you know
can walk out Martyrs.
Yeah, yeah, but it's a goodgroup because when we set up,
you know, I spent 20 years inthe one business in effect,
through murders and acquisitions, and the last acquisition was

(06:52):
by an American corporate and Igrew up in an owner controlled
business, so I wanted to getback to that.
So, myself and AnthonyMcDermott set up from scratch in
March 2015,.
You know, things were still alittle bit bleak, but there were
, there were green shoots and wegrew quite rapidly up through,
you know, 2019, and then COVID,ukraine, et cetera, et cetera,

(07:14):
and we've, you know, remained atabout 70 people throughout that
period.
So, but yeah, you do need fromdirectors down to graduates, and
a big part of our business istraining, so you will not keep
people unless you are trainingthem.
It is not enough to pay someone.

What's your focus in the business?
Do you look at research or Imean, because I know that you
we're going to get on some ofthe research that the firm has
put out, because a lot of it'svery interesting.

But is that something that you personally
concentrate on, or is thereanother area that you're I think
across the business, I think wedo as a business, focus on data
because I think that is thelifeblood of proper decision
making.
But like each year we now.
We started off with one infocard.

(08:01):
Now we produce 12, which is, ifyou say it in our office,
around October time.
It's like mentioning theleading search, because people
have to put all their data intotwo sides of an A4 page, which
is never easy, but it meansthey're digestible.
Research piece is a small piece, a part of what we do, my piece

(08:22):
I'm heavily involved incommercial and residential.
I have a big interest inresidential.
I sit on the viability groupwithin the housing commission,
worked at PII.
I've done a lot of voluntarywork for the Society of Charits
of Ayers, so that's a realinterest of mine.
Yeah, dare I say, passion.

Yeah Well, it's a good thing to be passionate
about.
You brought up viability there.
Viability is a very hot topicin the development industry.
We have, on the one hand,people like me, others that are
screaming for several yearsabout how difficult it is to
construct departments.
You then have a group I'mtrying to think of a polite term

(09:05):
to describe them, but youprobably know who I'm talking
about.
There's really four of them whoI'm not going to name, but if
they deign to listen to thepodcast which I'm sure that they
won't they will readily be ableto identify themselves A cabal
of half academics.
I would describe them as theanti-vaxxers of the property

(09:25):
world, who claim that, in fact,there's no issued viability and
that you can build houses forbasically nothing and it's just
a big profit hungry game by biggreedy developers, which I
freely admit.
I am a big greedy developer, ormaybe just a greedy developer,
not very big.
You are an independent voice onthis.

(09:47):
You're not a developer.
You don't work for contractors.
You are going to be employed,regardless of whether there is a
lot of profit, a little bit ofprofit.
Your role is at the nexus ofall of this.
Is there a viability problemwith the part of construction in

(10:07):
Ireland.
Yes, thank you for that verysimple answer.

I have the same reaction when I hear people who
are given a significant amountof airtime, who do not actually
work in the industry.
It pains me because that iswhat the public listened to when
, in 2015, I wrote a report forProperty Industry Ireland on

(10:38):
apartment development because Ifollowed it we were involved in
a significant amount ofapartments through the boom 2007
, right Negativity around.
Remember the late Liam Carrolland Chewbacke's apartments, then
a bachelor's walk that was inthe rise in the late 90s, early
2000s.
That was 2007,.

(11:00):
The department brought outtheir guidelines and they said
which is great, here's theminimum sizes.
They have one fatal line out,which was these are minimum
standards.
City and county councils shouldimprove on these where possible
.
At that stage in 2008, wetracked all this, we measured it

(11:23):
all and it's out there for thepublic to see.
The councils then started tocheck it's Cork City Council,
dublin City Council, don LeroyReddown and others but out their
own guidelines.
They said no, we want the sizesto be 10% bigger.
You can only build threeapartments per core.
We want a 100 percent dualaspect.

(11:44):
I remember being on apartmentschemes in Sandyford at the time
, trying to redesign theseschemes, and they were
absolutely decimated.
That was 2008,.
And then the world stopped In2014,.
They began in 2015, set upMitchell McDermott and I was a

(12:06):
member of PII at the time.
They said our apartments areviable.
I said, well, here are theissues.
We did some costs and we showedthat the changes they made in
2008, which never were changed,got added all the significant
money to the apartments.

(12:26):
We met with politicians, we metwith councillors, we met with
county councils and planners andthrough all the talk that was
going on at the time, changeswere made.
Dual aspect what they did waswhich was really useful.
They repealed the 2008 changes,if you remember, and they
basically brought them back to2007, and then, a year later,

(12:49):
they introduced Bill to Rent asan asset class.
But during 2016, we gatheredsorry.
Working for the SCSI voluntarycapacity, I led the report on
apartment viability.
The SCSI had done the previousreport a year before on housing

(13:09):
and we did this Just for anyonewho's listening.

the SCSI is a society of Charter Surveyors in
Ireland, so they're kind of theumbrella group that handled the
certification and that ofsurveyors right across the
property spectrum, so they'rewell respected.

They're well respected because they are
independent.
They're not a lobby group,actually a charity.
But then we carried out thisreport and we said, okay, let's
take all this data from people,anonymise data from quantity
surveying firms for all theseapartment blocks.
And at the time we got about3,000 apartments back.
We analysed that and we did thedevelopment appraisal.

(13:47):
And I remember the day thereport was issued and the PR guy
within the SCSI came back andsaid the Irish Times are not
going to run with the storybecause they don't believe it.
Okay, no, wait 24 hours later,right.
So that day it was launched, wepresented it to the politicians
, then we and journalists andthen we presented it to the

(14:08):
members and this report for thefirst time put out site data,
construction costs, salesinformation, viability across a
range of apartment types, everypaper around.
With that, the Irish Times cameback and said oh sorry, put two
articles that week on it, andit was fantastic because it was

(14:31):
the first time.
But we did get from some of thequarters that you talked about.
Someone asked us to say can youput an image to show what do
you mean when you say a core inan apartment block?
It was just no.
And one of those commentatorscame back to say oh, look at the
report.
It's based on a scheme thatwouldn't get a fire cert and in

(14:52):
actual fact, deliberately, itwas an image from a scheme in
the United States, so itwouldn't reflect any scheme here
.

It was just so an excellent Without just to pause
you there, without you giving meany other information.
I know precisely the individual.

I'm not going to mention it.

I won't mention her on this podcast, but anyway.

But here's the thing right.
So at that point some greatthings happened.
Two great things happened.
We got the apartment regschanged, built rents came in as
a new asset class but, moreimportantly, international funds
came into the market.
Because I can remember at thetime doing scheme after scheme

(15:35):
that built a cell, viabilitychecks for an AMA that wouldn't
work.
I remember at the chap sittingacross the table for me was
currently inclined to minesaying how come apartments don't
work?

