Property insights by Johnny Gannon, Fair Deal Property
In May 2026, Ireland received two separate institutional warnings about our housing crisis that we simply cannot afford to ignore. The European Investment Bank told Ireland that planning delays are destroying project economics. The European Parliament's Special Committee on the Housing Crisis told Ireland it is not utilising €43 billion in available EU funding. Together, these warnings describe a system failing on two fronts simultaneously: it cannot process capital efficiently, and even if it could, the underlying infrastructure and planning systems would prevent that capital from being converted into homes.
Consider a recent apartment scheme in Galway that our team worked with. The project was initially scoped for 18 months from planning approval to completion. The developer budgeted construction finance at approximately seven per cent interest, anticipated commencement within six months of approval, and modelled profit margins at roughly 15 per cent of gross development value.
Planning approval took four years instead of the anticipated six months. By the time the project commenced, ECB rate rises had pushed development finance to 10 per cent interest. Construction cost inflation, driven by labour shortages and material prices, increased total build costs by 28 per cent above initial estimates. The project timeline extended to 28 months in the ground due to labour availability constraints.
The mathematics became brutal. The €2.2 million in additional financing costs alone, combined with €1.8 million in construction cost overruns, compressed profit margins from 15 per cent to five per cent. For a developer, that margin compression transforms a viable project into a marginal one that is simply not worth the risk.
This is not a theoretical problem. This is what happens across Galway and Ireland repeatedly.
The EIB vice-president Ioannis Tsakiris stated plainly: projects fail not due to lack of finance or demand, but because planning delays and regulatory uncertainty erode investor confidence and destroy project economics. We see this exact dynamic play out with every significant scheme we advise on.
But here's where it becomes more complex. Even if this apartment scheme had moved faster through planning, it would have faced another constraint: Úisce Éireann water capacity.
The utility company has publicly stated it can currently support only 35,000 new homes annually without further investment, against a national target of 50,000 homes per year. The government is clearly making promises that it is in no position to keep.
In Galway, this manifests as wastewater treatment capacity limitations in specific areas. We have worked with developers on schemes where planning was secured but who then discovered that water infrastructure upgrades were required before development could commence. Those upgrades, typically managed through Úisce Éireann's capital programme, add 12 to 24 months to project timelines and €400,000 to €800,000 to project costs depending on scale and location.
Add that to planning delays, add that to construction finance now running at 10 per cent, and you understand why schemes across Ireland are being delayed or shelved entirely. This is not a funding problem. The EIB and other lenders are willing to provide capital. The problem is that the cost of deploying that capital has become economically unsustainable.
Meanwhile, the European Parliament delegation discovered that Ireland has not fully deployed €43 billion in available EU funding mechanisms designated for housing and infrastructure investment.
Irene Tinagli, chair of the Special Committee on the Housing Crisis, was direct in her assessment: "Ireland hasn't been capable in these years to leverage all the European Union instruments."
The Recovery and Resilience Facility, Cohesion Funds, and Social Funds contain substantial resources. Yet accessing this capital requires navigating European bureaucracy, demonstrating project viability, and coordinating between Irish authorities and Brussels. Many Irish local authorities and housing bodies lack the technical capacity to manage these applications effectively.
The result? Capital sits undeployed while housing shortages persist. This is a failure of system design and execution, not a reflection of insufficient resources existing.
From our position in the market, we observe several specific dynamics:
First, planning uncertainty is crushing confidence. We have seen developers delay site acquisitions because they cannot predict with reasonable certainty how long planning will require. One local developer we work with budgets three years for planning on complex schemes as a baseline, not an exception. That means a project must cover three additional years of land holding costs, interest on acquisition finance, and management overhead before construction even begins.
Second, construction costs remain stubbornly elevated. Labour costs in skilled trades have risen over 25 per cent since 2022. Material costs continue to rise, and energy costs are once again tracking higher due to geopolitical uncertainties A four-bedroom semidetached home budgeted at €280,000 in 2021 now costs €360,000 to build in 2026.
Third, financing costs have compressed margins to breaking point. A developer who could work profitably at six per cent development finance in 2022 cannot work at 10 per cent in 2026. The spread matters enormously. On a €20 million project financed over three years, the difference between six per cent and 10 per cent interest represents €2.4 million, typically more than the entire expected profit on the scheme.
Fourth, first-time buyers and investors are being priced out of affordability. House prices in Galway have risen 7.8 per cent in the 12 months to February 2026. The median home price nationally reached €390,000. A couple with a combined income of €70,000 can access €280,000 in mortgage lending (under Central Bank rules ), Even accounting for additional savings of €40,000 that buyer can afford approximately €320,000. The affordability gap is real and growing.
The EIB and European Parliament are not being critical for political effect. They are identifying genuine constraints requiring genuine action.
Ireland must simultaneously:
Accelerate planning. Projects should receive first decisions within 12 months for straightforward applications, 18 months maximum for complex schemes. Predictability matters as much as speed.
Deploy EU funding immediately. Create dedicated teams in the Department of Housing to access Recovery and Resilience Facility, Cohesion Funds, and Social Fund resources. Target €5 billion in EU capital deployment within 18 months.
Invest in infrastructure ahead of demand. Úisce Éireann requires €2 billion in additional capital to expand capacity to 50,000 homes annually. That investment should commence now, not after projects are constrained.
Improve development viability. Tax incentives for developers, accelerated depreciation allowances, or reduced development levies could restore profit margins to sustainable levels.
For policymakers: The institutional warnings from Brussels are not advisory. They represent serious concern from the institutions controlling capital access. They should be treated as such.
Ireland's housing crisis will not be solved by capital alone. It will not be solved by planning reform alone. It will not be solved by infrastructure investment alone. It requires simultaneous action on all fronts, capital deployment, planning acceleration, infrastructure investment, and viability restoration.
The EIB and European Parliament have delivered their diagnosis. The resources exist. The demand exists. The only question is whether Ireland will act with urgency. The evidence suggests that without immediate systemic intervention, housing delivery will continue to disappoint, affordability will continue to deteriorate, and the crisis will deepen.
That outcome is avoidable. But only if action begins now. For more visit www.fairdealproperty.ie
Johnny Gannon is the founder of Fair Deal Property Auctioneers and Estate Agents. For advice on buying or selling in the Galway market, contact Fair Deal Property on 091 394593.
