Good morning everyone.1Thank you very much for the invitation to take part in today’s conference.The theme of the conference – around housing infrastructure – is particularly relevant to the current challenges facing the Irish economy. Overall, the economy has been performing well, despite a number of external shocks in recent years, amid an increasingly uncertain global environment. Domestic economic activity has continued to expand, employment is at record highs and household incomes have grown strongly.In that context, a key challenge for public policy is ensuring that our infrastructure keeps up with the pace of expansion in the economy.And, within infrastructure, one of the main priorities from a public policy perspective is housing. So, in my remarks today, I will cover our economic assessment of the key factors that will shape the housing system’s ability to increase supply. The scars of the financial crisis on the housing marketBefore looking ahead, though, let me start by looking back.Over the past two decades, the Irish housing market has undergone extraordinary volatility, having experienced one of the most amplified boom-bust cycles globally.The financial crisis left persistent scars on the construction sector. Many companies went out of business and many construction workers emigrated from Ireland following the crash. This boom-bust cycle has had long-lasting implications for housing supply, with housing output as a share of national income in Ireland being significantly below the euro area average for a prolonged period (Chart 1).Amid a strong recovery of the broader economy, and faster than expected population growth, this has led to a persistent mismatch between underlying demand for, and supply of, housing.Between 2011 and 2022, our population grew by 12.2%, whereas the housing stock grew by only 5.9%.Chart 1: Housing investment as a share of national income has been below the euro-area average for a prolonged periodSource: CSO and Eurostat.Chart 2: House prices and rents have both risen faster than household incomes over the past decadeSource: CSO and Central Bank of Ireland calculations.Notes: Last observation house prices & rents 2024Q2, disposable income per household 2024Q1.This mismatch between demand and supply for housing has resulted in growing housing affordability challenges. House prices and rents have risen faster than incomes over the past decade, stretching household budgets (Chart 2). This has clear societal and distributional implications, as evidenced by the degree of public policy focus devoted to housing in recent years.And it also has macroeconomic and aggregate implications. For example, the availability of housing, at affordable prices and in locations close to economic activity, can affect employers’ ability to attract labour. Indeed, when we go around the country talking to businesses, one of the recurring themes we hear relates to the challenges that they can face in attracting employees because of housing constraints.This, in turn, is affecting their decisions on where and how to grow and invest.So, in addition to the clear impact on individuals, the imbalance between housing demand and supply can constrain the economy’s ability to expand, with adverse implications for the sustainable growth in living standards. Of course, when looking at more recent developments, it is important to highlight the significant increase in housing output we have seen in recent years, and the policy action that has accompanied it. In 2022 and 2023, housing completions increased rapidly, beyond the expectations of many, including previous Central Bank forecasts.Completions rose from close to 20,000 a year between 2019-2021 to around 33,000 in 2023 (Chart 3), approaching previous estimates of the underlying annual demand for housing units. Chart 3: There has been a significant increase in housing supply since 2019Source: CSO.Chart 4: Irish government housing expenditure is high relative to the rest of the euro areaSource: Eurostat, CSO.This has been despite the rapid increase in interest rates over the period, which typically weighs on residential investment.The increase in housing supply has taken place in the context of a growing policy focus on housing delivery, across a range of dimensions.From a fiscal perspective, for example, State spending on housing is now among the highest in Europe relative to the size of the economy (Chart 4). And it is as high, proportionately, as it was in 2008, having increased from €1.2bn to €6.5bn since 2015.Estimating future housing needsLet me now look ahead.In an in-depth piece of analysis that we published last week, we updated our estimates of the underlying demand for housing, given demographic trends.And, by that, I don’t just mean demand for places to buy. I mean demand for places to live.Our updated estimates take into account two factors.First, updated population projections by the Central Statistics Office (CSO), which have been revised upwards, including in light of the latest Census. Second, the degree of “pent-up” demand for housing that has accumulated over the past decade. One way of illustrating that “pent-up” demand is through trends in household formation at younger age groups. Since the 2011 Census, younger people have recorded the largest declines in household formation rates (‘headship’), reversing the previous upward trend evident up to then (Chart 5). Chart 5: Younger people have seen a particularly sharp fall in the headship rate between 2011 and 2022Source: CSOThis is consistent with younger people either living in their family home or living with others, as opposed to forming an independent household, for longer than previously.  It is an illustration of how “pent up” demand manifests in practice.So, taking into account both future population growth and the gradual unwinding of pent-up demand, our updated estimate is that around 52,000 new homes per year are required out to the middle of this century.This is an increase of around 20,000 homes relative to last year’s output. Of course, and I do want to emphasise that, there is uncertainty around these estimates. They rely on assumptions, for example on future population growth or average household size, which are uncertain.It is important that these assumptions are revisited periodically, in light of incoming data, especially to the extent that estimates such as these are then translated into targets for public policy. But, the main message still holds: there is a need to further scale up housing supply in the years ahead. The heart of the challenge: viability of construction at scaleHow can Ireland’s housing system transition towards such a level of supply? There is no doubt that this is a challenge for public policy, with no easy or quick fix. One key theme underpins our assessment: at its core, the underlying challenge relates to the housing system’s ability to produce viable housing projects at the required scale. Put differently, there is a disconnect between the cost of producing housing units by the construction sector at scale and the (sale or rental) prices that are within the reach of Irish households, given income levels. From our analysis, we have identified three broad policy areas that can bolster viability at greater scale. Firstly, the availability of zoned and serviced land. This is the starting point for construction and it entails a key role for the State. Capital spending can ensure that the supporting infrastructure – water, sewerage, energy and transport – is provided on time, at scale, and in locations closest to housing demand. Secondly, the planning process and the system of housing and building regulation. The role of delays, objections, and bottlenecks in the planning system is hard to quantify or to compare internationally. But, the evidence suggests that a more efficient system could both unlock additional supply and reduce construction costs.Our analysis also points to a strong pattern of increased supply in the regions surrounding Dublin, but with weaker supply nearer to the city centre and other urban centres such as Cork and Galway (Chart 6). Chart 6: The increase in supply has been higher in commuter belts than in urban centres Source: CSO and Central Bank calculations.Note: Annual completions by region divided by 2022 Census estimates of households in permanent dwellings (a proxy for the housing stock). Regions defined as follows: Dublin City given as Dublin City Council area separately. Dublin Non-City (Fingal, DLR, South County); GDA (Meath, Kildare, Wicklow); Other Urban (Galway, Cork, Limerick, Waterford).From an environmental, as well as an infrastructure, perspective, it is important that policy tackles any frictions that may be slowing down the development of housing nearer to employment centres, including higher-density housing. Thirdly, productivity and capacity of the construction sector. Our analysis suggests that Ireland’s construction sector has had investment levels below European peers for more than a decade (Chart 7). And the structure of the sector – consisting of a large number of small businesses – means that construction cannot easily benefit from economies of scale.  Of course some of these trends reflect the long shadow of the crisis. But the outcome is that value-added per hour worked in the sector is lower compared to other euro area countries (Chart 8).Policy can therefore look to incentivise greater scale and productivity in the sector, including through enhanced adoption of modern construction methods or standardisation of designs.This is particularly relevant given that the broader economy is at full employment, and meaningful addition of new workers may prove a challenge. Policy measures in these three areas would reinforce each other and, collectively, help to support greater viability at scale.Chart 7: The capital stock of the construction sector is further below pre-crisis levels than peersSource: Eurostat.Chart 8: Construction sector productivity is below comparator euro area countriesSource: Eurostat and Central Bank calculations.Assessing the financing of needs for future housing supplyLet me now turn to the question of financing of higher levels of housing development. Financing, of course, is a necessary ingredient for construction activity. But, it is also important to put its role into context. Additional financing alone cannot rectify housing imbalances, in the absence of measures to address the structural factors that I mentioned above.Indeed, as I’ll set out, our own analysis suggests that finance availability is not the main factor constraining housing supply.With that context, let me zoom in on the question of financing.The first key theme I want to highlight is the importance of diversity. The nature of financing in recent years has been very different compared to the pre-2007 housing boom.Back then, much of the financing took the form of debt funding provided by the domestic banking sector. By contrast, financing flows underpinning development in recent years have exhibited a healthy diversity. Indeed, it is surprisingly difficult to estimate with precision the quantum and sources of financing of housing development underpinning the units supplied in 2023. In part, that is because some of this financing is stemming from sources not regulated by the Central Bank. So this is an area where we want to continue to enhance our understanding in the years ahead. While there is uncertainty, we estimate that around €10bn-€11bn of development financing likely underpinned the housing supplied in 2023. The State, the domestic banking sector, and non-bank financial intermediaries, all played important roles. This diversification, with a key role played by inflows of debt and equity from overseas, is a strength from a macro-financial perspective.It enables risk sharing and can reduce the sensitivity of financing to the domestic economic cycle.So it will be essential to maintain that diversity to support a sustainable transition towards higher levels of supply. Looking ahead, we estimate that, over and above the continuation of financing underpinning last year’s delivery, an additional €6.5bn-€7bn would be required for an additional 20,000 units. While the State has an important role to play, most of the additional financing will need to stem from private – domestic and international – sources. The State has already increased capital spending on housing substantially.Its role will remain important, especially in meeting the needs of those at the lower end of the income distribution.But, given the diversity of housing needs across the population, most additional delivery will stem from a privately financed and developed market.Is there capacity to provide these additional financial flows? Assuming that the State maintains the same proportion in financing as in 2023 delivery, we estimate additional private sector capacity would need to be in the region of €5bn. The precise split between debt and equity depends on assumptions, such as the average loan-to-cost associated with development finance. But a reasonable split would be an additional €3bn in debt financing and €2bn in equity financing.Recent announcements from the domestic banks suggest up to €1.25bn of additional loan financing commitments are already in train. In addition, we estimate that undrawn, and already committed, debt funding within risk appetite at bank and non-bank lenders, is around €1bn-€2bn. Beyond this, certain cross-border debt financing flows, particularly important for larger-scale developments, are another potential financing source not captured in our data.Together, these sources can make a substantial contribution towards increased debt financing. Our assessment overall is that, within sustainable underwriting parameters, there is scope for the financial system to make a substantial contribution towards higher levels of housing output. The issue of equity financing presents more of a challenge. We estimate that up to €2bn of additional equity finance, above and beyond that committed to underpin 2023 supply, will be required every year to deliver an additional 20,000 homes. Equity can come from developers’ own balance sheets, or from external sources, which could be domestic in nature, or more likely will require foreign inflows from specialist funds and other institutional investors. Our engagement with sectoral experts suggests that, for a range of reasons, access to sufficient equity finance remains a difficulty, particularly for smaller construction and development businesses. This does take me back to the three fundamental areas of policy focus outlined above, because progress in these areas can support viability and, in turn, facilitate access to financing flows. For example, greater availability of zoned and serviced land as well as more certain and speedier planning decisions would help unlock additional equity financing, including from abroad.Indeed, from an international perspective, the Dublin market continues to offer competitive yields with respect to other European locations.Similarly, a more productive construction sector, operating at greater scale, would be in better position to build or access equity finance, which would in turn also facilitate access to debt finance. Still, certain policy measures may also support financial flows. These could relate, for example, to initiatives that ‘crowd-in’ additional equity through State participation.  An example here is ISIF’s model of using its capital to act as a catalyst for attracting third-party co-investment.Importance of resilience in financeLet me now turn to the importance of the resilience in finance, a dimension that is particularly close to our own mandate at the Central Bank. If there is one lesson from the past 20 years, it is that additional housing supply cannot – and should not – be based on shaky financing foundations. The costs of that, for society as a whole, are too large.  We can see that from the persistent scars that the crisis left on the construction sector, and the associated societal and economic implications of this period of undersupply.Equally, though, it is important to recognise that measures to safeguard resilience in finance entail both benefits and costs.And, on that, let me be clear. Our approach, at the Central Bank, is not to aim for resilience at any cost. That would not serve society well.Our aim is to balance the benefits and costs of our policy interventions carefully. Let me explain this with reference to the different macro-prudential measures that we have introduced over the past decade to safeguard resilience of finance.These are not aimed specifically at development finance, but they do interact with the housing market in different ways.Most directly, of course, the mortgage measures aim to ensure sustainable lending standards in the mortgage market. These measures have placed limits on the share of new lending at higher levels of household indebtedness since 2015.In 2022, we concluded an in-depth review of our framework. As part of that, we made a targeted adjustment to the calibration of the measures, which took effect at the start of last year. Our refreshed calibration was an outcome of our assessment of the evolving balance between the benefits and costs of the measures. Our judgement was that, due to the ongoing imbalance between supply and demand in the housing market, the costs of the measures at our previous calibration had grown over time, even if their benefits remained substantial. Our move from an LTI of 3.5 to 4 for First Time Buyers was an acknowledgement of the need to ease the costs of the measures, while safeguarding their resilience benefits for the mortgage and housing system.Indeed, lending at very high levels of indebtedness continues to remain well below the peaks that we saw in the mid-2000s (Chart 9), even following our refreshed recalibration. Chart 9: The share of new lending at high levels of indebtedness is much lower than in the mid-2000sSource: Central Bank of Ireland.Note: High indebtedness relates to lending at loan-to-income multiples greater than 4. FTB and SSB lending for property purchase or self-build purposes. Excludes equity release, top-up and refinance mortgages.In terms of bank resilience, our macroprudential and microprudential frameworks aim to ensure that the banking system is better able to absorb – rather than amplify – adverse shocks. This, in turn, enables an sustainable flow of financing to support economic activity. Again, the calibration of the macroprudential capital buffers for banks, also reviewed in-depth in 2022, aims to balance the macroeconomic benefits of greater resilience, against the macroeconomic costs of higher capital levels through the impact on lending. More recently, we introduced measures for property funds authorised in Ireland.In part, this recognises the evolving nature of financing of the domestic property market, with a greater role for non-bank finance.While the vast majority of property funds invest in commercial buildings – for example, offices, retail or logistics – there has also been growth in residential assets by these funds. Our measures aim to safeguard the resilience of this growing form of financial intermediation, by guarding against leverage-related vulnerabilities.Again, in calibrating these measures, we were careful to balance their benefits and costs. Indeed, the feedback we received from our consultation process was an important input in strengthening our understanding of that balance. In response to that feedback, we incorporated a longer implementation period for the measures; we excluded social housing funds, given their characteristics; and we made a methodological adjustment for funds pursuing development activity. We are now monitoring closely the implementation of these measures and are focused on assessing their impact.It is positive that, over the course of 2023, we continued seeing net flows into property funds, including those invested in residential property, and we have also seen continued demand to launch new funds over the course of 2023 and 2024. Although inflows were lower than in 2022, consistent with global trends given the rise in interest rates, this points to continued willingness of investors to provide capital.ConclusionHousing is a multi-faceted policy challenge, comprising a blend of public and private activity. Ultimately, the capacity of the housing system to meet underlying demographic needs is a key driver of sustainable growth in living standards, now and in the future.Our assessment is that policy focus should be in the areas of supply-side reform. These include enabling infrastructure, regulation and planning processes, and measures to support productivity and capacity in the construction sector. Of course, transitioning to the delivery of an additional 20,000 housing units a year also has broader macroeconomic implications, which need to be managed carefully.This is especially the case in the current context of the economy operating at capacity, and amid broader needs for infrastructure investment. Measures that support the productivity of the construction sector can ease some of the macro-economic trade-offs. However, these trade-offs also underscore why any additional capital spending to support housing supply needs to be prioritised within the overall envelope of the Governments’ net spending rule.Thank you for your attention. [1] These remarks build heavily on an Article published in the Central Bank’s Quarterly Bulletin 3, 2024. I am particularly grateful to Thomas Conefrey, Fergal McCann and Martin O’Brien for leading that work. And to Patrick Haran for his help with these remarks.