Right, and just on that, because I know where
you're going with that, and Ireally only bring this up
because last week I was at awedding and I'm sitting next to
somebody who I was trying toexplain this point to and,
rebecca, if you're listening, wenever came to an understanding.
But when you say you looked atthe viability check for, say,

(16:06):
regular apartments, right,that's building them to sell
them.
So it's building a bunch ofapartments and trying to get
people to buy them.
Ordinary purchasers we hearthis a lot and there's a whole
episode later planned about this, about this idea of these funds
are coming in.
They're buying apartments thatotherwise will be bought by
individuals.
So you were doing viabilitychecks and as part of that,

(16:28):
you're looking at the cost ofproducing the apartment and
you're looking at the end valueof the apartment, what they can
be sold for and the timeframe inwhich they can be sold, and the
result of that is that onedoesn't meet the other, right,
the revenue is not meeting thecost or go.
You do not have to be a chartersurveyor to figure out that
nobody is going to buildsomething in which they lose

(16:48):
money.
So that's where we were.
What year was that when youwere doing that stuff.
For now that was sort of 15, 16.

Yeah, and yeah, it was 15, 16, yeah, so even at
that point, which is okay.

Now it's seven, eight years ago and it feels
like a lifetime, but at the timethe property industry was on
the floor.
There wasn't a whole lot ofconstruction going on.
Tender prices were low,construction material prices
were a lot lower than they arenow.
A lot of the new regulationsaround fire and things that have
come recently were not presentthen.
Construction costs was a lotlower in 2015, and yet it still

(17:25):
did not make sense to buildthese things and to sell them.

Correct.
Yeah, and if you think about it, we were building apartments
back in the early 2000s orsomewhere.
Do you see a magic figure?
A 1650 square meter.
That figure now is between 24,2400 and 3000.

Yeah, I was gonna say probably closer to 3000 in
most cases.

Yeah, but depending on the scheme and the
report hopefully that will beissued soon has got all the data
.
And now for the latest report,which has just been issued to
the housing commission.
Has 14,000 apartments.
But the point was, prs came inor built a rent, and because it
was a completely different model, it was rent divided by yield

(18:12):
right, there's somehow magic.
It was able to happen, right,fantastic schemes were getting
built.
The things really startedhappening at that point were
built rent and the funds,because we couldn't get finance,
the banks weren't lendingenough and built sales isn't
viable.
So PRS or built a rent came in.

(18:33):
Built rent was the technicalplanning guidelines that are now
no longer.
Prs is the generic term for aprivate rental sector or we're
just renting units.
So these were, this was workingand we were producing units.
And it's the thing that Igrieves me a little bit is, as

(18:54):
soon as something is working, wechange it.
We cut built a rent, thepolitical pressure amounts.
We cut co-living, right, likehow many co-living schemes were
we ever going to build anyway?
Okay, and we need space for keyworkers, right, we need space

(19:14):
for everyone, and one of thethings that we've been talking
about recently is in terms ofsolutions.
What we actually need so we'vebeen cutting it all down right
so that everyone has to get areceipt is whether they can
afford it or not.
And what we actually need is weneed a graduated ladder of
housing typologies.
We need to be as a student, bein subsidized on-campus student

(19:39):
accommodation, we need to havepurpose-built student
accommodation that is subsidizedor not, but it needs to be
affordable.
And this is the key part in theearly stages of the curve.
How do we get affordability,viability and affordability two
completely different things.
How do we then move to a share,a professional share, co-living

(20:01):
, right Type arrangement, andhow do we then move to a PRS
apartment or cost rental oraffordable purchase?
And if we had those typologiesfor those and that kind of
housing ladder, we will cut outa lot of planning issues, both

(20:21):
in terms of planners makingmistakes, designers designing
the wrong things and developersdare I say it, putting forward
the wrong thing I see it all thetime the wrong schemes out
there.
There's a lot of schemes thatare stalled and some of those
are reasons for that.
But instead of kind of havingthis graduated typology in place

(20:43):
, we're actually cutting downthe typologies that we did put
in place and we're doing that asa reaction to outrage that's
based on nothing other than justdogma.

right that there shouldn't be.
Everyone should be living in areally large apartment, whether
they want to or not.
They shouldn't be high, theyshould be near everything,
everyone should have a parkingspace, but no one should have a
car.
You know we are.
It is schizophrenic the paceand the manner in which policy

(21:19):
around this stuff has been madeof late.
The media, I have to say, havea large part to play in that by
amplifying voices of people whodon't know what they're talking
about.
We've discussed that already.
But the politicians also have abit more responsibility around
this, because I do believe a lotof them understand what you're
saying.

(21:39):
But it is quite convenient toget on board with the Twitter
aty and just say the popularthing which is down with
department developments, but weneed housing.

I have a different view.

Okay.

I feel relatively more positive over the last
couple of years.

The last couple of years, or the last couple of
weeks, because the last coupleof years have, I think, been I
mean, look at all the thingsthat have happened.
Built to rent was cut.
That was an absolutelyridiculous decision that was
based on nothing other than, youknow, outrage.
Co-living was cut, ridiculousdecision that nobody could

(22:20):
justify with any kind of data orevidence.
Correct Building regulations inan inflationary environment,
continually being upgraded tothe point where we've seen
increases recently over twodifferent apartment blocks just
on sprinkling, costing 15,000euros more per apartment because

(22:41):
of needing to sprinkler thebasements, needing to have
telemetry to all the heads,needing to sprinkle the common
areas all this stuff that youcan't argue against.
It right, because then you'reanti-fire safety.
But there is a world thatexists without any of that.
That's perfectly safe, but weseem to live in a world when we

(23:01):
won't take the lessons of what'sgone in other countries and we
just can't come up with our own.
So I'm curious as to why youfeel optimism.
Over the last couple of years,the last couple of weeks, I
think, there's been a number ofthings actually a couple of
months even that have beenpositive.
But, expanding that a littlebit, what are you optimistic

(23:21):
about?

I think that.
So I agree with you in terms of, you know, bill to rent.
However, the bill to rent oneis like.
People got very upset over billto rent and I give a
presentation at the IPIconference last November and I
said there's not much differencebetween bill to rent and bill
to sell in the regulations.

(23:44):
Your mix is allowed.
You're allowed to go over 12apartments per core.
You're allowed to have lessbalconies.
Your average size doesn't haveto be 5% bigger.
Look at the schemes.
Look at the amount of bill torent schemes that are out there.
There aren't actually that.
Many People went because theydidn't like to be stuck with
this 15 year covenant, so theyjust got bill to sell planning

(24:07):
permissions and rented thebuildings otherwise known as PRS
.
So data in itself isn't reallygoing to hurt things.
What does hurt things is thelikes of Dublin City Council
saying 40% of apartmentbuildings have to be bill to
sell.
Now that is the death knell forapartments in Dublin.

