Monday November 30, 2020

We need to be cognisant as an industry

‘The development sector has already begun to integrate PRS strategies’ says David Lawlor, Director – Social and Affordable Housing for the O’Flynn Group

6th November, 2020

What's your name and what position do you hold?

David Lawlor, Director – Social and Affordable Housing for the O’Flynn Group

What are your day to day responsibilities?

I am responsible for leading our firm’s strategy and development of schemes for social and affordable/supported housing as well as being involved in residential acquisitions and underwriting of new developments. Across all of the sectors we focus on in the O’Flynn Group, we are developing broader data capture to better inform decision-making and forecasting. I am also heavily involved in policy research and development, much of which we do in collaboration with Property Industry Ireland, incorporating benchmarking and the use of in-depth market knowledge to develop balanced forward-looking structures and policies.

What is your professional background?

I started my career in the development and construction sector in Dublin across a number of commercial and mixed use developments. This was followed by more than a decade in the Middle East where I initially headed a regional office for a large consulting firm and was subsequently hired to be Head of Projects and Corporate Finance for a private investment firm in Abu Dhabi. There I led a team in the development of new projects and new businesses across a variety of industries from concept, strategic and corporate delivery through to operational management. Returning to Dublin in 2018, I took up my current role in the O’Flynn Group, where I use my experience across multiple jurisdictions and sectors to further develop our firm’s innovative and data driven approach to sourcing and implementing new schemes to create shareholder value.

How do you think the industry is coping with the Covid-19 crisis? What lasting impact do you see on the sector?

The industry has adapted well to this exceptional crisis and much of this success is attributed to being one of the first industries to introduce practical and implementable solutions to getting back to work safely. There is no doubt that the strong culture of health and safety in the sector provided an excellent platform for this.

From a strategic standpoint, some of the trends being observed during the pandemic, such as increased remote working and the growth of e-commerce, are fundamental shifts that were developing despite the virus but have been accelerated to some degree. For example, it is likely that we will see a hybrid in-office / remote work week in future which means that the office will remain a key part of work life. There has been significant research recently to highlight the importance of the office environment for collaboration, creativity and mental wellbeing, to name just a few of its essential benefits. In tandem, the residential sector is already looking at accommodating home-offices and delivery-storage solutions in housing and PRS developments to facilitate this trend.

Meanwhile, other restriction-imposed changes, while necessary, are more likely to be temporary. It is determining the difference, which will be crucial to the future direction of many sectors. We need to be cognisant as an industry of how important long-term thinking is for design, planning and development policy and to separate those decisions from the short-term changes which may be needed in a crisis. While there is a breadth of opinion on these matters, the pandemic has provided the ideal opportunity for analysis and debate and the industry has embraced this through in-depth virtual webinars and much broader industry engagement.

What’s your view of the measures introduced in Budget ’21 to deliver more affordable housing?

Overall, this was a positive budget for housing – the extension of the Help-to-Buy scheme is welcomed and even more importantly the budget recognises the need for specific affordable and supported housing measures. A common characteristic of housing crises in prosperous cities across the globe is that a combination of land shortages, increased regulation and limited availability of personal mortgage borrowing, means that generation Y has become the ‘Locked-Out Generation’ in terms of housing accessibility, particularly for those with incomes above the threshold to qualify for social housing. A significant proportion of Irish households are caught in this situation and affordable supported housing, whether to own or to rent, is the foundation for reducing poverty risk, improving access to opportunities, and making economic growth more inclusive and sustainable.

The inclusion of a shared equity affordable purchase scheme, further funding for the development of public land and dedicated cost rental funding for AHBs, shows the strong impetus from this Government to get the public and private sectors to work in tandem to address housing of all tenures. This collaboration and joined-up thinking is vital to sustain our housing recovery and truly address the housing crisis in the short, medium and long-term. We need to see more collaboration between the public and private sectors to ensure that sufficient supply can be provided for supported housing.

How do you see tech innovation transforming the industry? What do you think will be the major breakthroughs over the next 5–10 years?

While many industries have been transformed by technology in the last decade, real estate has to some degree lagged behind, most likely due to the fragmented nature of the industry and the vast number of professions and processes required to complete a transaction from initial purchase through to completion. While Proptech is becoming a buzzword in the VC sector and there is significant capital looking to invest in this space, the broader adoption of many new technologies will take time.

Some of the most interesting innovations in recent times have been those which address the points of friction in the system and look to improve efficiency. The following are some examples:

-Online platforms for viewing, assessing, bidding and even securing mortgage approval and closing of properties on single, seamless, legally recognised systems

-Large scale investment in volumetric modular solutions to centralise design and construction processes and improve efficiency

-Crowd funding and lending platforms which enable retail investors to participate in development funding and drive pricing competition with traditional forms of capital

-Machine learning-based asset management and facility management software to enable accurate, fast and more efficient decision making

The future of Proptech and the success of innovators in this space will be to identify solutions like these to minimise and reduce the pain points within the value chain. With the limited availability of broader industry data, there is also a significant market gap to collate, assimilate and analyse industry-wide, micro-level data. This will provide more accurate market information which will help the industry to improve efficiency and underwriting.

That said, the industry is not just waiting for ‘Silicon Valley’ to bring tech solutions to the table. Some of the largest global real estate firms and asset managers are hiring experienced professionals with core technology and innovation backgrounds into executive and leadership positions to ensure technology is front and centre of strategic and day-to-day planning. There are clear indicators that the firms who embrace data and technology as part of their central strategy will gain market share in the coming decade.

What will be the leading trends in the housing sector in coming years and how will businesses need to adapt?

While much progress has been made to address the housing shortage in the last 5 years in Ireland, most of the supply has been focused on the social housing and private housing segments of the market with the Locked-Out-Generation caught in between. If policymakers are to be successful, this segment of affordable supported housing, both to own and to rent, will make up an increasing percentage of overall housing demand in the coming years. This is starting from a very low base and again collaboration between the public and private sectors will be key to delivery.

Multi-family / PRS rental housing has been a well-established sector in the US for over 30 years and is in its infancy in Ireland. The increasing need for rental accommodation, the desire for well-managed properties, the high costs of new apartment delivery and the scale of capital looking for long-term stable returns will make PRS a key component of rental housing supply going forward, particularly in Ireland’s main urban centres. While many PRS schemes to date have been in prime, higher priced rental locations, we should see institutional investors and pension funds also owning and managing large-scale properties in more periphery locations where rents will be more affordable.

The development sector has already begun to integrate PRS strategies into planning and delivery, particularly for apartments. Going forward, when affordable purchase and affordable rental are added to the current segments of private housing, social housing and PRS, residential developments will need to underwrite for, and familiarise themselves with these broader housing tenures at concept and planning stages. We believe the expansion of the number of segments across the Irish housing market is essential and will be widely welcomed.

David Lawlor will be speaking at The Business Post’s inaugural Housebuilding Summit on Nov 10th. Visit www.housebuildingsummit.com for full details.

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