by Catherine Jane O'Rourke April-23-2020 in Banking & Financial Services, COVID-19, Construction
Prior to COVID-19, the housing crisis was at the forefront of national debate and there is no doubt it was the key issue which dominated the recent general election. The crisis has been further impacted by the halting of construction work in response to the COVID-19 pandemic.
Implications
In response to social-distancing requirements and in consideration of the health and well-being of construction workers, we saw the closure of construction sites at the end of March. We understand this has halted progress on the building of 60,000 new homes to the value of €10 billion across Ireland. We further understand from statistics released by the Central Bank of Ireland that, between 2018 and 2027, the country needs approximately 30,000-35,000 new homes per year in order to meet demand1. The COVID-19 pandemic has exacerbated the existing housing crisis with site closures leading to the inability to progress existing construction projects and commence new construction projects. Some results of this are increased costs for the construction projects and a slowing of the completion timelines.
Cautious Progress
On a macro scale, it is clear that a return to work needs to happen in the construction sector as soon as possible, while, of course, considering the health and well-being of those on-site. The Construction Industry Federation (CIF) in response to these issues, has drawn up a new operating procedure for the sector, in line with Government and HSE recommendations on the management of COVID-19, which includes new parameters around a socially-distanced way to work on construction sites. Going forward, it appears the intention is that a COVID-19 inspector will be appointed for each site to monitor the adherence of workers to this COVID-19 procedure with the intention of standardising the approach on sites of all sizes in Ireland.
Return to Work
The CIF has stated that the return to construction work may occur from next month on a site-by-site basis (in line with HSE advice), once these new health and safety guidelines have been tested across the industry. However, the Department of Housing, Planning and Local Government has recently confirmed that construction is set to resume ahead of this on 35 social housing projects, given the housing shortage in the public sector and the need for emergency accommodation. It is understood these projects are substantially complete, with only minor works remaining. We await confirmation from the Government in connection with how the country will return to a less restrictive way of life following 5 May in this sector and across the board.
Funding Considerations
It is not yet clear what the overall financial impact of the COVID-19 crisis will be on the construction sector or what the country's ability to deal with this financial effect will be. But what is clear, for those projects which are already being funded, is that developers will have to stay in close contact with lenders regarding covenant compliance under their financing agreements. They may also have to consider restructuring those agreements to bring them in line with revised projections on potential sale values and timelines.
Conclusion
We continue on an uncertain path, but the discussions of a return to work for the construction sector shows there is light at the end of the tunnel - albeit this re-opening needs to carefully follow Government and HSE guidance to ensure it does not detrimentally impact upon the work that has been done to flatten the curve in the fight against COVID-19.
For more information on any of the issues raised above, please contact Catherine Jane O'Rourke cjorourke@hayes-solicitors.ie or Danny Heffernan dheffernan@hayes-solicitors.ie
1Population Changeand Housing Demand in Ireland|Thomas Conefrey and David Staunton Vol. 2019, No.14
Back to Full NewsShare this article:
About the Author
Catherine Jane O'Rourke
Catherine advises both employers and employees, in relation to contentious and non-contentious employment matters, including contracts of employment, workplace policies, workplace investigations, statutory compliance, redundancies and dismissals. Catherine also has a background in transactional banking, including acquisition finance, property investment finance and development/construction finance.