(24:28):
That by itself, killseverything.

Well, I was going to say that you're right.
People didn't want to be tiedinto the rental thing because
they had the option of not doingit with relatively little
penalty.
But the reaction to thathappening was exactly that.
Dublin City Council saying 40%of apartments had to be bill to
sell, don't leave it right down.

(24:53):
And others now institutingconditions into the planning
permissions which I would sayare wholly illegal, requiring
you not to rent the property.
Now talk about infringement ofproperty rights.
If someone had the guts to godown the road of challenging
that, like I, just it will betossed and that has been the

(25:13):
reaction to it now this ideathat renting is bad and so we're
not going to build any rentalhousing, which says renters are
second class citizens who do notneed to be taken care of.
Not everybody wants to buy ahouse.
Not everybody is living hereforever.
Some people are coming here fora few years to work, or they're
coming here because they mettheir boyfriend or girlfriend

(25:34):
and they are going to leave andgo to wherever.
Why they felt the need to starttargeting renters under the
auspices of targeting landlords.
Right, because you hear a lotof this language is actually
about settled areas and aboutdisplaced populations and about
like it's not sustainable, whichis all code for we don't want

(25:57):
renters here, we want homeowners, because homeowners are better
people.

But, like, if you look at the way it's done, it's
like in the liberties.
You know they're brought inpurposeful student accommodation
, right, and the liberties wasan area that wasn't regenerated
during the boom, the last boom,and you went there and these
neighbors were up in arms andcomplaining about these students
, these noisy students that weregoing to come in and we're not
going to have this.
The planning got through and itwas pre the enlightenment of JR

(26:23):
rules and the owner, the guythat was the most kind of a
noisy neighbor, came up to theowner and he said look, when are
you actually going to movethese students in?
You know, he said they've beenin two months.
He said what?
So you know.
And next thing, this like sixor seven schemes now down, a new

(26:46):
market right For new market istransformed Fantastic.
Lovely shops, the distilleries,all the rest right down there.
But to wind back a secondbecause I've gone down to tenure
, but in terms of the positivethings that I think, so yeah,
those are negative.
Co-living was a miss, right.
I just think it's really poor,you know.
And going back to when you sayI'm independent, my clients are

(27:09):
developers.
So from that point of view,anyone listening to go well, he
would say that because he askedfor developers, so put that out
there.
But you know, we did our firstco-living scheme in Dunleary,
you know which is up there andbuilt.
We have another four on the way, but that's about all that has
planning and there will be nomore.

No, there will be no more.

And so I think that that was a miss and I think
hopefully some shape of thatwill come back into play at some
point again.
But if you look at, I supposewhat's been happening, if we
didn't have the change in termsof the LDA, if we didn't have
the AHB's cost rental right,this industry would have just

(27:52):
stalled right now, Like theamount of insolvency I would say
around departments games willbe very high because there
wasn't an alternative.
So that's very positive, it'sprovided an alternative, the
government and look, if you lookat the, we kind of track all
the changes that happen andthere are a myriad of things

(28:12):
that have come into play Allthese deposit scheme first, home
schemes, the most recent Starone, which is cost rental for
private developers.
So every few months there'ssomething new has been
introduced, to the point thatit's confusing, and so it's very
confusing now.
That's okay.
It's okay to be confused aboutif we've got measures that are
helping, like Cree, Conor orwhatever.

You can work it out .
If you're confused, you canfigure it out.
It's better than there beingjust a stroke.

So the only thing here construction costs are
going to continue to increaseand we did that study that we'll
probably talk about comparingthe costs with the other cities
in Europe for the governmentrace issue to publish it in May
and that, looked at it was avery deep dive inside into

(29:05):
construction costs here becausethe mantra is the same Ireland's
too expensive, rip off Ireland.
Construction costs are way toohigh and for the first time
we've reported that it's done areally, really deep dive, like
for comparison.

Yeah, so what you did there was you did this
traveling box.
So you designed and for anyonewill post a link to the report
because it is publicly availablein the show notes.
It's very long and it's verydetailed, but if you have an
interest in how this thingactually works and you want
actual facts, I encourage you togo and read it.
At least read the introductionand the summary, if you're not

(29:40):
going to read the odd 90 pagesof it, fair enough.
So you took the traveling box,which is an apartment you
designed, and you said let'sbuild this apartment in Dublin,
in somewhere in Birmingham.
You tricked in the Netherlandsand Berlin and Copenhagen right.
What did you find?

So it was fascinating because people have
tried to do this before andthere are other reports that are
out there and they comparethings at a high level and if
you look at those and in it wedid the list review and you'll
show that every report sayssomething different.
Yeah, absolutely.
So we actually took fourdifferent asset classes.
We took housing, scheme housing, urban apartments, suburban

(30:23):
apartments and purpose-builtstudent accommodation.
So it was a heavy lift becausewe did four asset classes across
five cities, so you had fourtraveling boxes.
Really.

We had four traveling boxes.

And so we had 20 development proposals.
Our cost comparison cutdevelopment proposals and so
when we took the traveling boxso I was fully so the purpose of
this report was the governmentto say, okay, go off, look at
those other four cities, comeback and tell us how we can
reduce construction costs.
That was the purpose of thereport and when we so, in our

(30:58):
methodology and in fairness theyput together a very good
steering group that a verydetailed, brief construction
costs only.
What we found was that when wetook the Irish apartment block
and we got a price by quantitiesof airs in the four other
cities, the cost difference wasplus or minus 4%.
It was negligible.
You would lose that in a tenderin the Irish market on the

(31:22):
exact same job to fivecontractors Quite easily.
Yeah, and I was kind of goinglike it took us there, kind of,
there was 6,000 lines of pricingin the apartment block, so it's
an actual apartment block inDublin that was tendered, so
we'd real cost out.
And the fact that everyone waspricing the traveling box cut
out inflation, cut outtechnological differences, cut

(31:45):
out building standarddifferences.
It was just priceless.

So this is down to you're specifying the brick, the
wall makeup, the type ofmechanical installation.
Everything is the same.
And how much does it cost inDenmark, how much does it cost
in Utrecht, how much does itcost in Dublin, et cetera.

So we did that.
So then I went whoa, that's,that's.
I was expecting all these othercities to be lower.
Why are they not lower?
So then our second pass, whichwas always planned, was that we
would go in and we say, okay,well, here, here is our Irish
product.
Now, Rick, you tell us whatyou're building for in Utrecht,
Copenhagen, Berlin and Berlin.

(32:22):
The costs came back from theother ricks between 17 and 30%
lower, and we were kind of goinghang on, you've just priced
6,000 lines of data.
It's taken us six months to getthrough, and now you're telling
us that this changes.

So I wasn't personally surprised when I read
that, and that's just becauseI've talked to people in other
countries about it and about thestandards that we have here.
And this is down to theMercedes and the Toyota.
Right, we're building, we'rebuilding a Mercedes, and in
Utrecht and in Denmark they'remaybe not building quite a

(33:02):
Mercedes.

