Last week, I was having a conversation with a friend about the pros and cons of the government’s possible relaxation of permissions for detached cabins in the future. We went on to complain about prices of everything in general, and then it hit me.
What exactly are the causes of all these rising prices?
How are they connected to each other?
How exactly do they affect house prices in Ireland as we know them today?
I realised I only had a vague idea of why this was the case, and it wasn’t helpful at all. So I began my research – with the aim of summarising it here hoping that it would be useful to at least 1 person.
Introduction.
We already know that Ireland has been grappling with soaring inflation rates since 2019, affecting virtually every aspect of the economy – but none more seriously than our paychecks and the housing market.
This post will try to densely summarise the actual causes of inflation in Ireland, supported by online sources as well as the 2023 Central Bank of Ireland Report on supply and demand determinants of inflation, and explores how these factors have impacted the current housing crisis.
I will also try to evaluate possible policy solutions, including innovative construction methods like modular and timber-frame housing, that could offer short-term relief.
Overview of Main Causes of Inflation in Ireland from 2019 & Their Impact on Housing.
Inflation Breakdown by Year.
Key Drivers Summary
| Year | Average Inflation Rate | Key Drivers |
|---|---|---|
| 2019 | 1.1% | Steady consumer demand, modest wage growth |
| 2020 | -0.3% | COVID-19 lockdowns, reduced consumer spending |
| 2021 | 2.4% | Reopening economy, supply chain issues |
| 2022 | 8.1% | Energy price surge due to War in Ukraine, supply chain disruptions |
| 2023 | 5.8% | Demand-driven services inflation, housing costs |
| 2024 | ≈ 2.1% | Approximate figure |
As seen above, the current state of Inflation in Ireland was steady around 2019, but it reached unprecedented levels in the years following the COVID-19 pandemic – with its highest peak at 2022.
Here are the key points to consider:
1. Supply-Side Factors.
A. The War in Ukraine & Energy Prices.
Cause and Effect
- The Russia-Ukraine conflict significantly disrupted global energy markets. Europe, including Ireland, was highly dependent on Russian gas, which led to a drastic increase in energy prices when supplies were cut or restricted.
- This rise in energy costs also affected the costs of underlying commodities (food, building materials, etc) and contributed to an increase in overall inflation, with the prices of electricity, gas and other fuels peaking at 72.8% in October 2022. (CSO.ie)
Impact on Housing Crisis
- Increased energy costs indirectly impacted housing construction. The rise in manufacturing costs for building materials like cement, steel, and insulation materials increased the overall cost of building homes.
- As utility costs soared, household budgets tightened, reducing disposable income available for housing purchases or rent, thus straining the housing market further.
B. Supply Chain Disruptions
Cause and Effect
- The COVID-19 pandemic led to global supply chain bottlenecks due to factory shutdowns, labour shortages, and logistical constraints in international shipping.
- These disruptions continued even after economies reopened, leading to shortages of key building materials like timber, steel, and electronics used in modern housing.
Impact on Housing Crisis
- The shortage of building materials delayed construction projects (to this day), increased construction costs, and reduced housing supply. (Construction Dive)
- Delays in housing completions contributed to a backlog in housing availability, exacerbating the demand-supply imbalance in Ireland’s housing market.
- Developers faced increased costs, which were passed on to homebuyers and renters, leading to higher property prices and rent rates.
2. Demand-Side Factors
A. Post COVID-19 Pandemic Demand Increase
Cause and Effect
- After COVID-19 pandemic restrictions were lifted, there was an increase in consumer demand as people resumed spending on housing, travel, and entertainment.
- The pent-up demand was amplified by accumulated household savings during lockdown periods, leading to an increase in housing demand.
Impact on Housing Crisis
- The sudden increase in housing demand far outpaced the supply of available homes, intensifying competition among buyers and renters.
- The heightened demand drove property developers to prioritise high-profit projects, further reducing the availability of affordable housing units.
B. Fiscal Stimulus Measures (WFH Rent Relief & Energy Credits)
Cause and Effect
- In response to the war in Ukraine, the Irish government implemented fiscal stimulus measures, including rent relief for those working from home, and direct electricity credits to households.
- These measures increased disposable income, boosting household spending and aggregate demand in the economy.
Possible Impact on Housing Crisis
- Increased disposable income may have enabled more people to enter the housing market, intensifying competition for a limited supply of homes.
3. Population Growth
Over the years, Ireland has experienced significant population growth due to its perceived strong economic growth – leading to increased demand for housing. This surge in demand, coupled with insufficient housing supply, has driven up property prices and rents. (Savills)
According to the chart, from 2015-2023, approximately 3.8 people were added to the population for every one new unit of housing delivered – a ratio of nearly four to one.
This is by far the highest among the the countries analysed and 14% higher than Spain, which saw 3.4 new people per new unit, followed by Canada down to Germany which had less than one person (0.9) for every new housing unit delivered. While housing shortages are common across most western economies, Ireland does stand out by far.
Impact on Housing Crisis
- Limited housing stock & growing demand has driven house prices, overcrowding and rents upward, making homeownership increasingly unaffordable for many, particularly first-time buyers.
- Young professionals and families are forced to delay purchasing homes, leading to long-term economic and social consequences such as lower birth rates and reduced household stability.
- In urban areas especially, the rising population also puts added pressure on transport, healthcare, and education systems – making it even more critical to address housing supply issues to maintain quality of life.
Possible Considerations for The Irish State to Further Reduce Inflation in Ireland and Improve the Housing Situation.