Good morning everyone.1Thank you very much for the invitation to take part in today’s conference.The theme of the conference – around housing infrastructure – is particularly relevant to the current challenges facing the Irish economy. Overall, the economy has been performing well, despite a number of external shocks in recent years, amid an increasingly uncertain global environment. Domestic economic activity has continued to expand, employment is at record highs and household incomes have grown strongly.In that context, a key challenge for public policy is ensuring that our infrastructure keeps up with the pace of expansion in the economy.And, within infrastructure, one of the main priorities from a public policy perspective is housing. So, in my remarks today, I will cover our economic assessment of the key factors that will shape the housing system’s ability to increase supply. The scars of the financial crisis on the housing marketBefore looking ahead, though, let me start by looking back.Over the past two decades, the Irish housing market has undergone extraordinary volatility, having experienced one of the most amplified boom-bust cycles globally.The financial crisis left persistent scars on the construction sector. Many companies went out of business and many construction workers emigrated from Ireland following the crash. This boom-bust cycle has had long-lasting implications for housing supply, with housing output as a share of national income in Ireland being significantly below the euro area average for a prolonged period (Chart 1).Amid a strong recovery of the broader economy, and faster than expected population growth, this has led to a persistent mismatch between underlying demand for, and supply of, housing.Between 2011 and 2022, our population grew by 12.2%, whereas the housing stock grew by only 5.9%.Chart 1: Housing investment as a share of national income has been below the euro-area average for a prolonged periodSource: CSO and Eurostat.Chart 2: House prices and rents have both risen faster than household incomes over the past decadeSource: CSO and Central Bank of Ireland calculations.Notes: Last observation house prices & rents 2024Q2, disposable income per household 2024Q1.This mismatch between demand and supply for housing has resulted in growing housing affordability challenges. House prices and rents have risen faster than incomes over the past decade, stretching household budgets (Chart 2). This has clear societal and distributional implications, as evidenced by the degree of public policy focus devoted to housing in recent years.And it also has macroeconomic and aggregate implications. For example, the availability of housing, at affordable prices and in locations close to economic activity, can affect employers’ ability to attract labour. Indeed, when we go around the country talking to businesses, one of the recurring themes we hear relates to the challenges that they can face in attracting employees because of housing constraints.This, in turn, is affecting their decisions on where and how to grow and invest.So, in addition to the clear impact on individuals, the imbalance between housing demand and supply can constrain the economy’s ability to expand, with adverse implications for the sustainable growth in living standards. Of course, when looking at more recent developments, it is important to highlight the significant increase in housing output we have seen in recent years, and the policy action that has accompanied it. In 2022 and 2023, housing completions increased rapidly, beyond the expectations of many, including previous Central Bank forecasts.Completions rose from close to 20,000 a year between 2019-2021 to around 33,000 in 2023 (Chart 3), approaching previous estimates of the underlying annual demand for housing units. Chart 3: There has been a significant increase in housing supply since 2019Source: CSO.Chart 4: Irish government housing expenditure is high relative to the rest of the euro areaSource: Eurostat, CSO.This has been despite the rapid increase in interest rates over the period, which typically weighs on residential investment.The increase in housing supply has taken place in the context of a growing policy focus on housing delivery, across a range of dimensions.From a fiscal perspective, for example, State spending on housing is now among the highest in Europe relative to the size of the economy (Chart 4). And it is as high, proportionately, as it was in 2008, having increased from €1.2bn to €6.5bn since 2015.Estimating future housing needsLet me now look ahead.In an in-depth piece of analysis that we published last week, we updated our estimates of the underlying demand for housing, given demographic trends.And, by that, I don’t just mean demand for places to buy. I mean demand for places to live.Our updated estimates take into account two factors.First, updated population projections by the Central Statistics Office (CSO), which have been revised upwards, including in light of the latest Census. Second, the degree of “pent-up” demand for housing that has accumulated over the past decade. One way of illustrating that “pent-up” demand is through trends in household formation at younger age groups. Since the 2011 Census, younger people have recorded the largest declines in household formation rates (‘headship’), reversing the previous upward trend evident up to then (Chart 5). Chart 5: Younger people have seen a particularly sharp fall in the headship rate between 2011 and 2022Source: CSOThis is consistent with younger people either living in their family home or living with others, as opposed to forming an independent household, for longer than previously.  It is an illustration of how “pent up” demand manifests in practice.So, taking into account both future population growth and the gradual unwinding of pent-up demand, our updated estimate is that around 52,000 new homes per year are required out to the middle of this century.This is an increase of around 20,000 homes relative to last year’s output. Of course, and I do want to emphasise that, there is uncertainty around these estimates. They rely on assumptions, for example on future population growth or average household size, which are uncertain.It is important that these assumptions are revisited periodically, in light of incoming data, especially to the extent that estimates such as these are then translated into targets for public policy. But, the main message still holds: there is a need to further scale up housing supply in the years ahead. The heart of the challenge: viability of construction at scaleHow can Ireland’s housing system transition towards such a level of supply? There is no doubt that this is a challenge for public policy, with no easy or quick fix. One key theme underpins our assessment: at its core, the underlying challenge relates to the housing system’s ability to produce viable housing projects at the required scale. Put differently, there is a disconnect between the cost of producing housing units by the construction sector at scale and the (sale or rental) prices that are within the reach of Irish households, given income levels. From our analysis, we have identified three broad policy areas that can bolster viability at greater scale. Firstly, the availability of zoned and serviced land. This is the starting point for construction and it entails a key role for the State. Capital spending can ensure that the supporting infrastructure – water, sewerage, energy and transport – is provided on time, at scale, and in locations closest to housing demand. Secondly, the planning process and the system of housing and building regulation. The role of delays, objections, and bottlenecks in the planning system is hard to quantify or to compare internationally. But, the evidence suggests that a more efficient system could both unlock additional supply and reduce construction costs.Our analysis also points to a strong pattern of increased supply in the regions surrounding Dublin, but with weaker supply nearer to the city centre and other urban centres such as Cork and Galway (Chart 6). Chart 6: The increase in supply has been higher in commuter belts than in urban centres Source: CSO and Central Bank calculations.Note: Annual completions by region divided by 2022 Census estimates of households in permanent dwellings (a proxy for the housing stock). Regions defined as follows: Dublin City given as Dublin City Council area separately. Dublin Non-City (Fingal, DLR, South County); GDA (Meath, Kildare, Wicklow); Other Urban (Galway, Cork, Limerick, Waterford).From an environmental, as well as an infrastructure, perspective, it is important that policy tackles any frictions that may be slowing down the development of housing nearer to employment centres, including higher-density housing. Thirdly, productivity and capacity of the construction sector. Our analysis suggests that Ireland’s construction sector has had investment levels below European peers for more than a decade (Chart 7). And the structure of the sector – consisting of a large number of small businesses – means that construction cannot easily benefit from economies of scale.  Of course some of these trends reflect the long shadow of the crisis. But the outcome is that value-added per hour worked in the sector is lower compared to other euro area countries (Chart 8).Policy can therefore look to incentivise greater scale and productivity in the sector, including through enhanced adoption of modern construction methods or standardisation of designs.This is particularly relevant given that the broader economy is at full employment, and meaningful addition of new workers may prove a challenge. Policy measures in these three areas would reinforce each other and, collectively, help to support greater viability at scale.Chart 7: The capital stock of the construction sector is further below pre-crisis levels than peersSource: Eurostat.Chart 8: Construction sector productivity is below comparator euro area countriesSource: Eurostat and Central Bank calculations.Assessing the financing of needs for future housing supplyLet me now turn to the question of financing of higher levels of housing development. Financing, of course, is a necessary ingredient for construction activity. But, it is also important to put its role into context. Additional financing alone cannot rectify housing imbalances, in the absence of measures to address the structural factors that I mentioned above.Indeed, as I’ll set out, our own analysis suggests that finance availability is not the main factor constraining housing supply.With that context, let me zoom in on the question of financing.The first key theme I want to highlight is the importance of diversity. The nature of financing in recent years has been very different compared to the pre-2007 housing boom.Back then, much of the financing took the form of debt funding provided by the domestic banking sector. By contrast, financing flows underpinning development in recent years have exhibited a healthy diversity. Indeed, it is surprisingly difficult to estimate with precision the quantum and sources of financing of housing development underpinning the units supplied in 2023. In part, that is because some of this financing is stemming from sources not regulated by the Central Bank. So this is an area where we want to continue to enhance our understanding in the years ahead. While there is uncertainty, we estimate that around €10bn-€11bn of development financing likely underpinned the housing supplied in 2023. The State, the domestic banking sector, and non-bank financial intermediaries, all played important roles. This diversification, with a key role played by inflows of debt and equity from overseas, is a strength from a macro-financial perspective.It enables risk sharing and can reduce the sensitivity of financing to the domestic economic cycle.So it will be essential to maintain that diversity to support a sustainable transition towards higher levels of supply. Looking ahead, we estimate that, over and above the continuation of financing underpinning last year’s delivery, an additional €6.5bn-€7bn would be required for an additional 20,000 units. While the State has an important role to play, most of the additional financing will need to stem from private – domestic and international – sources. The State has already increased capital spending on housing substantially.Its role will remain important, especially in meeting the needs of those at the lower end of the income distribution.But, given the diversity of housing needs across the population, most additional delivery will stem from a privately financed and developed market.Is there capacity to provide these additional financial flows? Assuming that the State maintains the same proportion in financing as in 2023 delivery, we estimate additional private sector capacity would need to be in the region of €5bn. The precise split between debt and equity depends on assumptions, such as the average loan-to-cost associated with development finance. But a reasonable split would be an additional €3bn in debt financing and €2bn in equity financing.Recent announcements from the domestic banks suggest up to €1.25bn of additional loan financing commitments are already in train. In addition, we estimate that undrawn, and already committed, debt funding within risk appetite at bank and non-bank lenders, is around €1bn-€2bn. Beyond this, certain cross-border debt financing flows, particularly important for larger-scale developments, are another potential financing source not captured in our data.Together, these sources can make a substantial contribution towards increased debt financing. Our assessment overall is that, within sustainable underwriting parameters, there is scope for the financial system to make a substantial contribution towards higher levels of housing output. The issue of equity financing presents more of a challenge. We estimate that up to €2bn of additional equity finance, above and beyond that committed to underpin 2023 supply, will be required every year to deliver an additional 20,000 homes. Equity can come from developers’ own balance sheets, or from external sources, which could be domestic in nature, or more likely will require foreign inflows from specialist funds and other institutional investors. Our engagement with sectoral experts suggests that, for a range of reasons, access to sufficient equity finance remains a difficulty, particularly for smaller construction and development businesses. This does take me back to the three fundamental areas of policy focus outlined above, because progress in these areas can support viability and, in turn, facilitate access to financing flows. For example, greater availability of zoned and serviced land as well as more certain and speedier planning decisions would help unlock additional equity financing, including from abroad.Indeed, from an international perspective, the Dublin market continues to offer competitive yields with respect to other European locations.Similarly, a more productive construction sector, operating at greater scale, would be in better position to build or access equity finance, which would in turn also facilitate access to debt finance. Still, certain policy measures may also support financial flows. These could relate, for example, to initiatives that ‘crowd-in’ additional equity through State participation.  An example here is ISIF’s model of using its capital to act as a catalyst for attracting third-party co-investment.Importance of resilience in financeLet me now turn to the importance of the resilience in finance, a dimension that is particularly close to our own mandate at the Central Bank. If there is one lesson from the past 20 years, it is that additional housing supply cannot – and should not – be based on shaky financing foundations. The costs of that, for society as a whole, are too large.  We can see that from the persistent scars that the crisis left on the construction sector, and the associated societal and economic implications of this period of undersupply.Equally, though, it is important to recognise that measures to safeguard resilience in finance entail both benefits and costs.And, on that, let me be clear. Our approach, at the Central Bank, is not to aim for resilience at any cost. That would not serve society well.Our aim is to balance the benefits and costs of our policy interventions carefully. Let me explain this with reference to the different macro-prudential measures that we have introduced over the past decade to safeguard resilience of finance.These are not aimed specifically at development finance, but they do interact with the housing market in different ways.Most directly, of course, the mortgage measures aim to ensure sustainable lending standards in the mortgage market. These measures have placed limits on the share of new lending at higher levels of household indebtedness since 2015.In 2022, we concluded an in-depth review of our framework. As part of that, we made a targeted adjustment to the calibration of the measures, which took effect at the start of last year. Our refreshed calibration was an outcome of our assessment of the evolving balance between the benefits and costs of the measures. Our judgement was that, due to the ongoing imbalance between supply and demand in the housing market, the costs of the measures at our previous calibration had grown over time, even if their benefits remained substantial. Our move from an LTI of 3.5 to 4 for First Time Buyers was an acknowledgement of the need to ease the costs of the measures, while safeguarding their resilience benefits for the mortgage and housing system.Indeed, lending at very high levels of indebtedness continues to remain well below the peaks that we saw in the mid-2000s (Chart 9), even following our refreshed recalibration. Chart 9: The share of new lending at high levels of indebtedness is much lower than in the mid-2000sSource: Central Bank of Ireland.Note: High indebtedness relates to lending at loan-to-income multiples greater than 4. FTB and SSB lending for property purchase or self-build purposes. Excludes equity release, top-up and refinance mortgages.In terms of bank resilience, our macroprudential and microprudential frameworks aim to ensure that the banking system is better able to absorb – rather than amplify – adverse shocks. This, in turn, enables an sustainable flow of financing to support economic activity. Again, the calibration of the macroprudential capital buffers for banks, also reviewed in-depth in 2022, aims to balance the macroeconomic benefits of greater resilience, against the macroeconomic costs of higher capital levels through the impact on lending. More recently, we introduced measures for property funds authorised in Ireland.In part, this recognises the evolving nature of financing of the domestic property market, with a greater role for non-bank finance.While the vast majority of property funds invest in commercial buildings – for example, offices, retail or logistics – there has also been growth in residential assets by these funds. Our measures aim to safeguard the resilience of this growing form of financial intermediation, by guarding against leverage-related vulnerabilities.Again, in calibrating these measures, we were careful to balance their benefits and costs. Indeed, the feedback we received from our consultation process was an important input in strengthening our understanding of that balance. In response to that feedback, we incorporated a longer implementation period for the measures; we excluded social housing funds, given their characteristics; and we made a methodological adjustment for funds pursuing development activity. We are now monitoring closely the implementation of these measures and are focused on assessing their impact.It is positive that, over the course of 2023, we continued seeing net flows into property funds, including those invested in residential property, and we have also seen continued demand to launch new funds over the course of 2023 and 2024. Although inflows were lower than in 2022, consistent with global trends given the rise in interest rates, this points to continued willingness of investors to provide capital.ConclusionHousing is a multi-faceted policy challenge, comprising a blend of public and private activity. Ultimately, the capacity of the housing system to meet underlying demographic needs is a key driver of sustainable growth in living standards, now and in the future.Our assessment is that policy focus should be in the areas of supply-side reform. These include enabling infrastructure, regulation and planning processes, and measures to support productivity and capacity in the construction sector. Of course, transitioning to the delivery of an additional 20,000 housing units a year also has broader macroeconomic implications, which need to be managed carefully.This is especially the case in the current context of the economy operating at capacity, and amid broader needs for infrastructure investment. Measures that support the productivity of the construction sector can ease some of the macro-economic trade-offs. However, these trade-offs also underscore why any additional capital spending to support housing supply needs to be prioritised within the overall envelope of the Governments’ net spending rule.Thank you for your attention. [1] These remarks build heavily on an Article published in the Central Bank’s Quarterly Bulletin 3, 2024. I am particularly grateful to Thomas Conefrey, Fergal McCann and Martin O’Brien for leading that work. And to Patrick Haran for his help with these remarks.