Yeah, and it's in some cases.
We're not comparing apples withapples, right?
So what do you mean by that?
So in some cases, so if we gohere, we build an apartment and
you've got floor finishes, getyour full kitchen, you've got
your fitted wardrobes, you'vegot some form of joinery- All
right, okay, so they're notincluding a lot of that.

(33:26):
So some cases, so a lot of casesthey won't have joinery, they
won't have floor finishes.
In some cases it's extreme theydon't have a kitchen, so it's
called gray box living.
You walk in, there's a pendantin the middle of the room,
there's a few sockets right andoff you go.
Yeah.

Right, that's actually very common in the
rental market in Germany, andtheir apartments are rentable at
a kitchen and you bring yourown kitchen from.

My daughter is just moving to Manpulli next
week to start her arousal thisyear and there's no furniture.

I'm going to come.
Well, actually, ireland and theUK are the only two rental
markets in the world that supplyfurniture.
Yeah, in North America it isconsidered countless, in Canada
it's just absolutely not.
Like renting an apartment withfurniture would be considered
like.
Who are you?

But it's not that like.
So furniture is one thing right, which is in and out of schemes
here, but like they havedistrict heating right, their
sizes are different.
But to be honest with you,while we have prescriptive sizes
here, prescriptive minimumsizes, they don't.

Yeah, they have typically smaller apartments.
They're up and down.

And you'll see it in the report.
It's not actually becausethere's reports that are in the
Irish market published to sayour sizes are X square meters
percentage above.
We have found that some of themare higher than ours, but every
scheme was different and unlessyou're going off measuring
every single scheme inCopenhagen and Berlin.
But so basically one of the bigdifferences was scope.

(34:56):
Right, we did find thatmechanical electrical pricing
here was higher.
However, in a lot of theschemes in mainland Europe
you've got district heatingright Big steam pipe going down
center of street heating up yourapartment block where we have
to build boilers and PV unitsand heat pumps and so on.

(35:17):
So there was a difference thereand what we said was there was
specification and the one thingwe found was that the other
power, the other countries andcities, viewed Ireland so they
said you have got really highhealth and safety standards.
You've got higher energystandards, like the UK I think

(35:39):
it's just from the beginning ofthis year they weren't allowed
to put gas boiler in, so ourends up and all the other energy
requirements have been herehigher.
They're all creeping up to getto us.

So we're still creeping up.

Everyone is creeping up.
They were plateauing.
We'll come back to that.
But our health and safety, ourbeaker, how we sign off our
buildings right, is much higherhere than in the other cities
and I've seen this personallymyself in other places in terms
of health and safety.
So does that?
They don't put in non-sweets,things like that that are just

(36:18):
and when you in the report andwell, it's the long report there
are some tables that you canjust go to the graph and just go
.
Okay, they say it's this, andwhen we take the spec and scope
and apples and oranges thinginto account, we kind of get
back to where we are.
So from that point of view, wesaid to government, you can
reduce construction costs andour income by up to 14% if you

(36:40):
did the same thing.
But do you want to move into anapartment without a kitchen?
Right Now there was uproar andwe were getting all sorts of
emails to the office to say howday is just?
Rent is bad enough, can't evenafford the rent.
Now you're not even going togive me a kitchen, are you?

ridiculous.
But there's an argument to saywe're not really reducing the
construction costs, right, we'rejust passing it on to something
else, exactly.

And that's what we've called it.
We've called it deferred yeah,differred scope.
The tenant, right, carrie isgoing to come in here and still
going to have to go off and buyfurniture or go to IKEA.
But we actually looked at thisback in 2015 with PII gray box
living and I thought it was anoutrageous concept, right, and I
don't think it'll fit here.

(37:18):
But what this report did was tosay, for once and for all here
is the comparison, here is thedetail You're not being gouged
by Irish contractors ordevelopers, right, but you know,
construction cost is only 50%of the overall cost.
The report recommends that theother half, which is soft costs,

(37:41):
are examined also, and in arecent report, when we looked at
the apartment, we found that aminimum of 35% was going to the
state.

Yeah, the state doesn't really react very well
to that argument when it's beingrepeatedly made, as we have
done over the years as anindustry, to say I always come
back to VAT people don't quiterealize this.
They're buying a house that13.5% of what they're paying is

(38:13):
actually going directly to thestate.
So when people the help to buyscheme, for example, say it's
costing the government 30,000euros per unit, it absolutely is
basically free for thegovernment because they're
collecting revenue on the otherside.
That's essentially paying.
They're just giving the VATback to the customer who's
buying the house.

But the other thing that they come into play
which is something that we do,we can learn from is
standardization.
So when we got, we're terribleat that yeah we are terrible.
We are.
All developers are competingwith each other and we have no
standards.
Asim, we're always trying to dowhat the local authorities did
back in 2008.
And so when we got them toprice this scheme, they said why

(38:57):
do you have 16 different windowtypes in your apartments?
We said, look, 16 differentwindow types.
And so we've got four, becausethat's what you get off the end
of the convertible from thefactories and you can place them
any which way you want.
But we've got four of them.
And they said why do you have10 kilometers worth of this
really expensive steel channel?
And we said well, that holds upthe outer line of the wall.

(39:21):
We've got this brick facade andwe've got a cavity, so this big
angle has to carry the.
And then, okay, what do you do?
Well, we just have an insulatedclay block and we clad the
inside of a plasterboard.
We insulated and we plasteredon the outside, and that's our
wall.

Yeah, that's a huge difference.
Can we do that here, though,under building regular, because
I understand how the principleof that works and it works
absolutely fine, and actuallymost of those countries are all
much colder than Ireland, orisn't winter, and they have no
problems with it.
But I imagine that if you wentdown the road trying to do that
here, you'd face a lot ofopposition from local authority

(40:01):
building control, fire officeret cetera.

Any time you try and do anything new.
One of the things that we didtry and get into was building
regulations, which is verydifficult, because building
regulations doesn't say yourblock has to be 100 mil thick.
It says your U value on yourfacade needs to be X, which can
be achieved in many differentways.
Building regulations, energyand fire are all creeping up.

(40:26):
We have new fire rags about tocome into play in Ireland which
are going to change the way thatwe design our buildings.

They are very, very serious changes that are being
made.

They're serious changes and they will come into
play, and whilst I think thebiggest thing here is that the
biggest change that we have tomake is the changes that are
being made to design andstandards have to be
independently viability checkedand people will say they are.

(40:58):
But if we look at the newcompact housing design
guidelines that are going to becoming out for consultation in
four or five weeks time, whatextent of viability check has
been done on them?
Or is it up to charity groupsand like the SCSI to pull

(41:19):
members like me in to say canyou give your free time here to
do these checks, please, andissue this?