Although Ireland’s inflation rate dropped all the way down to around 2.1% in 2024, the housing crisis remains critical due to persistent supply shortages, high construction costs, and planning delays.
Addressing these challenges requires a multi-faceted approach that tackles both inflationary pressures and housing supply constraints. In my humble opinion, below are potential solutions that support non-standard housing while also considering broader economic factors.
PS. I am not an Economist. So please, do not hesitate to share in the comments if you disagree or have separate views.
1. Invest in Non-Standard Housing to Reduce Supply Shortages
a) Promote Alternative Living & Modular Homes
Recently, the Minister of State at the Department of Housing, Local Government and Heritage, made an announcement to consider planning exemptions for detached cabins and modular-style structures in Irish back gardens. This is a move that, if implemented, may help to slightly improve the housing situation in Ireland.
However, that is only a drop in the proverbial ocean in my humble opinion. For significant improvements, the Irish government would have to consider encouraging investment in the following:
- Modular & Full Timber-Frame Home Construction – Modular homes can be built in factories and assembled quickly, reducing labour and material costs. Timber-frame homes, which are cheaper than concrete-based builds, can further offset rising cement costs.
- Scalability – Large-scale modular projects (such as student and social housing) could rapidly increase supply while reducing strain on traditional housing stock.
- Policy Action – The government could subsidise modular and non-standard construction through tax incentives or grants to developers, making it a more attractive alternative to conventional housing.
PS – Of course, subsidies won’t come from thin air. All the above short-term suggestions are based on the ability of the Irish government to collect and make full use of the 14+ billion euros owed to Ireland by Apple Inc in the short term (My Little Home).
b) Expand Log Cabins and Tiny Homes as Affordable Options
- Planning Exemptions – Fast-track planning permission for log cabins and tiny homes, especially in rural and suburban areas, to provide more affordable housing. Ireland is well known for its planning permissions red-tape. (Jounal.ie)
- Self-Build Incentives – Offer low-interest loans or tax relief to individuals building non-standard homes on their land, making homeownership more accessible.
- Sustainable Living – Timber-based housing solutions reduce reliance on carbon-intensive materials like cement and steel, aligning with Ireland’s sustainability goals. (SKR.se)
c) Use Vacant and Underutilised Land for Temporary Housing
- Convert vacant properties and underused land – As of 2024, there are between 100-164K vacant properties in ireland alone! (Social Justice.ie). There is a vacant refurbishment grant available but it appears there aren’t many takers – according to reports.
- Introduce tax penalties on land hoarding – In order to incentivise development of property, the Irish government already has a Residential Zoned Land Tax which takes care of this to some extent. I cannot find details on whether this is a success or not. Also, it appears that this tax also extends to some Irish farmland, which for me is very counter-productive.
Agriculture, Healthcare and Housing are lifelines for society and I believe they should be subsidised as much as possible instead of being taxed further. However, as the years go by, we always find a way to transform simple human necessities into vehicles for investment.
2. Improve Access to Affordable Housing and Homeownership
a) Reform the Mortgage System for Non-Standard Homes
- Encourage banks to offer mortgages for modular and log cabin or timber-frame homes, similar to financing for traditional builds.
- Provide state-backed guarantees to banks to reduce risk perception around modular and non-standard housing.
- Expand First Home schemes to include modular and timber-frame housing solutions to make ownership more accessible.
- Expand the Help-to-Buy grant for modular homes to encourage non-standard construction.
b) Expand State-Led Housing Development
- Use part of the €13bn Apple tax fund to create a state-backed housing development agency that focuses on modular and non-standard social rapid-build homes.
- Increase social and affordable housing supply by subsidising pre-built modular units.
3. Improve Rental Market Stability
a) Introduce Landlord Incentives Without Scrapping Rent Controls
See Argentina’s recent success story
- Introduce grants for small landlords – to help with maintenance costs and inflationary pressures, preventing them from leaving the market.
4. Maintain Inflation Control While Boosting Housing Supply
a) Balance Interest Rate Policies to Keep Housing Affordable
- Keep interest rates stable or introduce targeted reductions for homebuyers and developers to reduce borrowing costs.
- Encourage banks, credit unions and alternative lenders to finance non-standard housing by offering lower interest rates.
Conclusion
The inflation crisis in Ireland, driven by a complex mix of supply and demand-side factors, has directly impacted the housing market, exacerbating affordability issues and supply shortages. By leveraging innovative construction methods like timber-frame modular homes, Ireland can counter rising construction costs and accelerate housing supply.
Strategic government interventions, such as using the €13bn Apple Tax fund and streamlining planning permissions, could pave the way for a more sustainable and efficient housing market. As Ireland navigates these economic challenges, a balanced approach, addressing both supply constraints and demand pressures, is key to resolving the housing crisis.
References:
- Central Bank of Ireland. (2023). Supply and Demand Determinants of Inflation in Ireland.
- MyBuildingSupplies.ie. (2025). Building Materials Price Tracker – Updated January 2025.
- Irish Mirror. (2025). Minister to Seek Planning Exemptions for Detached Cabins and Modular Structures.
- The Journal. (2025). Government to Make Cabin Homes in Back Gardens Exempt from Planning.
- Central Statistics Office (2025). Ireland 2024: The Year in Numbers
- Statista.ie (2025). Inflation rate for the Consumer Price Index (CPI) in the Republic of Ireland from January 2019 to December 2024
- Construction Dive (2024). Supply chain headaches persist 4 years into pandemic