Good morning everyone.1Thank you very much for the invitation to take part in today’s conference.The theme of the conference – around housing infrastructure – is particularly relevant to the current challenges facing the Irish economy. Overall, the economy has been performing well, despite a number of external shocks in recent years, amid an increasingly uncertain global environment. Domestic economic activity has continued to expand, employment is at record highs and household incomes have grown strongly.In that context, a key challenge for public policy is ensuring that our infrastructure keeps up with the pace of expansion in the economy.And, within infrastructure, one of the main priorities from a public policy perspective is housing. So, in my remarks today, I will cover our economic assessment of the key factors that will shape the housing system’s ability to increase supply. The scars of the financial crisis on the housing marketBefore looking ahead, though, let me start by looking back.Over the past two decades, the Irish housing market has undergone extraordinary volatility, having experienced one of the most amplified boom-bust cycles globally.The financial crisis left persistent scars on the construction sector. Many companies went out of business and many construction workers emigrated from Ireland following the crash. This boom-bust cycle has had long-lasting implications for housing supply, with housing output as a share of national income in Ireland being significantly below the euro area average for a prolonged period (Chart 1).Amid a strong recovery of the broader economy, and faster than expected population growth, this has led to a persistent mismatch between underlying demand for, and supply of, housing.Between 2011 and 2022, our population grew by 12.2%, whereas the housing stock grew by only 5.9%.Chart 1: Housing investment as a share of national income has been below the euro-area average for a prolonged periodSource: CSO and Eurostat.Chart 2: House prices and rents have both risen faster than household incomes over the past decadeSource: CSO and Central Bank of Ireland calculations.Notes: Last observation house prices & rents 2024Q2, disposable income per household 2024Q1.This mismatch between demand and supply for housing has resulted in growing housing affordability challenges. House prices and rents have risen faster than incomes over the past decade, stretching household budgets (Chart 2). This has clear societal and distributional implications, as evidenced by the degree of public policy focus devoted to housing in recent years.And it also has macroeconomic and aggregate implications. For example, the availability of housing, at affordable prices and in locations close to economic activity, can affect employers’ ability to attract labour. Indeed, when we go around the country talking to businesses, one of the recurring themes we hear relates to the challenges that they can face in attracting employees because of housing constraints.This, in turn, is affecting their decisions on where and how to grow and invest.So, in addition to the clear impact on individuals, the imbalance between housing demand and supply can constrain the economy’s ability to expand, with adverse implications for the sustainable growth in living standards. Of course, when looking at more recent developments, it is important to highlight the significant increase in housing output we have seen in recent years, and the policy action that has accompanied it. In 2022 and 2023, housing completions increased rapidly, beyond the expectations of many, including previous Central Bank forecasts.Completions rose from close to 20,000 a year between 2019-2021 to around 33,000 in 2023 (Chart 3), approaching previous estimates of the underlying annual demand for housing units. Chart 3: There has been a significant increase in housing supply since 2019Source: CSO.Chart 4: Irish government housing expenditure is high relative to the rest of the euro areaSource: Eurostat, CSO.This has been despite the rapid increase in interest rates over the period, which typically weighs on residential investment.The increase in housing supply has taken place in the context of a growing policy focus on housing delivery, across a range of dimensions.From a fiscal perspective, for example, State spending on housing is now among the highest in Europe relative to the size of the economy (Chart 4). And it is as high, proportionately, as it was in 2008, having increased from €1.2bn to €6.5bn since 2015.Estimating future housing needsLet me now look ahead.In an in-depth piece of analysis that we published last week, we updated our estimates of the underlying demand for housing, given demographic trends.And, by that, I don’t just mean demand for places to buy. I mean demand for places to live.Our updated estimates take into account two factors.First, updated population projections by the Central Statistics Office (CSO), which have been revised upwards, including in light of the latest Census. Second, the degree of “pent-up” demand for housing that has accumulated over the past decade. One way of illustrating that “pent-up” demand is through trends in household formation at younger age groups. Since the 2011 Census, younger people have recorded the largest declines in household formation rates (‘headship’), reversing the previous upward trend evident up to then (Chart 5). Chart 5: Younger people have seen a particularly sharp fall in the headship rate between 2011 and 2022Source: CSOThis is consistent with younger people either living in their family home or living with others, as opposed to forming an independent household, for longer than previously.  It is an illustration of how “pent up” demand manifests in practice.So, taking into account both future population growth and the gradual unwinding of pent-up demand, our updated estimate is that around 52,000 new homes per year are required out to the middle of this century.This is an increase of around 20,000 homes relative to last year’s output. Of course, and I do want to emphasise that, there is uncertainty around these estimates. They rely on assumptions, for example on future population growth or average household size, which are uncertain.It is important that these assumptions are revisited periodically, in light of incoming data, especially to the extent that estimates such as these are then translated into targets for public policy. But, the main message still holds: there is a need to further scale up housing supply in the years ahead. The heart of the challenge: viability of construction at scaleHow can Ireland’s housing system transition towards such a level of supply? There is no doubt that this is a challenge for public policy, with no easy or quick fix. One key theme underpins our assessment: at its core, the underlying challenge relates to the housing system’s ability to produce viable housing projects at the required scale. Put differently, there is a disconnect between the cost of producing housing units by the construction sector at scale and the (sale or rental) prices that are within the reach of Irish households, given income levels. From our analysis, we have identified three broad policy areas that can bolster viability at greater scale. Firstly, the availability of zoned and serviced land. This is the starting point for construction and it entails a key role for the State. Capital spending can ensure that the supporting infrastructure – water, sewerage, energy and transport – is provided on time, at scale, and in locations closest to housing demand. Secondly, the planning process and the system of housing and building regulation. The role of delays, objections, and bottlenecks in the planning system is hard to quantify or to compare internationally. But, the evidence suggests that a more efficient system could both unlock additional supply and reduce construction costs.Our analysis also points to a strong pattern of increased supply in the regions surrounding Dublin, but with weaker supply nearer to the city centre and other urban centres such as Cork and Galway (Chart 6). Chart 6: The increase in supply has been higher in commuter belts than in urban centres Source: CSO and Central Bank calculations.Note: Annual completions by region divided by 2022 Census estimates of households in permanent dwellings (a proxy for the housing stock). Regions defined as follows: Dublin City given as Dublin City Council area separately. Dublin Non-City (Fingal, DLR, South County); GDA (Meath, Kildare, Wicklow); Other Urban (Galway, Cork, Limerick, Waterford).From an environmental, as well as an infrastructure, perspective, it is important that policy tackles any frictions that may be slowing down the development of housing nearer to employment centres, including higher-density housing. Thirdly, productivity and capacity of the construction sector. Our analysis suggests that Ireland’s construction sector has had investment levels below European peers for more than a decade (Chart 7). And the structure of the sector – consisting of a large number of small businesses – means that construction cannot easily benefit from economies of scale.  Of course some of these trends reflect the long shadow of the crisis. But the outcome is that value-added per hour worked in the sector is lower compared to other euro area countries (Chart 8).Policy can therefore look to incentivise greater scale and productivity in the sector, including through enhanced adoption of modern construction methods or standardisation of designs.This is particularly relevant given that the broader economy is at full employment, and meaningful addition of new workers may prove a challenge. Policy measures in these three areas would reinforce each other and, collectively, help to support greater viability at scale.Chart 7: The capital stock of the construction sector is further below pre-crisis levels than peersSource: Eurostat.Chart 8: Construction sector productivity is below comparator euro area countriesSource: Eurostat and Central Bank calculations.Assessing the financing of needs for future housing supplyLet me now turn to the question of financing of higher levels of housing development. Financing, of course, is a necessary ingredient for construction activity. But, it is also important to put its role into context. Additional financing alone cannot rectify housing imbalances, in the absence of measures to address the structural factors that I mentioned above.Indeed, as I’ll set out, our own analysis suggests that finance availability is not the main factor constraining housing supply.With that context, let me zoom in on the question of financing.The first key theme I want to highlight is the importance of diversity. The nature of financing in recent years has been very different compared to the pre-2007 housing boom.Back then, much of the financing took the form of debt funding provided by the domestic banking sector. By contrast, financing flows underpinning development in recent years have exhibited a healthy diversity. Indeed, it is surprisingly difficult to estimate with precision the quantum and sources of financing of housing development underpinning the units supplied in 2023. In part, that is because some of this financing is stemming from sources not regulated by the Central Bank. So this is an area where we want to continue to enhance our understanding in the years ahead. While there is uncertainty, we estimate that around €10bn-€11bn of development financing likely underpinned the housing supplied in 2023. The State, the domestic banking sector, and non-bank financial intermediaries, all played important roles. This diversification, with a key role played by inflows of debt and equity from overseas, is a strength from a macro-financial perspective.It enables risk sharing and can reduce the sensitivity of financing to the domestic economic cycle.So it will be essential to maintain that diversity to support a sustainable transition towards higher levels of supply. Looking ahead, we estimate that, over and above the continuation of financing underpinning last year’s delivery, an additional €6.5bn-€7bn would be required for an additional 20,000 units. While the State has an important role to play, most of the additional financing will need to stem from private – domestic and international – sources. The State has already increased capital spending on housing substantially.Its role will remain important, especially in meeting the needs of those at the lower end of the income distribution.But, given the diversity of housing needs across the population, most additional delivery will stem from a privately financed and developed market.Is there capacity to provide these additional financial flows? Assuming that the State maintains the same proportion in financing as in 2023 delivery, we estimate additional private sector capacity would need to be in the region of €5bn. The precise split between debt and equity depends on assumptions, such as the average loan-to-cost associated with development finance. But a reasonable split would be an additional €3bn in debt financing and €2bn in equity financing.Recent announcements from the domestic banks suggest up to €1.25bn of additional loan financing commitments are already in train. In addition, we estimate that undrawn, and already committed, debt funding within risk appetite at bank and non-bank lenders, is around €1bn-€2bn. Beyond this, certain cross-border debt financing flows, particularly important for larger-scale developments, are another potential financing source not captured in our data.Together, these sources can make a substantial contribution towards increased debt financing. Our assessment overall is that, within sustainable underwriting parameters, there is scope for the financial system to make a substantial contribution towards higher levels of housing output. The issue of equity financing presents more of a challenge. We estimate that up to €2bn of additional equity finance, above and beyond that committed to underpin 2023 supply, will be required every year to deliver an additional 20,000 homes. Equity can come from developers’ own balance sheets, or from external sources, which could be domestic in nature, or more likely will require foreign inflows from specialist funds and other institutional investors. Our engagement with sectoral experts suggests that, for a range of reasons, access to sufficient equity finance remains a difficulty, particularly for smaller construction and development businesses. This does take me back to the three fundamental areas of policy focus outlined above, because progress in these areas can support viability and, in turn, facilitate access to financing flows. For example, greater availability of zoned and serviced land as well as more certain and speedier planning decisions would help unlock additional equity financing, including from abroad.Indeed, from an international perspective, the Dublin market continues to offer competitive yields with respect to other European locations.Similarly, a more productive construction sector, operating at greater scale, would be in better position to build or access equity finance, which would in turn also facilitate access to debt finance. Still, certain policy measures may also support financial flows. These could relate, for example, to initiatives that ‘crowd-in’ additional equity through State participation.  An example here is ISIF’s model of using its capital to act as a catalyst for attracting third-party co-investment.Importance of resilience in financeLet me now turn to the importance of the resilience in finance, a dimension that is particularly close to our own mandate at the Central Bank. If there is one lesson from the past 20 years, it is that additional housing supply cannot – and should not – be based on shaky financing foundations. The costs of that, for society as a whole, are too large.  We can see that from the persistent scars that the crisis left on the construction sector, and the associated societal and economic implications of this period of undersupply.Equally, though, it is important to recognise that measures to safeguard resilience in finance entail both benefits and costs.And, on that, let me be clear. Our approach, at the Central Bank, is not to aim for resilience at any cost. That would not serve society well.Our aim is to balance the benefits and costs of our policy interventions carefully. Let me explain this with reference to the different macro-prudential measures that we have introduced over the past decade to safeguard resilience of finance.These are not aimed specifically at development finance, but they do interact with the housing market in different ways.Most directly, of course, the mortgage measures aim to ensure sustainable lending standards in the mortgage market. These measures have placed limits on the share of new lending at higher levels of household indebtedness since 2015.In 2022, we concluded an in-depth review of our framework. As part of that, we made a targeted adjustment to the calibration of the measures, which took effect at the start of last year. Our refreshed calibration was an outcome of our assessment of the evolving balance between the benefits and costs of the measures. Our judgement was that, due to the ongoing imbalance between supply and demand in the housing market, the costs of the measures at our previous calibration had grown over time, even if their benefits remained substantial. Our move from an LTI of 3.5 to 4 for First Time Buyers was an acknowledgement of the need to ease the costs of the measures, while safeguarding their resilience benefits for the mortgage and housing system.Indeed, lending at very high levels of indebtedness continues to remain well below the peaks that we saw in the mid-2000s (Chart 9), even following our refreshed recalibration. Chart 9: The share of new lending at high levels of indebtedness is much lower than in the mid-2000sSource: Central Bank of Ireland.Note: High indebtedness relates to lending at loan-to-income multiples greater than 4. FTB and SSB lending for property purchase or self-build purposes. Excludes equity release, top-up and refinance mortgages.In terms of bank resilience, our macroprudential and microprudential frameworks aim to ensure that the banking system is better able to absorb – rather than amplify – adverse shocks. This, in turn, enables an sustainable flow of financing to support economic activity. Again, the calibration of the macroprudential capital buffers for banks, also reviewed in-depth in 2022, aims to balance the macroeconomic benefits of greater resilience, against the macroeconomic costs of higher capital levels through the impact on lending. More recently, we introduced measures for property funds authorised in Ireland.In part, this recognises the evolving nature of financing of the domestic property market, with a greater role for non-bank finance.While the vast majority of property funds invest in commercial buildings – for example, offices, retail or logistics – there has also been growth in residential assets by these funds. Our measures aim to safeguard the resilience of this growing form of financial intermediation, by guarding against leverage-related vulnerabilities.Again, in calibrating these measures, we were careful to balance their benefits and costs. Indeed, the feedback we received from our consultation process was an important input in strengthening our understanding of that balance. In response to that feedback, we incorporated a longer implementation period for the measures; we excluded social housing funds, given their characteristics; and we made a methodological adjustment for funds pursuing development activity. We are now monitoring closely the implementation of these measures and are focused on assessing their impact.It is positive that, over the course of 2023, we continued seeing net flows into property funds, including those invested in residential property, and we have also seen continued demand to launch new funds over the course of 2023 and 2024. Although inflows were lower than in 2022, consistent with global trends given the rise in interest rates, this points to continued willingness of investors to provide capital.ConclusionHousing is a multi-faceted policy challenge, comprising a blend of public and private activity. Ultimately, the capacity of the housing system to meet underlying demographic needs is a key driver of sustainable growth in living standards, now and in the future.Our assessment is that policy focus should be in the areas of supply-side reform. These include enabling infrastructure, regulation and planning processes, and measures to support productivity and capacity in the construction sector. Of course, transitioning to the delivery of an additional 20,000 housing units a year also has broader macroeconomic implications, which need to be managed carefully.This is especially the case in the current context of the economy operating at capacity, and amid broader needs for infrastructure investment. Measures that support the productivity of the construction sector can ease some of the macro-economic trade-offs. However, these trade-offs also underscore why any additional capital spending to support housing supply needs to be prioritised within the overall envelope of the Governments’ net spending rule.Thank you for your attention. [1] These remarks build heavily on an Article published in the Central Bank’s Quarterly Bulletin 3, 2024. I am particularly grateful to Thomas Conefrey, Fergal McCann and Martin O’Brien for leading that work. And to Patrick Haran for his help with these remarks.