And one problem I see with that, the way things
have changed in the developmentmarket in recent years, is that
these changes are coming in,they invariably raise cost and
so, yeah, the SCSI and peoplelike you will go and you'll do
the work.
You'll say this is raising cost.
This is terrible.
But now that the market hasshifted to being majority

(41:49):
controlled by people like theLDA, people like the AHBs, who
are providing solely for publicservice housing public housing,
shall we call it, whether it'scost-rental, cost-sale, whatever
it's being 100% funded by thestate.
So there's no commercialpressure in the other direction

(42:13):
against these things from thatarm of the development market.
Because if the cost is 300,000euros to build a house or it's
400,000 euros to build a house,the house is needed and the
check gets written by thegovernment and then the money
gets paid, and so theregulations have no pushback on
them, apart from people wherethe economics do matter.
Me, you or we say well,actually we can't make that work

(42:38):
anymore, we can't build it ifit's going to be that price.
So maybe think about theregulations.
We're getting to be a smallerand smaller part of that
conversation as this sort ofpublic housing behemoth rises
around us, and I wonder a lotabout the regulation you talk
about viability testing.
I just see it as there's just awhole load of fiefdoms among

(43:02):
people who are writing theseregulations and they want this
and the fire guys want this, andit's just well, we get whatever
we want, down to the lightswitches or the socket switches.
I don't know if you know this,that the switches for the socket
used to be in the center andnow we've decided they have to
be on the outside.
I think we're the only countryin Europe that requires this, so
click, or whoever it is.

(43:22):
Make these socket covers, haveto make a separate, different
one for Ireland.
That's increased the cost ofthe socket.
It's just a small thing, right,but how many sockets are in an
apartment?
How many are in an apartmentbuilding?
All of these things that we do?
I mean it would be a dream tosay you can't change anything
unless you viability test it.

Yeah, but I think you're always going to get the
incremental change.

But it should be purposeful, right?
It should be Like sprinklers.
We were putting sprinklers intoapartments before they were
required.
Sprinklers are a good idea.
There's a fire, sprays water onit, puts fire out who can be
against that?
But to go from a situation whenthey weren't required to now,
we have to put telemetry to allof them and they have to be
physically inspected every year.
And there has to be acommercial system, because

(44:11):
there's a car park involved.
That requires I am not joking aswimming pool to be built
underneath the basement car parkto supply the thing with water,
like an enormous quantity ofwater, enormous pump sets
expense.
That is just for and it's likeI look at it and think why we
have all these car parks withcars in them with no sprinkler

(44:34):
systems, but now, all of asudden, there's an imperative
that there is fire suppressionin car parks, just because why?

And I think the other thing is that that's not
consistent across the board.
So we have regulations, butthen we have some fire officers
who say no, who?

can vary them at will, right yeah.

And they'll say I'm not going to give you your
fire cert.

Yeah, unless you do .
The only defense to that is goto Mbore Planola.
Take a year, by which point thebuilding will be ready.
Hopefully they will rule foryou, because the fire rags are
meant to be the law but maybethey won't.

Well, in a recent case they turned around and
said the fire officer is theexpert, not us.
And going with the fire officer, and there's a particular
county where you go, and I onlyhad a meeting last week and they
said this is what you're goingto have to do, but it's not in
the rags.
Yeah, yeah, I know that, butyou will not get a fire cert.
Yeah, and that's just anindividual.

(45:26):
Yeah, an individual that'ssaying I am taking an overly
conservative approach and youwill pay Because there isn't.
You know, like developers hereare an easy scapegoat in one way
, they are blamed all the time.
I think the thing has changed alittle bit over the last few
years.
I think people realize hang on,if we don't have developers and

(45:49):
if we don't have internationalfunds, we are not going to get
units.
Yeah, that doesn't get down toit.
I do honestly believe, and thisis why I'm more optimistic, I
do think, that the departmentand I do think the likes of the
LDA and councils are shiftingbig time in terms of saying no,

(46:11):
no, we know what the facts areand we know where you have to go
.
Cree, come on Right.
That's an acknowledgement thatapartments for sale don't are
not viable yeah, and thegovernment are going to put in
up to 144 grand per unit yeah,and the subvention of up to 150
grand per unit for cost rentallegislation is positive.

That's very positive and they should and I'm
all for it, they should becomplimented for those schemes.
They make a lot of sense.

Yeah, and the changes like only three weeks
ago.
They increased the salarylimits for cost rental from 59
grand up to 66 grand for doubleand that's net household income.

Right, that's net household income.
Yeah, so I mean that's, that'sa four.

Most people, I would say that's a 400 euro
increase in the allowable rent.
Yeah, and that makes becausewe're involved in a lot of cost
rental schemes and that makes aworld of difference.
But take it that in a costrental scheme, things that don't
work are a high percentage ofthree beds.
Take it that you have a recentplanning permission near where

(47:10):
you live that in, in conditionfor the planning that was
granted, said love your scheme,just change, you know, the three
by one up the level of threebeds to over 25%.
That kills cost rental.
Like moves like that.
Just set back a scheme andthink about judicial review,

(47:33):
think about planning, thinkabout all that that has to go
through right, yeah, so thatscheme is set back by two years
and we're running on inflationof five or 6% per annum, like
things like that are criminal.
And at the beginning of thisyear, when we issued our
infocards, we said we needed athree year emergency.
We needed a three yearemergency to bridge this gap and

(47:54):
we needed to do things that youwouldn't ordinarily do.
And there were things around arebate on that.
There were things aroundnailing planning contributions
for three years, great for thecommune, for 12 months,
fantastic, and other things that.
But we have to do those thingsnow, but some of those things

(48:14):
are happening.
They're happening on the publicside.
That's a venture that'shappening on the public side.
It's an interesting point youraised then about who's thinking
about the private developer now.

Well, this is the thing the private developer and
I say this a lot and peoplethink I'm just like whinging
which I am whinging we as anindustry are going extinct.
A lot of people got wiped outin the crash.
You can have your own opinionas to whether Naaman, how all
that was done, was right orwrong.
It was a very good disasterthat wiped a lot of people out.

(48:50):
People got old, people retired,people died.
Whenever I go to any of thelobby meetings or breakfast or
any of that stuff, I'minvariably one of the youngest
people in the room.
I'm not that young anymore.
I was.
When I first started going, Iwas a little kid and I'm sure
people were looking at me funny.

(49:11):
There is nobody getting intothe space of development now.

Yeah, part of our work with the Housing
Commission was I went and spoketo the German Housing Commission
.
I'll be interested to hear whatthat was like yeah, I had a two
hour conversation with a veryfriendly economist and he said
they spent two years working ina particular commission, which
is on the reduction ofconstruction costs, the

(49:37):
commissions for different things.
He said they spent two yearsworking with a very expert group
to come up with 78recommendations.
16 were implemented andconstruction costs went up.

