Housing Supply Model | Progress Ireland

What would supply look like if homes only had to have a B1 energy rating? How many homes has the requirement to make homes BER A2 cost us?

This model estimates the reduction in housing supply attributable to the 2019 revision of Technical Guidance Document L under Ireland’s Building Regulations, which implemented the NZEB requirements of the EU’s Energy Performance of Buildings Directive, using the Irish government’s own ex ante estimates of the resulting construction cost increase.

This model applies the construction cost elasticity estimated by Lyons & Günnewig-Mönert (2024) to the additional construction costs imposed by energy efficiency building regulations, introduced in November 2019.

The elasticity of −1.9 means that a 1 per cent increase in construction costs reduces new housing supply by 1.9%. The Irish government’s own cost-optimal analysis estimated a cost uplift at an average of 1.9% over then-current construction costs, with a range of 0.7%–4.2% depending on dwelling type and specification.

This is not an argument against the regulations. It is an attempt to quantify the loss of housing supply that arose due to a regulatory change.

The calculation works by multiplying the cost uplift by the elasticity to get an annual supply reduction percentage. That percentage is then applied to actual CSO completions data for each year since November 2019. So if costs rose by 2% and the elasticity is −1.9, supply in any given year is estimated to be 3.8% lower than it would otherwise have been. Summed across each year from 2019 to today, that gives you the cumulative figure. The model uses real annual completions rather than a fixed baseline, because Irish output varied significantly across the period — from just over 20,000 in the COVID years to over 36,000 in 2025. Applying a flat baseline across all years would overstate the early losses.

Parameters

Marginal cost uplift over 2011 standard (%) 3.0%

This models only the cost increase over and above the 2011 Part L standard, which is already absorbed into the baseline completions figure. Dept-commissioned research estimates the 2019 NZEB uplift at 0.7–4.2% (central: 1.9%). SCSI estimates 5–9% relative to the previous standard. Values above 9% represent ZEB (2030) projections or sensitivity testing.

Cost elasticity of supply (Lyons & Günnewig-Mönert, 2024) −1.9

Year	Completions	Homes lost (est.)

* 2019 figure covers November–December only, when regulations took effect. 2020 and 2021 figures affected by COVID-19 site closures. See limitations.

Key Metrics

Supply reduction

3.6%

Homes lost per year (2025 base)

1,306

Cumulative since Nov 2019

8,361

Scenario Comparison

Cost uplift	Supply reduction	Homes lost/yr (2025 base)	Cumulative (year-by-year)

Homes Lost Per Year by Uplift Scenario

10%

In Context

Part L regulation timeline

Year	Regulatory standard	Target BER	Typical energy use (kWh/m²/yr)	EU directive	Additional construction cost
1991–2005	Prescriptive approach; no EPC	N/A	~150	None — nationally determined	Baseline
2007	40% improvement on 2005 baseline¹	B1	~90	EPBD 2002 (2002/91/EC) — transposed via S.I. 666 of 2006	€4,452–€8,544 per unit³. Absorbed into baseline completions — not modelled separately
2011	60% improvement on 2005 baseline¹	A3	~60	EPBD Recast 2010 (2010/31/EU) — transposed via S.I. 243 of 2012	Absorbed into baseline completions — not modelled separately
2019	70% improvement on 2005 baseline¹ — NZEB	A2	~45	EPBD Recast 2010 (2010/31/EU) — NZEB deadline 31 Dec 2020	Dept research: 0.7–4.2% (central 1.9%)². SCSI: 5–9%.
~2030	Zero Emission Building (ZEB) — transposition due May 2026	A (ZEB)	TBC	EPBD Recast 2024 (2024/1275)	Not yet quantified; adds whole-life embodied carbon requirement

¹ 2005 baseline used following DHLGH documentation; some SEAI sources reference 2002. ² Dept 1.9% is the central estimate from research commissioned prior to implementation. SCSI 5–9% is relative to the 2011 standard and includes some materials inflation from the same period. ³ SCSI, House Rebuilding Costs Have Increased by Average of 7.3% Nationally Over Last 18 Months.

First, some years housing supply are genuinely anomalous due to extreme events, such as COVID. That means, the base year is slightly biasing our model to underestimate the effects.

Second, I am using the government’s own ex ante predictions of the marginal costs introduced by the regulation, not estimated costs ex post. As I explain in the accompanying piece, the actual cost has likely exceeded the ex ante predictions.

Third, there are limitations to using supply elasticities to make this sort of calculation across years.

The elasticity of −1.9 is estimated by Lyons & Günnewig-Mönert (2024) using an error-correction model (ECM) with instrumental variables. The IV approach matters: it addresses the fact that costs and supply are jointly determined, which would otherwise bias the estimate. The ECM identifies the long-run relationship between the level of construction costs and the annual flow of completions.

The −1.9 figure is a long-run elasticity. Markets take time to adjust. The model therefore probably overstates the loss in the early years. I think this is likely compensated by the fact that actual costs exceeded the ex ante predictions, but the model is interactive, so you can introduce your own cost estimates.

An increase in costs acts like a permanent tax. Other things equal, it raises the hurdle rate for a project, which decreases the set of marginally feasible projects in every subsequent year. But in the real world, other things are never equal. Demand increases through population growth, changes in household size, income growth, government subsidies, and so on, pushing in the opposite direction. This adds a fundamental limit to the veracity of the figures produced here.

You should therefore take the numbers produced seriously but not literally.