Good morning everyone.1Thank you very much for the invitation to take part in today’s conference.The theme of the conference – around housing infrastructure – is particularly relevant to the current challenges facing the Irish economy. Overall, the economy has been performing well, despite a number of external shocks in recent years, amid an increasingly uncertain global environment. Domestic economic activity has continued to expand, employment is at record highs and household incomes have grown strongly.In that context, a key challenge for public policy is ensuring that our infrastructure keeps up with the pace of expansion in the economy.And, within infrastructure, one of the main priorities from a public policy perspective is housing. So, in my remarks today, I will cover our economic assessment of the key factors that will shape the housing system’s ability to increase supply. The scars of the financial crisis on the housing marketBefore looking ahead, though, let me start by looking back.Over the past two decades, the Irish housing market has undergone extraordinary volatility, having experienced one of the most amplified boom-bust cycles globally.The financial crisis left persistent scars on the construction sector. Many companies went out of business and many construction workers emigrated from Ireland following the crash. This boom-bust cycle has had long-lasting implications for housing supply, with housing output as a share of national income in Ireland being significantly below the euro area average for a prolonged period (Chart 1).Amid a strong recovery of the broader economy, and faster than expected population growth, this has led to a persistent mismatch between underlying demand for, and supply of, housing.Between 2011 and 2022, our population grew by 12.2%, whereas the housing stock grew by only 5.9%.Chart 1: Housing investment as a share of national income has been below the euro-area average for a prolonged periodSource: CSO and Eurostat.Chart 2: House prices and rents have both risen faster than household incomes over the past decadeSource: CSO and Central Bank of Ireland calculations.Notes: Last observation house prices & rents 2024Q2, disposable income per household 2024Q1.This mismatch between demand and supply for housing has resulted in growing housing affordability challenges. House prices and rents have risen faster than incomes over the past decade, stretching household budgets (Chart 2). This has clear societal and distributional implications, as evidenced by the degree of public policy focus devoted to housing in recent years.And it also has macroeconomic and aggregate implications. For example, the availability of housing, at affordable prices and in locations close to economic activity, can affect employers’ ability to attract labour. Indeed, when we go around the country talking to businesses, one of the recurring themes we hear relates to the challenges that they can face in attracting employees because of housing constraints.This, in turn, is affecting their decisions on where and how to grow and invest.So, in addition to the clear impact on individuals, the imbalance between housing demand and supply can constrain the economy’s ability to expand, with adverse implications for the sustainable growth in living standards. Of course, when looking at more recent developments, it is important to highlight the significant increase in housing output we have seen in recent years, and the policy action that has accompanied it. In 2022 and 2023, housing completions increased rapidly, beyond the expectations of many, including previous Central Bank forecasts.Completions rose from close to 20,000 a year between 2019-2021 to around 33,000 in 2023 (Chart 3), approaching previous estimates of the underlying annual demand for housing units. Chart 3: There has been a significant increase in housing supply since 2019Source: CSO.Chart 4: Irish government housing expenditure is high relative to the rest of the euro areaSource: Eurostat, CSO.This has been despite the rapid increase in interest rates over the period, which typically weighs on residential investment.The increase in housing supply has taken place in the context of a growing policy focus on housing delivery, across a range of dimensions.From a fiscal perspective, for example, State spending on housing is now among the highest in Europe relative to the size of the economy (Chart 4). And it is as high, proportionately, as it was in 2008, having increased from €1.2bn to €6.5bn since 2015.Estimating future housing needsLet me now look ahead.In an in-depth piece of analysis that we published last week, we updated our estimates of the underlying demand for housing, given demographic trends.And, by that, I don’t just mean demand for places to buy. I mean demand for places to live.Our updated estimates take into account two factors.First, updated population projections by the Central Statistics Office (CSO), which have been revised upwards, including in light of the latest Census. Second, the degree of “pent-up” demand for housing that has accumulated over the past decade. One way of illustrating that “pent-up” demand is through trends in household formation at younger age groups. Since the 2011 Census, younger people have recorded the largest declines in household formation rates (‘headship’), reversing the previous upward trend evident up to then (Chart 5). Chart 5: Younger people have seen a particularly sharp fall in the headship rate between 2011 and 2022Source: CSOThis is consistent with younger people either living in their family home or living with others, as opposed to forming an independent household, for longer than previously.  It is an illustration of how “pent up” demand manifests in practice.So, taking into account both future population growth and the gradual unwinding of pent-up demand, our updated estimate is that around 52,000 new homes per year are required out to the middle of this century.This is an increase of around 20,000 homes relative to last year’s output. Of course, and I do want to emphasise that, there is uncertainty around these estimates. They rely on assumptions, for example on future population growth or average household size, which are uncertain.It is important that these assumptions are revisited periodically, in light of incoming data, especially to the extent that estimates such as these are then translated into targets for public policy. But, the main message still holds: there is a need to further scale up housing supply in the years ahead. The heart of the challenge: viability of construction at scaleHow can Ireland’s housing system transition towards such a level of supply? There is no doubt that this is a challenge for public policy, with no easy or quick fix. One key theme underpins our assessment: at its core, the underlying challenge relates to the housing system’s ability to produce viable housing projects at the required scale. Put differently, there is a disconnect between the cost of producing housing units by the construction sector at scale and the (sale or rental) prices that are within the reach of Irish households, given income levels. From our analysis, we have identified three broad policy areas that can bolster viability at greater scale. Firstly, the availability of zoned and serviced land. This is the starting point for construction and it entails a key role for the State. Capital spending can ensure that the supporting infrastructure – water, sewerage, energy and transport – is provided on time, at scale, and in locations closest to housing demand. Secondly, the planning process and the system of housing and building regulation. The role of delays, objections, and bottlenecks in the planning system is hard to quantify or to compare internationally. But, the evidence suggests that a more efficient system could both unlock additional supply and reduce construction costs.Our analysis also points to a strong pattern of increased supply in the regions surrounding Dublin, but with weaker supply nearer to the city centre and other urban centres such as Cork and Galway (Chart 6). Chart 6: The increase in supply has been higher in commuter belts than in urban centres Source: CSO and Central Bank calculations.Note: Annual completions by region divided by 2022 Census estimates of households in permanent dwellings (a proxy for the housing stock). Regions defined as follows: Dublin City given as Dublin City Council area separately. Dublin Non-City (Fingal, DLR, South County); GDA (Meath, Kildare, Wicklow); Other Urban (Galway, Cork, Limerick, Waterford).From an environmental, as well as an infrastructure, perspective, it is important that policy tackles any frictions that may be slowing down the development of housing nearer to employment centres, including higher-density housing. Thirdly, productivity and capacity of the construction sector. Our analysis suggests that Ireland’s construction sector has had investment levels below European peers for more than a decade (Chart 7). And the structure of the sector – consisting of a large number of small businesses – means that construction cannot easily benefit from economies of scale.  Of course some of these trends reflect the long shadow of the crisis. But the outcome is that value-added per hour worked in the sector is lower compared to other euro area countries (Chart 8).Policy can therefore look to incentivise greater scale and productivity in the sector, including through enhanced adoption of modern construction methods or standardisation of designs.This is particularly relevant given that the broader economy is at full employment, and meaningful addition of new workers may prove a challenge. Policy measures in these three areas would reinforce each other and, collectively, help to support greater viability at scale.Chart 7: The capital stock of the construction sector is further below pre-crisis levels than peersSource: Eurostat.Chart 8: Construction sector productivity is below comparator euro area countriesSource: Eurostat and Central Bank calculations.Assessing the financing of needs for future housing supplyLet me now turn to the question of financing of higher levels of housing development. Financing, of course, is a necessary ingredient for construction activity. But, it is also important to put its role into context. Additional financing alone cannot rectify housing imbalances, in the absence of measures to address the structural factors that I mentioned above.Indeed, as I’ll set out, our own analysis suggests that finance availability is not the main factor constraining housing supply.With that context, let me zoom in on the question of financing.The first key theme I want to highlight is the importance of diversity. The nature of financing in recent years has been very different compared to the pre-2007 housing boom.Back then, much of the financing took the form of debt funding provided by the domestic banking sector. By contrast, financing flows underpinning development in recent years have exhibited a healthy diversity. Indeed, it is surprisingly difficult to estimate with precision the quantum and sources of financing of housing development underpinning the units supplied in 2023. In part, that is because some of this financing is stemming from sources not regulated by the Central Bank. So this is an area where we want to continue to enhance our understanding in the years ahead. While there is uncertainty, we estimate that around €10bn-€11bn of development financing likely underpinned the housing supplied in 2023. The State, the domestic banking sector, and non-bank financial intermediaries, all played important roles. This diversification, with a key role played by inflows of debt and equity from overseas, is a strength from a macro-financial perspective.It enables risk sharing and can reduce the sensitivity of financing to the domestic economic cycle.So it will be essential to maintain that diversity to support a sustainable transition towards higher levels of supply. Looking ahead, we estimate that, over and above the continuation of financing underpinning last year’s delivery, an additional €6.5bn-€7bn would be required for an additional 20,000 units. While the State has an important role to play, most of the additional financing will need to stem from private – domestic and international – sources. The State has already increased capital spending on housing substantially.Its role will remain important, especially in meeting the needs of those at the lower end of the income distribution.But, given the diversity of housing needs across the population, most additional delivery will stem from a privately financed and developed market.Is there capacity to provide these additional financial flows? Assuming that the State maintains the same proportion in financing as in 2023 delivery, we estimate additional private sector capacity would need to be in the region of €5bn. The precise split between debt and equity depends on assumptions, such as the average loan-to-cost associated with development finance. But a reasonable split would be an additional €3bn in debt financing and €2bn in equity financing.Recent announcements from the domestic banks suggest up to €1.25bn of additional loan financing commitments are already in train. In addition, we estimate that undrawn, and already committed, debt funding within risk appetite at bank and non-bank lenders, is around €1bn-€2bn. Beyond this, certain cross-border debt financing flows, particularly important for larger-scale developments, are another potential financing source not captured in our data.Together, these sources can make a substantial contribution towards increased debt financing. Our assessment overall is that, within sustainable underwriting parameters, there is scope for the financial system to make a substantial contribution towards higher levels of housing output. The issue of equity financing presents more of a challenge. We estimate that up to €2bn of additional equity finance, above and beyond that committed to underpin 2023 supply, will be required every year to deliver an additional 20,000 homes. Equity can come from developers’ own balance sheets, or from external sources, which could be domestic in nature, or more likely will require foreign inflows from specialist funds and other institutional investors. Our engagement with sectoral experts suggests that, for a range of reasons, access to sufficient equity finance remains a difficulty, particularly for smaller construction and development businesses. This does take me back to the three fundamental areas of policy focus outlined above, because progress in these areas can support viability and, in turn, facilitate access to financing flows. For example, greater availability of zoned and serviced land as well as more certain and speedier planning decisions would help unlock additional equity financing, including from abroad.Indeed, from an international perspective, the Dublin market continues to offer competitive yields with respect to other European locations.Similarly, a more productive construction sector, operating at greater scale, would be in better position to build or access equity finance, which would in turn also facilitate access to debt finance. Still, certain policy measures may also support financial flows. These could relate, for example, to initiatives that ‘crowd-in’ additional equity through State participation.  An example here is ISIF’s model of using its capital to act as a catalyst for attracting third-party co-investment.Importance of resilience in financeLet me now turn to the importance of the resilience in finance, a dimension that is particularly close to our own mandate at the Central Bank. If there is one lesson from the past 20 years, it is that additional housing supply cannot – and should not – be based on shaky financing foundations. The costs of that, for society as a whole, are too large.  We can see that from the persistent scars that the crisis left on the construction sector, and the associated societal and economic implications of this period of undersupply.Equally, though, it is important to recognise that measures to safeguard resilience in finance entail both benefits and costs.And, on that, let me be clear. Our approach, at the Central Bank, is not to aim for resilience at any cost. That would not serve society well.Our aim is to balance the benefits and costs of our policy interventions carefully. Let me explain this with reference to the different macro-prudential measures that we have introduced over the past decade to safeguard resilience of finance.These are not aimed specifically at development finance, but they do interact with the housing market in different ways.Most directly, of course, the mortgage measures aim to ensure sustainable lending standards in the mortgage market. These measures have placed limits on the share of new lending at higher levels of household indebtedness since 2015.In 2022, we concluded an in-depth review of our framework. As part of that, we made a targeted adjustment to the calibration of the measures, which took effect at the start of last year. Our refreshed calibration was an outcome of our assessment of the evolving balance between the benefits and costs of the measures. Our judgement was that, due to the ongoing imbalance between supply and demand in the housing market, the costs of the measures at our previous calibration had grown over time, even if their benefits remained substantial. Our move from an LTI of 3.5 to 4 for First Time Buyers was an acknowledgement of the need to ease the costs of the measures, while safeguarding their resilience benefits for the mortgage and housing system.Indeed, lending at very high levels of indebtedness continues to remain well below the peaks that we saw in the mid-2000s (Chart 9), even following our refreshed recalibration. Chart 9: The share of new lending at high levels of indebtedness is much lower than in the mid-2000sSource: Central Bank of Ireland.Note: High indebtedness relates to lending at loan-to-income multiples greater than 4. FTB and SSB lending for property purchase or self-build purposes. Excludes equity release, top-up and refinance mortgages.In terms of bank resilience, our macroprudential and microprudential frameworks aim to ensure that the banking system is better able to absorb – rather than amplify – adverse shocks. This, in turn, enables an sustainable flow of financing to support economic activity. Again, the calibration of the macroprudential capital buffers for banks, also reviewed in-depth in 2022, aims to balance the macroeconomic benefits of greater resilience, against the macroeconomic costs of higher capital levels through the impact on lending. More recently, we introduced measures for property funds authorised in Ireland.In part, this recognises the evolving nature of financing of the domestic property market, with a greater role for non-bank finance.While the vast majority of property funds invest in commercial buildings – for example, offices, retail or logistics – there has also been growth in residential assets by these funds. Our measures aim to safeguard the resilience of this growing form of financial intermediation, by guarding against leverage-related vulnerabilities.Again, in calibrating these measures, we were careful to balance their benefits and costs. Indeed, the feedback we received from our consultation process was an important input in strengthening our understanding of that balance. In response to that feedback, we incorporated a longer implementation period for the measures; we excluded social housing funds, given their characteristics; and we made a methodological adjustment for funds pursuing development activity. We are now monitoring closely the implementation of these measures and are focused on assessing their impact.It is positive that, over the course of 2023, we continued seeing net flows into property funds, including those invested in residential property, and we have also seen continued demand to launch new funds over the course of 2023 and 2024. Although inflows were lower than in 2022, consistent with global trends given the rise in interest rates, this points to continued willingness of investors to provide capital.ConclusionHousing is a multi-faceted policy challenge, comprising a blend of public and private activity. Ultimately, the capacity of the housing system to meet underlying demographic needs is a key driver of sustainable growth in living standards, now and in the future.Our assessment is that policy focus should be in the areas of supply-side reform. These include enabling infrastructure, regulation and planning processes, and measures to support productivity and capacity in the construction sector. Of course, transitioning to the delivery of an additional 20,000 housing units a year also has broader macroeconomic implications, which need to be managed carefully.This is especially the case in the current context of the economy operating at capacity, and amid broader needs for infrastructure investment. Measures that support the productivity of the construction sector can ease some of the macro-economic trade-offs. However, these trade-offs also underscore why any additional capital spending to support housing supply needs to be prioritised within the overall envelope of the Governments’ net spending rule.Thank you for your attention. [1] These remarks build heavily on an Article published in the Central Bank’s Quarterly Bulletin 3, 2024. I am particularly grateful to Thomas Conefrey, Fergal McCann and Martin O’Brien for leading that work. And to Patrick Haran for his help with these remarks.