I thought there was going to be a happy point of
that story.

Don't do happy Private priorities.
The interesting thing was thenthat two hours you could have
interchanged the word Germanywith Ireland all through.
Where they're at is zero profitcompanies, ahbs but zero profit

(50:20):
coming in.
What they do is they take land,the state get land, and then
they go out to developers, toyou, and they say, okay, give me
your best bid for this site,including your proposal.
It's a bit like the OdevanyGardens model.
You'll say, okay, I'm going togive you a third cost rental, a

(50:43):
quarter affordable purchase, abid for sale, and I'm going to
put the rest on the privatemarket.
The level of subvention thatthey have is huge.
It was a real eye-opener for mebecause it meant hang on, this
is they're struggling, theycan't meet their numbers.
The UK can't meet their numbers, the US can't meet their
numbers, they're throwing moneyat us.

(51:05):
The thing about it is when youlook at it, because all our
conversation today has beenaround viability.
When you then bring theaffordability piece into play,
that is when the realconversation starts, because you
might say an apartment, likewhen we were building apartments
in Sandyford back in the 2000stwo-bed apartments were been

(51:26):
sold for $550,000, $600,000,$630,000 back then.
Today's price is $430,000,$480,000, $510,000.

Which, adjusted, is half.

So why did it work before?
Like metrics have completelychanged.
Construction costs are notgoing to go down.
Site values will reducedepending on supply and demand.

But they're already low anyway.

They've reduced actually 39% on average since we
did our SCSI report.

Which makes a lot of sense, but we're seeing the
point now where site values areso low, particularly for
apartments sites, that it'salmost immaterial.
Land used to be a third of ourcost.

20 years ago.
Third of third of third.

Third of third right that's what we used to
have.
Now it's sort of 7% 8%.
So even if land price were tofall 50% from where they are now
, that's shaved 3%.

And you know, the big issue here is that
everybody that talks about theirown particular part of that 50%
.
You're 50% which isconstruction.
You have the other 50% of softcosts, which includes site.
When you look at that pie chart, each bit is only 5% to 10%.
So when you talk to the council, to the government, about

(52:45):
reducing planning contributions,how does that move the needle?
If we were to use planningcontributions by 50%, it changes
the needle by 2%.
Just the example you've givenon the site, that not sure if I
take it off that the developmentis just going to bid more on
the sites, which is a hazard, sothat that rebate would look to

(53:09):
kind of change that.
If you sell below a particularlevel, then you get your VAT.
If you don't, you don't.
There's ways around that, Ibelieve.
So that's the problem, the bit.
So therefore, people only wantto go after the chunky bit which
is construction costs which,for all the reasons we've talked
about, are going toincrementally climb.
They're going to wax and wanewith the market and tender price
levels and then we'll probablysee some adjustment at the
beginning of next year, but forthe most part we are just

(53:33):
incrementally going up.

And each of those construction costs in a way is
also a little bit of the piechart.
Like we can say 50% of it isconstruction, but actually 1% of
it is bricks and 2% of it issteel or whatever.
So you need all those things tofall and the only common
component of them is energy andlogistics.
But everything else isdifferent.
Right, this clay goes intobricks and there's ore goes into
steel and timber comes from.
So we like to just lump it intoone basket and say construction

(53:59):
costs, but there's a vastnumber of commodities involved
particularly nowadays and partof the hyperinflation that we
experienced.

For the first time we were analyzing buildings
, not on composite rates, as howmuch is to put a cube of
concrete in place.
It was where does the rebarcome from?
And why are we now trackingscrap steel prices in Turkey for
cars?
Because that's the raw materialthat's used to make rebar and
we get the rebar from there andthe rebar comes and that makes

(54:31):
our concrete.
So it's mind-boggling when youget into it right and you can
see there's an explosion in somefactory in America that makes
some little insulation chemicalthrough all our prices.
We were during COVID.
We actually were getting somany questions every day from
clients but when everything waschanging that we just started

(54:53):
issuing this weekly COVID update, which then became a kind of
death rate upgrade.
Our graphs had changed fromcost per square meter on
concrete and steel to debts andit was kind of crazy but it
showed the kind of global supplychain impact on construction

(55:14):
costs and that has settled downsomewhat.

Going into some weeks has been kicking off a
little bit again.

There's opportunism, but the one thing
that we haven't touched on andwe'll do that over the next half
hour is availability andresources.
Now, the whole world is shortof resources, right, but we are
short of contractors, we'reshort of suppliers, and what
happens when, hopefully in theshort term, ukraine situation

(55:45):
ceases and we get into a rebuildsituation?
Right, we've already lost a lotof Eastern European workers
back to Europe post COVID.
There are all these otherthings coming down the track,
and we've got developers whowent through the crash before,
like the developers you talkedabout, and they're more
conservative now, right, andthey're not going to take that

(56:07):
chance.

Absolutely not going to take that.
They're not going to take andthey're not going to be less
because the funding won't bethere for them to take those
chances either.
You touched on costs andshortages of resources and one
of the things I had down herewas to talk to you about MMC
modern methods of constructionwhich most people take to mean

(56:28):
modular building.
I'm going to give you our takeon modular right.
So we've looked at this.
Every which way we in the pastup to now have made the
bathrooms in all of ourapartment buildings have been
modular right.
They've been bathroom pods thatwere made in near Limerick and
then in Nina, steel frame.

(56:49):
Perfectly nice bathroom all thesame.
I don't know how many of.
We bought thousands of them andthey worked fine.
We then went and started doingthe plant rooms in the
apartments modularly.
So very similar Again, they'renot tiled but they have sort of
a plastic cladding inside.
We do all the mechanical heatrecovery and the heat pump.

(57:14):
We do it all the same in allthe apartments.
It's hot water tank wouldencourage heat pump all in
little box.
Modular, got delivered, workedfine.
We then thought, okay, well,let's take it a step further and
see, can we do the kitchens?
No, can't do it, too manydifferent types of kitchen.
So the kitchens are alreadytechnically manufactured off
site.
But we were kind of hoping wecould get the whole thing in one

(57:35):
piece and drop it in save time,no too difficult.
So then I started just gettingcurious and looking into modular
construction around the world,and the only place I found that
seems to be doing it fairlyreliably is in Asia.
So in Japan, in Malaysia, inplaces like this, particularly
in Japan, they have a huge issuewith labor there can't get any.

(57:56):
So they have come up withmodular buildings and they work
well, they're all the same.
Every floor is exactly the same, with the whole way up.
The UK they're doing it.
John Fleming, I think, isprobably, if not the biggest,
one of the biggest peoplethey're doing modular
construction.
But in Ireland it just doesn'tseem to fly Like it's hard to

(58:20):
even make precast work.
From what we've seen, it's likeyou can do it, but it actually
doesn't cost any less.
In some cases it costs more andsay, ok, well, your time on
site is less, so there's asafety benefit to that, but
other than that not really muchof a saving.
Tell me I'm wrong.
Tell me you have the solution.