I am delighted to be here. Many thanks to Brian for inviting me, and Pete for that interesting presentation. I look forward to the panel discussion, but before I will just say a few words about the growing complexity of the financial sector landscape – and what this means for consumers – as well as how the Central Bank of Ireland (CBI) is evolving to continue to protect consumers in this increasingly challenging risk environment.But first a word on our two institutions. While the Central Bank and Health Insurance Authority (HIA) have distinct mandates as it relates to health insurance, there are many areas where our roles and goals intersect. We both work to ensure the market is well regulated; and we have a common responsibility for consumer protection in its broadest sense.The HIA’s responsibility for the provision of information to health insurance consumers is an increasingly important one – as I will come to – and the HIA sectoral engagements, including the Health Insurance Comparison tool is an important conduit in this regard. For our part, the Central Bank regulates the insurance sector and expects all regulated entities, including health insurers, to act honestly, fairly and professionally in the best interests of its customers and the integrity of the market. This includes informing customers in a clear and transparent manner and considering their best interest in product design, development and distribution.Given this intersection of roles, historically the CBI and the HIA have a track record of good cooperation. More recently, both organisations have taken steps to deepen cooperation and have committed to sharing insights where appropriate, while also respecting our individual mandates.  This will allow us to harness our respective areas of expertise and be better placed to deliver better outcomes for the public.Complexity and change in the financial sector landscapeI have spoken before of the increasingly complex and rapidly changing financial sector landscape.[1] How the size, scale and shape of our financial sector has changed in recent years – including through a whole host of new entities, new channels and new products for consumers to engage with.This has brought, and has the potential to further bring, real benefits – including through innovation, ease of access and competition, all of which can be beneficial for consumers and the wider economy. This changing and more complex landscape, however, has also presented risks – posing challenges for regulators, industry and consumers alike. This is particularly true when complexity leads to opacity…Or when novel innovations neglect to account for basic risks – either to the entity or their customers…It is also true when information and “choice” grows in such abundance to be neither informative nor an enabler of decision making.Such risks are ones we have been considering in a consumer context for some time now, and featured in our Regulatory and Supervisory Outlook[2] earlier this year – including: risks from unclear information being provided at various points in the customer journey; risks to consumers from evolving business models; and technology-driven risks from cyber security as well as frauds and scams – the latter one of the reasons combatting financial crime is the theme of our inaugural Innovation Sandbox to launch later this year.And these are just some examples of how the financial sector and financial risks are changing for consumers –mirroring the wider complexity and change in our daily lives.The paradox of choice“Too many choices, too many decisions, too little time…”[3]  No I am not talking about trying to keep up with my Streaming habits, rather this is a quote from ‘The Paradox of Choice’ – a book about how decision making had become too complex due to an abundance of choices. The point is while choice is obviously a good thing – too much choice can be counterproductive.Published 20 years ago, I would suggest that the situation has significantly worsened in the intervening years. And while this issue extends to all parts of our lives, and is most often merely an annoyance, in a financial services context it increases the risks of consumer detriment and financial loss, and can run counter to empowering consumers to make decisions in their own best interests.In the Health Insurance context, in terms of in-patient plans, it does appear there is an abundance of choice. For example, at the end of 2023, there were 350 active in-patient plans. Notwithstanding this proliferation of plans, around 50% of people with health insurance are on one of only 30 plans.Again, while consumer choice is obviously a good thing – there is a concern that too much choice is impacting how much engagement consumers are having with the options available to them, resulting in consumers not considering, or not being offered, the best and most suitable product available. This is something from a supervisory point of view that we are actively considering, in terms of whether choices are being well explained, or well understood, or are really adding value.Empowering Consumers to make informed choiceSo, what is required to ensure consumers are empowered to make informed choices in a world of increasing choice and complexity?At the Central Bank we would see three complementary aspects necessary to ensure consumers are well equipped to make decisions in their own best interest.  To be informed you need information of course – but that is not enough:That information needs to be presented in a way that seeks to effectively inform consumers – meaning it needs to be clear and easy to understand;Consumers on the other hand need to be equipped with sufficient financial literacy to be able to use that information effectively;And consumers themselves must also take on the responsibility to inform themselves – including reasonable time and care to read and understand information, to ensure they are making decisions in their own best interests.In terms of informing effectively, new Standard for Business in the revised Consumer Protection Code should make firms’ obligations clearer in this regard. These will place a duty on financial services firms to consider their overall approach to communicating consumer information, to make sure it supports consumers to make effective, timely and informed decisions. A firm’s overall approach should not be about simply ‘providing information’ to meet their regulatory disclosure obligations, but should also be about ensuring practical understanding by the consumer, so that they can take decisions that are in their best interests.In terms of financial literacy, we very much welcome and will support the Government’s National Financial Literacy Strategy. Along with the Government, the HIA, the Competition and Consumer Protection Commission and other stakeholders, we are keen to play our role in developing and implementing initiatives that seek to improve the overall level of financial literacy of Irish citizens, and to provide valuable information for consumers to understand and to compare financial products. While this will take time to produce results, it is a key means of empowering consumers to make the right choices. Once equipped by firms with the right information, in the right way, and once equipped with the financial literacy to understand and assess that information, then it is up to consumers themselves to sufficiently inform themselves and to make their own decisions.How the Central Bank is strengthening its approach Consumer Protection I spoke earlier of the increasingly complex and interconnected financial sector, the growing pace of digitalisation and the development of new, innovative business models.All of this is reshaping the risk context of the sectors we supervise and the consumers we protect.In our strategic plan we recognised this. And we recognised that in order to keep pace with this changing world and to continue to deliver on our mandate, now and into the future, the way we regulate and supervise the financial sector must change too – to ensure consumers of financial services are protected in all respects in this changing and increasingly complex and interconnected financial sector.This is why the Central Bank is making changes to how we regulate and supervise – to ensure we continue to protect consumers and the public in this new and challenging environment. We have already started to make these changes.This includes the step change in our external engagement over the last two years – recognising that the rapid pace of change means that we need to be well-connected to all of our stakeholders, including authorities such as the HIA, and the public.It also includes two landmark pieces of legislation, in the form of the revision of the Consumer Protection Code and introduction of the Individual Accountability Framework, both of which seek to ensure firms are taking greater responsibility for securing consumer interests.In terms of the Consumer Protection Code Review, this is building on the strong foundations of the Code – which is a cornerstone of the Central Bank’s consumer protection regulatory framework.[4] Our review is very much about modernising the code, reflecting the provision of financial services in a changing and more digital world. Our consultation on the changes to the Code closed during the summer; and we will publish a revised Code and Feedback Statement in 2025.In addition to these we are transforming our supervisory approach – with a new supervisory model to be implemented from January next year.Our new model is also building on strong foundations. It will of course remain risk based, but is evolving to deliver a more integrated approach to supervision, drawing on all elements of our mandate – consumer and investor protection, safety and soundness, financial stability and integrity of the system.This new approach will see integrated teams supervise with respect to all elements of this mandate, working in partnership with specific areas of supervisory expertise (e.g. conduct, financial resilience, governance etc.) It will position us better as an organisation to meet our objectives and ensure a changing, increasingly complex and interconnected financial system continues to operate in the best interests of consumers and the wider economy.It will ensure we are more efficient and effective in our supervisory work. It will make it easier to direct our supervisory resources to the areas of most risk to consumers or the system. And, importantly, it will place consumer protection at the heart of day to day supervision.I firmly believe that these changes are not just important; they are necessary – so that in a changing world we continue to deliver on our mandate in the public interest and in the interest of consumers.ConclusionTo conclude, the Central Bank and the HIA are working hard to ensure that consumers get the best possible outcome. The insurance sector has an important role to play in ensuring that the products offered are clear, transparent and can be well understood. And consumers also have their own responsibilities in this regard – with increasing the level of financial literary in Ireland an important objective to ensure they are equipped to act in their own best interest.And finally the financial sector is rapidly changing and becoming increasingly complex. In that regard, the Central Bank is changing too – so that we can continue to deliver for consumers in a more complex world.  [1] See Donnery “Maintaining stability in the face of volatility – financial regulation in a rapidly changing world” November 2023 [2] See Central Bank of Ireland Regulatory & Supervisory Outlook 2024 Feb 2024[3] Barry Schwarz: The Paradox of Choice: Why More Is Less  2004 [4] See Derville Rowland https://www.centralbank.ie/news/article/speech-deputy-governor-derville-rowland-opening-remarks-for-launch-of-consultation-paper-on-review-of-the-consumer-protection-code-07-mar-2024  