You're wrong, I have the solution.

OK.

No, you have to edit the bit out.
I think there's been a lot ofmovement and MMC is a broad
church and it's become a bit ofa buzzword over the last couple
years it has, and I should saythat it has become a thing that
people throw out to be likethat's politically.

You hear a lot, well, we'll reduce construction
costs, we'll just use MMCbecause it'll be cheaper.
And you say, well, will it be?
Don't worry about that.
Look at these magic beans andvote for me.
But yeah, so it's a buzzword,but it has been an area of focus
for a lot of people who areattracted to the idea of making
things in a factory.

(59:18):
The same way, cars are made ina factory, if we're going to
build a Mercedes, we might aswell build a factory.
What we do right now is buildit in a factory outside Kevin,
who works here with us on thecost control side.
He of us says what we do is webuild houses in a factory with
no roof and every single houseis different, and we have like
35 people coming along going doit this way, do it that way.

(59:40):
I don't like it and that's howwe operate our business, which
is, you would say, on Facebook,crazy, but we haven't seen
another, better option.

And, like the, there's a fantastic report that
was produced by the WorldEconomic Forum for four or five
years old, looking at theconstruction industry.
It's the best report I've seenBecause it addresses all of the
issues that people becausepeople talk about it.
It's such a fragmented industry.
Right Got the average number ofworkers in a construction

(01:00:11):
company in Ireland.
It's like single digits.
Yeah, it's crazy.
Right Now, pit every one ofthem against each other and get
them to bid for a prototypeevery time.

Rick Larkin (01:00:20):
Yeah, it's a prototype.

Paul Mitchell (01:00:22):
You're not building a Mercedes, you're
building a mix between aMercedes, a portion of Fiesta,
right Maybe, and maybe that willchange during the course.
So we're trying to tie up aprototype with a factory process
, right, and that gives rise tochallenges.

(01:00:43):
So in the UK the report wasmodernize or die, right Probably
four or five years ago.
It was like all about MMC andmainly modular.
And that moniker came out lastyear to say modernize and die
because of the amount ofinsolvency in modularity.

But that has been crazy to see the amount of
insolvency.

But it's not like if I have a factory producing
tautas and I'm spitting them outthe door right and then
suddenly the whole world says Idon't want tautas, what do you
do?
You have to shut your factorydown.
You can't keep it going andpile up tautas in the car park
right.
And that's effectively whatwe're trying to do.
And in order to do it, welooked at this previously and we

(01:01:27):
actually we looked at a schemehere of 900 student beds, one
scheme, modular, and we went toSweden with the developer.
We saw the modules beingconstructed onsite and it
literally was two bedrooms,corridor in the middle did 40
foot containers, lego, legoright, and then Prander Fassad.

(01:01:50):
We then left with that developerfrom Sweden and we traveled to
China.
We spent a week on a very hotfactory floor trying to see how
we would put Irish B-car onthese boxes that were being
built in China.
And you talk about fire.
So then, for every box that wasdifferent, we'd send France

(01:02:11):
Burnett, spend a hundred grandright and the regulatory risk.
And I said it to thisparticular client.
I said I don't want to besitting here with 400 units,
sitting out there in a ship inDublin port with someone saying
no no, I put them, put them inand then I'll see whether I'll
approve them or not.

(01:02:32):
So you need buy-in from allsorts to be able to do that.
So that is modular.
Nmc is is very tricky.
It was done here.
Apartment buildings were builthere in the boom by Mr Fleming.
Yeah, that are still standingtoday.
But the MMC, more so, is allabout just different

(01:02:52):
technologies.
It's more about they call itabout 2D and 3D.
So it's about getting a flatpanel.
So I might get my wall built inheavy gauge, light gauge steel
right.
So I just throw up the wall.
It's vertical.
It might come with its windows.
Yeah, we're currently doing thesidings, office building, which

(01:03:12):
is really interesting to lookat because we are now just
lifting.
So we've put the building inconcrete and now we're putting
up the brick, the precast, theglazing, all in panels.
They're just going up.
So that's MMC designed threeyears ago.
So the future for MMC?

(01:03:33):
I think it shouldn't be, weshouldn't be negative about it.
It's not a panacea and but itwill be more 2D than 3D.
Well, chains have done modular,part of the shelter and hotel
is modular.

Yeah.
Well, it makes a lot of sensefor hotels, right, because they
want it to be exactly the same.

But and I can't remember which hotel group it
was, but their findings on itwas it was slightly more
expensive, it was in the singledigits more expensive
construction wise, but it savedon time.
If you're in a time sensitivezone and you've just bought a
site in Manhattan and you haveto get that revenue flown on
your IRRs under pressure, itmakes sense.

(01:04:13):
If you're doing an apartmentscheme that may have three to
six months flex in it, right,and we've looked at it, we've
looked at it here for otherstudent schemes.
But I think, and when you lookat any of the time lapse videos
and you see a house been built,you see all these workers go
around the site, right, they'reall digging and putting down
cables and trenches andfoundations right, this takes

(01:04:35):
forever on this 60 second video.
And then that's the house goneup Because it's just delivered
to site.
And then the other 24 seconds,right, is them putting the roof
on, putting the gluing the threebits together, right.
So it's part of a solution, butit's not an overall solution

(01:04:56):
Because a lot of the work thatyou see.

The house just comes to site.
But somebody made that house aswell, and that was human beings
.
There weren't robots that didthat.

Exactly.

I've kept you here more than an hour so far, so
apologies for that.

I've probably kept you here more than an hour,
I mean I find it veryinteresting.

I actually think it's going to be very
interesting.
I think people are going tolike it.
Carrie is here letting us test.

You still awake, still awake.

You're still awake.

No, I saw the head hit the table.
Extra coffee you have to editthat out later on.

Other things that you're working on.
I know that you have thisreport coming out and maybe you
can't talk about it the sprawl,the cost of sprawl.
You probably can't give me thedetails as to what you found,
but you are looking into how allthat works and I find that very
interesting because we lastepisode we talked to Colin
McCarthy and he was making thepoint about sprawl and how the

(01:05:51):
horse bolted a bit.
We've already done the sprawl,so now let's not make the
mistake of layering bullshittransport solutions like rail on
top of it just to makeourselves feel better.
You're doing a report that'slooking at more nuanced costs
around sprawl whether it'shappened or whether we're going

(01:06:11):
to do it, but there are realcosts to it.

Absolutely.
One of the things we found ourreport is a high level report
because to try and understandthe cost of sprawl is a one to
two year exercise.
First off, you say, well, lookfirst pass, is there an issue?
Right?
So in 2006, european EconomicReport about Ireland to say that
it was probably the worst casesof sprawl in Europe.