I am delighted to be here. Many thanks to Brian for inviting me, and Pete for that interesting presentation. I look forward to the panel discussion, but before I will just say a few words about the growing complexity of the financial sector landscape – and what this means for consumers – as well as how the Central Bank of Ireland (CBI) is evolving to continue to protect consumers in this increasingly challenging risk environment.But first a word on our two institutions. While the Central Bank and Health Insurance Authority (HIA) have distinct mandates as it relates to health insurance, there are many areas where our roles and goals intersect. We both work to ensure the market is well regulated; and we have a common responsibility for consumer protection in its broadest sense.The HIA’s responsibility for the provision of information to health insurance consumers is an increasingly important one – as I will come to – and the HIA sectoral engagements, including the Health Insurance Comparison tool is an important conduit in this regard. For our part, the Central Bank regulates the insurance sector and expects all regulated entities, including health insurers, to act honestly, fairly and professionally in the best interests of its customers and the integrity of the market. This includes informing customers in a clear and transparent manner and considering their best interest in product design, development and distribution.Given this intersection of roles, historically the CBI and the HIA have a track record of good cooperation. More recently, both organisations have taken steps to deepen cooperation and have committed to sharing insights where appropriate, while also respecting our individual mandates.  This will allow us to harness our respective areas of expertise and be better placed to deliver better outcomes for the public.Complexity and change in the financial sector landscapeI have spoken before of the increasingly complex and rapidly changing financial sector landscape.[1] How the size, scale and shape of our financial sector has changed in recent years – including through a whole host of new entities, new channels and new products for consumers to engage with.This has brought, and has the potential to further bring, real benefits – including through innovation, ease of access and competition, all of which can be beneficial for consumers and the wider economy. This changing and more complex landscape, however, has also presented risks – posing challenges for regulators, industry and consumers alike. This is particularly true when complexity leads to opacity…Or when novel innovations neglect to account for basic risks – either to the entity or their customers…It is also true when information and “choice” grows in such abundance to be neither informative nor an enabler of decision making.Such risks are ones we have been considering in a consumer context for some time now, and featured in our Regulatory and Supervisory Outlook[2] earlier this year – including: risks from unclear information being provided at various points in the customer journey; risks to consumers from evolving business models; and technology-driven risks from cyber security as well as frauds and scams – the latter one of the reasons combatting financial crime is the theme of our inaugural Innovation Sandbox to launch later this year.And these are just some examples of how the financial sector and financial risks are changing for consumers –mirroring the wider complexity and change in our daily lives.The paradox of choice“Too many choices, too many decisions, too little time…”[3]  No I am not talking about trying to keep up with my Streaming habits, rather this is a quote from ‘The Paradox of Choice’ – a book about how decision making had become too complex due to an abundance of choices. The point is while choice is obviously a good thing – too much choice can be counterproductive.Published 20 years ago, I would suggest that the situation has significantly worsened in the intervening years. And while this issue extends to all parts of our lives, and is most often merely an annoyance, in a financial services context it increases the risks of consumer detriment and financial loss, and can run counter to empowering consumers to make decisions in their own best interests.In the Health Insurance context, in terms of in-patient plans, it does appear there is an abundance of choice. For example, at the end of 2023, there were 350 active in-patient plans. Notwithstanding this proliferation of plans, around 50% of people with health insurance are on one of only 30 plans.Again, while consumer choice is obviously a good thing – there is a concern that too much choice is impacting how much engagement consumers are having with the options available to them, resulting in consumers not considering, or not being offered, the best and most suitable product available. This is something from a supervisory point of view that we are actively considering, in terms of whether choices are being well explained, or well understood, or are really adding value.Empowering Consumers to make informed choiceSo, what is required to ensure consumers are empowered to make informed choices in a world of increasing choice and complexity?At the Central Bank we would see three complementary aspects necessary to ensure consumers are well equipped to make decisions in their own best interest.  To be informed you need information of course – but that is not enough:That information needs to be presented in a way that seeks to effectively inform consumers – meaning it needs to be clear and easy to understand;Consumers on the other hand need to be equipped with sufficient financial literacy to be able to use that information effectively;And consumers themselves must also take on the responsibility to inform themselves – including reasonable time and care to read and understand information, to ensure they are making decisions in their own best interests.In terms of informing effectively, new Standard for Business in the revised Consumer Protection Code should make firms’ obligations clearer in this regard. These will place a duty on financial services firms to consider their overall approach to communicating consumer information, to make sure it supports consumers to make effective, timely and informed decisions. A firm’s overall approach should not be about simply ‘providing information’ to meet their regulatory disclosure obligations, but should also be about ensuring practical understanding by the consumer, so that they can take decisions that are in their best interests.In terms of financial literacy, we very much welcome and will support the Government’s National Financial Literacy Strategy. Along with the Government, the HIA, the Competition and Consumer Protection Commission and other stakeholders, we are keen to play our role in developing and implementing initiatives that seek to improve the overall level of financial literacy of Irish citizens, and to provide valuable information for consumers to understand and to compare financial products. While this will take time to produce results, it is a key means of empowering consumers to make the right choices. Once equipped by firms with the right information, in the right way, and once equipped with the financial literacy to understand and assess that information, then it is up to consumers themselves to sufficiently inform themselves and to make their own decisions.How the Central Bank is strengthening its approach Consumer Protection I spoke earlier of the increasingly complex and interconnected financial sector, the growing pace of digitalisation and the development of new, innovative business models.All of this is reshaping the risk context of the sectors we supervise and the consumers we protect.In our strategic plan we recognised this. And we recognised that in order to keep pace with this changing world and to continue to deliver on our mandate, now and into the future, the way we regulate and supervise the financial sector must change too – to ensure consumers of financial services are protected in all respects in this changing and increasingly complex and interconnected financial sector.This is why the Central Bank is making changes to how we regulate and supervise – to ensure we continue to protect consumers and the public in this new and challenging environment. We have already started to make these changes.This includes the step change in our external engagement over the last two years – recognising that the rapid pace of change means that we need to be well-connected to all of our stakeholders, including authorities such as the HIA, and the public.It also includes two landmark pieces of legislation, in the form of the revision of the Consumer Protection Code and introduction of the Individual Accountability Framework, both of which seek to ensure firms are taking greater responsibility for securing consumer interests.In terms of the Consumer Protection Code Review, this is building on the strong foundations of the Code – which is a cornerstone of the Central Bank’s consumer protection regulatory framework.[4] Our review is very much about modernising the code, reflecting the provision of financial services in a changing and more digital world. Our consultation on the changes to the Code closed during the summer; and we will publish a revised Code and Feedback Statement in 2025.In addition to these we are transforming our supervisory approach – with a new supervisory model to be implemented from January next year.Our new model is also building on strong foundations. It will of course remain risk based, but is evolving to deliver a more integrated approach to supervision, drawing on all elements of our mandate – consumer and investor protection, safety and soundness, financial stability and integrity of the system.This new approach will see integrated teams supervise with respect to all elements of this mandate, working in partnership with specific areas of supervisory expertise (e.g. conduct, financial resilience, governance etc.) It will position us better as an organisation to meet our objectives and ensure a changing, increasingly complex and interconnected financial system continues to operate in the best interests of consumers and the wider economy.It will ensure we are more efficient and effective in our supervisory work. It will make it easier to direct our supervisory resources to the areas of most risk to consumers or the system. And, importantly, it will place consumer protection at the heart of day to day supervision.I firmly believe that these changes are not just important; they are necessary – so that in a changing world we continue to deliver on our mandate in the public interest and in the interest of consumers.ConclusionTo conclude, the Central Bank and the HIA are working hard to ensure that consumers get the best possible outcome. The insurance sector has an important role to play in ensuring that the products offered are clear, transparent and can be well understood. And consumers also have their own responsibilities in this regard – with increasing the level of financial literary in Ireland an important objective to ensure they are equipped to act in their own best interest.And finally the financial sector is rapidly changing and becoming increasingly complex. In that regard, the Central Bank is changing too – so that we can continue to deliver for consumers in a more complex world.  [1] See Donnery “Maintaining stability in the face of volatility – financial regulation in a rapidly changing world” November 2023 [2] See Central Bank of Ireland Regulatory & Supervisory Outlook 2024 Feb 2024[3] Barry Schwarz: The Paradox of Choice: Why More Is Less  2004 [4] See Derville Rowland https://www.centralbank.ie/news/article/speech-deputy-governor-derville-rowland-opening-remarks-for-launch-of-consultation-paper-on-review-of-the-consumer-protection-code-07-mar-2024  