(01:06:39):
One of the things that I didn'tknow up until a few months ago
was that they fly an airplaneover the entire Europe at low
altitude every two years andphotograph the landmass.
Really, if you look up KoreanC-O-R-I-N-E maps, you can

(01:07:02):
actually go in to any part ofIreland and see the change in
the different time periods.
But you can go in and see thedifference between 2006 and 2012
.
Some of them are wider thanothers and that's just publicly
available.
Publicly it's online and you goin and you can see where land

(01:07:22):
they check forestation,deforestation, commercial,
residential.
So one of the things that we'redoing is we've had a lot of
interaction with the publicutility companies.
What is to come up with atheoretical scenario and say, if

(01:07:43):
we built at a denser level andwe didn't have to connect to
this town over here, how muchwould we save?
And figures yet to be finalised, but there is a cost.
Now there's some fascinatingreports.
Actually in Canada, one of theplaces they looked at, they've
actually worked out the capitalcost of urban sprawl per head

(01:08:04):
and the operational cost perhead and the cost of commuting
to your health.
The thesis has been done over inIreland the cost of accidents,
the environmental cost.
We know without doing the oneto two year research that it
costs money.
Ireland has an infrastructuredeficit all over the place

(01:08:29):
Electricity, sewage, water andwe're a country that started off
in a very large bog with trailsand over the last few thousand
years we've termed the trailsand we've all these roads and
therefore we're a dispersedcountry and then we've tried to
connect all these people withelectricity and water.

(01:08:49):
So we have this extra cost.
But so I think cost is bold, sohorse is bolded, but we can
bring the horse back into thecity.

We can stop bringing the horse out into the
field with the open gate.
That will be a start.
I don't think we're making muchprogress on this.

Yeah, again, I'm going to be positive here for a
second.
If you look at, the changesthat are out to the government
come out of consultation, butthis new compact living which
had been put out there by theRAI, it's been put out there by
some of the private developersand got some negative feedback
in some quarters.

What was the negative feedback?
The negative feedback was whenStephen Garvey said that we
should make the back gardens alittle bit smaller, and people
went absolutely nuts though bythat which totally nuanced
reaction to what was veryreasonable.
Yeah, and people in my mind gotthe wrong.
That was taken up wrong as thesethings often, do I mean, if you

(01:09:50):
listened to just 10 seconds ofwhat he said, you would realise
that that was totally out ofcontext, like this.
Not, he wasn't saying peopleshouldn't have gardens.
He was saying maybe if we justshrink it a little bit.

Yeah, and it was just.
We're living with standardsthat are very old right and we
need we have a moral obligationand an environmental obligation
to make better use of our land.
We are putting in three andfour bed semi-detached houses
that are not occupied by four orfive people respectively.

(01:10:23):
Our average household size is2.7.
We have a huge issue around ourhousing need, demand analysis
and the mismatch with the censuslike that's a whole other
conversation that I think youdiscussed a little bit with John
Downey, but you know so.

(01:10:43):
When the regulations changedthat we don't want to build 30
units per hectare anymore,dwellings per hectare, they've
changed it to now we want tobuild 50.
So then that meant thedevelopers had to try and build
department blocks out in Lueckinor Manus or Kilcock, where
they're not needed, wherethey're, people don't want, they
don't commute out that long far.
They want a three bed semi-Dwith the garden.

(01:11:05):
So those viability issues.
And next thing, you found thatthe houses were actually
subventing the apartments andnow there's a new typologies,
which are really welcome to beput out there, about a mix of
duplexes, houses and so on.
That's what we need and it goesback to the point about having
a graduated ladder of housingtypologies, which doesn't stop

(01:11:29):
at your house.
It's your trade down, it's yoursenior living, it's your
supported housing, it's yournursing home, it's your final
home.
But I think some of that stuffis going to be fascinating.
But again, this is the pointwhere we could make an absolute
mistake.
This is like 2008 and on ourwebsite you'll see apartments,

(01:11:49):
how we were repeating themistakes of the past, where we
catalog from 2007 up to lastyear.
And this is right at the pointwhere you go oh no, don't put a
new typology in place that's nottested.
Is it going to produce morepeople?
Is it actually going to be moredense or is it just going to be
more dense because of theamount of units?

(01:12:11):
And there's a nuance in thereand we need to be very careful
with that nuance and that's whyyou need quantity severe to know
that you're schemes.

Well, that feels like a natural place to release
you from the prison of this room.
But before you go, I askeverybody about the magic wand
If you could change one thing.
Now some people have tried tohijack this by saying, well, I
changed this and because of thatI changed this One thing.
Yeah, you can literally just goin to tomorrow, to the doll or

(01:12:42):
to wherever building control,and you can say we're not doing
this anymore.

I'd add 200 people to unbored Hanola 200
people to unbored.

So planners and inspectors and people like that,
clear out the planning backlog.
Yeah, yeah, it doesn't seemlike a bad idea.

It's a simple idea.

Yeah, I think they are trying to do that.
I mean, I was on a panel awhile ago with somebody from the
Department of Housing and shehad said that there was a huge
recruitment drive for BoredHanola, but they're really
struggling to get people.

We have other parts of the world that aren't
experiencing what we'reexperiencing.
Our thing that we said in partof our three year emergency that
we said in January was go tothe UK, get planning consultants
and second them in.
Pay them.
Think about the money we'relosing.
We actually worked out the costof judicial reviews.

(01:13:40):
Money we're losing is so paythe planners 20 grand more,
right, what is 20 grand in ourcrisis Zip?
Yeah, three year emergency.
If the government think aboutit as an emergency, we will do
things like we did in COVID lotsof cycle tracks that we never

(01:14:01):
would have had if we didn't haveCOVID or people working at home
.
Do things like that Temporary.
Now I know there's always anissue with temporary measures.
Put those in place.
Put three year emergency, dealwith it.
Knock it on the head becausethe deficit when you and I are
talking in three or four yearstime, we will talk about the
deficit of this time period andthe mistakes made now.

Yeah, and the reaction to that.
Paul, thanks very much forcoming down, for giving us your
time.
I know that it wasn't justtoday.
We had our warm up call and youdid a lot of research too, and
it's been very helpful for mebecause I feel like I've learned
a lot, particularly from thereports that you guys write.
And you do all that, like yousay, on a voluntary basis.

(01:14:46):
You're not paid for it, so itis a real benefit to the
industry and it's a benefit toanyone else who wants to learn
about costs and learn about howthe development industry works.
So I want to thank you, notonly for today but for that work
that you and your colleaguesare doing.
And, yeah, let's see come backin three years and see how the
three year emergency is going.
Very good, the build is hostedby me, rick Larkin.

(01:15:11):
Carrie Fernandez produced thisepisode.
Original music was written byCass.
If you have a suggestion forthe show or know someone we
should interview, please let meknow by email, rick at
thebillpodcastcom.
Thanks for listening.

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