The governor speaks about his experience and outlook on the field of economics, and shares advice with students studying the discipline.

The governor speaks about his experience and outlook on the field of economics, and shares advice with students studying the discipline.

Change and challenges – responding to uncertainty, transforming for the future and driving innovation - Remarks by Deputy Governor Derville Rowland

Change and challenges – responding to uncertainty, transforming for the future and driving innovation - Remarks by Deputy Governor Derville Rowland

Warning: Unauthorised Retail Credit Firm Unauthorised Firm Name Short Term Credit Website https://www.shorttermcredit.info/en/ Email address(es) used hGllo@cblcredit.com Phone number(s) used +353 83 416 3399+353 86 800 6174 Authorisation in Ireland This firm is not authorised to provide Retail Credit or High Cost Credit services in Ireland. Additional information This scam is an example of an ‘advanced fee fraud’, where a payment is sought upfront prior to providing a loan. The loans are never provided.The firm cloned the details of a Central Bank authorised firm and has been seeking to pass itself off as E&L Credit Limited in order to deceive consumers. It should be noted there is no connection whatsoever between the Central Bank authorised firm and this fraudulent entity. Notes:Any person wishing to contact the Central Bank with information regarding such firms / persons may telephone (01) 224 5800.For more information on how to protect yourself from financial scams, please visit www.centralbank.ie/financialscams The name of the above firm is published under section 53 of the Central Bank (Supervision and Enforcement) Act 2013

Warning: Unauthorised Retail Credit Firm Unauthorised Firm Name Short Term Credit Website https://www.shorttermcredit.info/en/ Email address(es) used hGllo@cblcredit.com Phone number(s) used +353 83 416 3399+353 86 800 6174 Authorisation in Ireland This firm is not authorised to provide Retail Credit or High Cost Credit services in Ireland. Additional information This scam is an example of an ‘advanced fee fraud’, where a payment is sought upfront prior to providing a loan. The loans are never provided.The firm cloned the details of a Central Bank authorised firm and has been seeking to pass itself off as E&L Credit Limited in order to deceive consumers. It should be noted there is no connection whatsoever between the Central Bank authorised firm and this fraudulent entity. Notes:Any person wishing to contact the Central Bank with information regarding such firms / persons may telephone (01) 224 5800.For more information on how to protect yourself from financial scams, please visit www.centralbank.ie/financialscams The name of the above firm is published under section 53 of the Central Bank (Supervision and Enforcement) Act 2013

Warning: Unauthorised Retail Credit Firm Unauthorised Firm Name Short Term Credit Website https://www.shorttermcredit.info/en/ Email address(es) used hGllo@cblcredit.com Phone number(s) used +353 83 416 3399+353 86 800 6174 Authorisation in Ireland This firm is not authorised to provide Retail Credit or High Cost Credit services in Ireland. Additional information This scam is an example of an ‘advanced fee fraud’, where a payment is sought upfront prior to providing a loan. The loans are never provided.The firm cloned the details of a Central Bank authorised firm and has been seeking to pass itself off as E&L Credit Limited in order to deceive consumers. It should be noted there is no connection whatsoever between the Central Bank authorised firm and this fraudulent entity. Notes:Any person wishing to contact the Central Bank with information regarding such firms / persons may telephone (01) 224 5800.For more information on how to protect yourself from financial scams, please visit www.centralbank.ie/financialscams The name of the above firm is published under section 53 of the Central Bank (Supervision and Enforcement) Act 2013

Warning: Unauthorised Retail Credit Firm Unauthorised Firm Name Short Term Credit Website https://www.shorttermcredit.info/en/ Email address(es) used hGllo@cblcredit.com Phone number(s) used +353 83 416 3399+353 86 800 6174 Authorisation in Ireland This firm is not authorised to provide Retail Credit or High Cost Credit services in Ireland. Additional information This scam is an example of an ‘advanced fee fraud’, where a payment is sought upfront prior to providing a loan. The loans are never provided.The firm cloned the details of a Central Bank authorised firm and has been seeking to pass itself off as E&L Credit Limited in order to deceive consumers. It should be noted there is no connection whatsoever between the Central Bank authorised firm and this fraudulent entity. Notes:Any person wishing to contact the Central Bank with information regarding such firms / persons may telephone (01) 224 5800.For more information on how to protect yourself from financial scams, please visit www.centralbank.ie/financialscams The name of the above firm is published under section 53 of the Central Bank (Supervision and Enforcement) Act 2013

Warning: Unauthorised Retail Credit Firm Unauthorised Firm Name Short Term Credit Website https://www.shorttermcredit.info/en/ Email address(es) used hGllo@cblcredit.com Phone number(s) used +353 83 416 3399+353 86 800 6174 Authorisation in Ireland This firm is not authorised to provide Retail Credit or High Cost Credit services in Ireland. Additional information This scam is an example of an ‘advanced fee fraud’, where a payment is sought upfront prior to providing a loan. The loans are never provided.The firm cloned the details of a Central Bank authorised firm and has been seeking to pass itself off as E&L Credit Limited in order to deceive consumers. It should be noted there is no connection whatsoever between the Central Bank authorised firm and this fraudulent entity. Notes:Any person wishing to contact the Central Bank with information regarding such firms / persons may telephone (01) 224 5800.For more information on how to protect yourself from financial scams, please visit www.centralbank.ie/financialscams The name of the above firm is published under section 53 of the Central Bank (Supervision and Enforcement) Act 2013

Warning: Unauthorised Retail Credit Firm Unauthorised Firm Name Short Term Credit Website https://www.shorttermcredit.info/en/ Email address(es) used hGllo@cblcredit.com Phone number(s) used +353 83 416 3399+353 86 800 6174 Authorisation in Ireland This firm is not authorised to provide Retail Credit or High Cost Credit services in Ireland. Additional information This scam is an example of an ‘advanced fee fraud’, where a payment is sought upfront prior to providing a loan. The loans are never provided.The firm cloned the details of a Central Bank authorised firm and has been seeking to pass itself off as E&L Credit Limited in order to deceive consumers. It should be noted there is no connection whatsoever between the Central Bank authorised firm and this fraudulent entity. Notes:Any person wishing to contact the Central Bank with information regarding such firms / persons may telephone (01) 224 5800.For more information on how to protect yourself from financial scams, please visit www.centralbank.ie/financialscams The name of the above firm is published under section 53 of the Central Bank (Supervision and Enforcement) Act 2013

Warning: Unauthorised Retail Credit Firm Unauthorised Firm Name Short Term Credit Website https://www.shorttermcredit.info/en/ Email address(es) used hGllo@cblcredit.com Phone number(s) used +353 83 416 3399+353 86 800 6174 Authorisation in Ireland This firm is not authorised to provide Retail Credit or High Cost Credit services in Ireland. Additional information This scam is an example of an ‘advanced fee fraud’, where a payment is sought upfront prior to providing a loan. The loans are never provided.The firm cloned the details of a Central Bank authorised firm and has been seeking to pass itself off as E&L Credit Limited in order to deceive consumers. It should be noted there is no connection whatsoever between the Central Bank authorised firm and this fraudulent entity. Notes:Any person wishing to contact the Central Bank with information regarding such firms / persons may telephone (01) 224 5800.For more information on how to protect yourself from financial scams, please visit www.centralbank.ie/financialscams The name of the above firm is published under section 53 of the Central Bank (Supervision and Enforcement) Act 2013

Warning: Unauthorised Retail Credit Firm Unauthorised Firm Name Short Term Credit Website https://www.shorttermcredit.info/en/ Email address(es) used hGllo@cblcredit.com Phone number(s) used +353 83 416 3399+353 86 800 6174 Authorisation in Ireland This firm is not authorised to provide Retail Credit or High Cost Credit services in Ireland. Additional information This scam is an example of an ‘advanced fee fraud’, where a payment is sought upfront prior to providing a loan. The loans are never provided.The firm cloned the details of a Central Bank authorised firm and has been seeking to pass itself off as E&L Credit Limited in order to deceive consumers. It should be noted there is no connection whatsoever between the Central Bank authorised firm and this fraudulent entity. Notes:Any person wishing to contact the Central Bank with information regarding such firms / persons may telephone (01) 224 5800.For more information on how to protect yourself from financial scams, please visit www.centralbank.ie/financialscams The name of the above firm is published under section 53 of the Central Bank (Supervision and Enforcement) Act 2013

Warning: Unauthorised Retail Credit Firm Unauthorised Firm Name Short Term Credit Website https://www.shorttermcredit.info/en/ Email address(es) used hGllo@cblcredit.com Phone number(s) used +353 83 416 3399+353 86 800 6174 Authorisation in Ireland This firm is not authorised to provide Retail Credit or High Cost Credit services in Ireland. Additional information This scam is an example of an ‘advanced fee fraud’, where a payment is sought upfront prior to providing a loan. The loans are never provided.The firm cloned the details of a Central Bank authorised firm and has been seeking to pass itself off as E&L Credit Limited in order to deceive consumers. It should be noted there is no connection whatsoever between the Central Bank authorised firm and this fraudulent entity. Notes:Any person wishing to contact the Central Bank with information regarding such firms / persons may telephone (01) 224 5800.For more information on how to protect yourself from financial scams, please visit www.centralbank.ie/financialscams The name of the above firm is published under section 53 of the Central Bank (Supervision and Enforcement) Act 2013

Chair and committee members, thank you for the opportunity to address you today. Martin O'Brien, head of our Irish Economic Analysis Division, joins me.Our Quarterly Bulletin, published today, paints a picture of a resilient domestic economy poised to grow in the region of 2.5 per cent annually through 2026[i]. The labour market remains robust, and inflation has fallen below 2 per cent for the last six months. However, revisions to national accounts data for 2023 and evidence on wage developments highlight the risk of persistent domestically generated inflation. Service inflation, in particular, has been stubbornly high, hovering between 4 and 5 per cent for over a year.These factors necessitate a measured and targeted approach to budgetary policy that balances the need for economic stability with the imperative to address structural deficiencies.The Summer Economic Statement (SES) outlines a fiscal package of €8.3 billion for Budget 2025. Nearly half of this increase directly supports maintaining the current level of services, doubling the allocation from Budget 2024. Over one-third of the package targets additional current spending and tax reductions, while the remaining 17 per cent is reserved for capital spending under the National Development Plan.This represents a net spending increase of 7 per cent in 2025. This procyclical budget stance will add further to domestic price pressures. As outlined in the last Bulletin, spending increases of this magnitude above the 5 per cent rule since 2022 has added half a percentage point to inflation annually[ii].I want to draw out the vital interaction between fiscal and monetary policy.Last week’s Governing Council meeting saw the second 25 basis point cut in interest rates. This follows a sharp increase of 450 basis points in response to rising inflation from the strength of the pandemic recovery and, more prominently, Russia's invasion of Ukraine.The ECB Governing Council has communicated that the future path for interest rates will be data-dependent and calibrated to economic developments across the euro area as a whole. Fiscal policy is the key instrument available to national governments to manage the economy. However, a prolonged period of expansionary fiscal policy during an upturn in the economic cycle risks generating persistently higher domestic inflation, allowing wage growth to outstrip productivity gains and erode competitiveness.Ireland’s fiscal stance this year stands in contrast to the contractionary stance of the aggregate euro area. Addressing the imbalance in the housing marketLet me turn to the pressing issue of addressing housing market imbalances. Housing supply has not kept pace with the rapid growth in job creation - with a ratio of one home for every four new workers and now acting as a constraint on job growth.Housing demand pressures are not unique to Ireland, and we have seen a rapid increase in delivery over the last couple of years. Demographic pressures and pent-up demand will likely require an upward shift to more than 50,000 new builds annually[iii].An increase of this magnitude fundamentally hinges upon making construction both financially and practically viable. Such viability is linked to three interconnected pillars: Preparation of zoned and serviced land, an efficient planning processes, and construction productivity.Preparing serviced land ensures that land becomes available and is equipped with essential infrastructure. Without the requisite services, land cannot be developed efficiently, stifling the ability to meet housing demand.Protracted approval times and complexity in the planning process can significantly delay housing developments and exacerbate costs.A range of indicators point to labour capacity constraints in the construction sector. Policy can support productivity, reducing the amount of labour needed per unit by promoting and incentivising more expanded use of modern construction methods.Addressing the viability of housing requires a multifaceted approach encompassing fiscal and non-fiscal policy interventions, with some measures exerting minimal direct pressure on public finances. Nevertheless, given the social and economic implications of the housing challenge, there is a justification for increased capital expenditure, particularly in infrastructure development and serviced land provision.Such spending, however, must be carefully calibrated to ensure it does not jeopardise fiscal sustainability or contribute to overheating the economy. The final component is financing - an upward shift to more than 50,000 units will require an estimated additional seven billion euro.Additional financing alone cannot rectify housing imbalances; trying to do so would exacerbate overheating risks. Addressing viability concerns and lowering risk will strengthen the construction sector's ability to attract equity capital, which will, in turn, improve its capacity to raise debt and maintain an essential diversity of financing. The State will continue to have an important role to play by providing social, affordable and cost-rental housing. However, the State’s role has to co-exist alongside a sustainable, privately financed and developed market to ensure a diversity of housing and tenure types.  International investment will remain an important source of financing, as will the domestic banking system’s balance sheet capacity for lending that can play a role in scaling up housing delivery.Sustainability of public financesWhile addressing housing demands is warranted, additional capital spending must be funded in a manner that does not increase vulnerability in public finances.The SES captures the known risks on both the revenue and expenditure sides well.Corporation tax receipts continue to outperform expectations, yet these revenues remain highly concentrated across a small number of firms. Almost half of the funds collected are delinked from domestic economic activity.This concentration poses a significant 'sudden stop' risk, immediately turning the current headline surplus into a deficit.On the expenditure side, challenges loom large. An ageing population will place increasing pressure on public services, particularly in healthcare and pensions. At the same time Ireland's commitment to reducing emissions will require substantial investment. Sustainability is also at the heart of the European Union's revised economic governance framework[iv].However, the effectiveness of EU rules is limited for Ireland. GDP is used as the measure of economic activity, which is distorted by the global activities of large multinationals with a presence in Ireland. In addition, the rules do not account for excess or windfall corporation tax revenues.Therefore, the Government's Net Spending Rule is crucial in ensuring macroeconomic and fiscal sustainability[v].The Net Spending Rule is not mentioned in this year's SES, and the projections show noncompliance in 2025 and 2026. The rule is designed to prevent overheating during periods of strong demand and high inflation while enabling supportive fiscal policy during downturns. Adherence to the rule should facilitate difficult decisions necessary to ensure fiscal sustainability and avoid the boom-bust cycles that have damaged the Irish economy in the past.ConclusionIn conclusion, our economy is set for moderate but steady growth but is operating at capacity across several sectors. The health of our public finances presents a unique opportunity to address the infrastructural and housing deficits built up over the past decade.By maintaining an overall budgetary stance that is prudent and prioritising capital investment, we can safeguard Ireland's economic future and deliver long-term prosperity for all.I thank the committee members for their attention, and we are happy to answer the members' questions.  [i] See Quarterly Bulletin 3, 2024 [ii] See Quarterly Bulletin Signed Article Fiscal Priorities for the Short and Medium Term[iii] See QB Housing Article[iv] See European Commission Revised Economic Governance Framework[v] The Government Net Spending Rule was announced in the 2021 Summer Economic Statement. This rule, designed to stabilise expenditure based on trend growth (currently estimated at 3%) and the price stability target for inflation (2%), supports counter-cyclical fiscal policy.