The Shape of the Irish Economy, to 2040 and beyond PPAN Workshop Ireland in 2040: Managing change over a generation Ronan C. Lyons, Trinity College Dublin

Living standards in 1923 (1990 US$) Ireland in the 20th century was not an economic outlier, rather a demographic one Average AGR in living standards (20 OECD countries, 1923-2000) Change in persons/km2 (20 OECD countries, 1923-2000) 3.5% 250% R² = 80% R² = 20% 3.0% 200% 2.5% 150% 2.0% 1.5% 100% 1.0% 50% 0.5% 0.0% 0% $2,000 $4,000 $6,000 Living standards in 1923 (1990 US$) 100 150 200 Persons per km2, 1923 $0 $8,000 50 250 300 Source: Author calculations, based on Maddison, IMF WEO, Wikipedia, CIA World Factbook

With a swing towards population growth, Ireland’s outlier status is going to persist in the 21st century Average decadal change in population: 1850-1980 15% 10% 5% 0% -5% -10% Bulgaria Greece Romania Portugal Poland Netherlands Italy Finland Hungary Germany Denmark Spain Norway Belgium Austria UK Sweden France Ireland Source: Author calculations, based on Maddison (2013), Eurostat Population Projections (2013)

With a swing towards population growth, Ireland’s outlier status is going to persist in the 21st century Average decadal change in population: 2015-2080 forecast 15% 10% 5% 0% -5% -10% Bulgaria Greece Romania Portugal Poland Netherlands Italy Finland Hungary Germany Denmark Spain Norway Belgium Austria UK Sweden France Ireland Source: Author calculations, based on Maddison (2013), Eurostat Population Projections (2013)

With a swing towards population growth, Ireland’s outlier status is going to persist in the 21st century Average decadal change in population: 2015-2080 vs. 1850-1980 15% 10% 5% 0% -5% -10% -15% -20% Bulgaria Greece Romania Portugal Poland Netherlands Italy Finland Hungary Germany Denmark Spain Norway Belgium Austria UK Sweden France Ireland Source: Author calculations, based on Maddison (2013), Eurostat Population Projections (2013)

Ireland’s demographic outlier status is also evident in urbanization rates and in average household size Urbanization rates, 1960-2016 by country Average household size, by country (2014) 100 90 80 70 60 50 40 30 20 10 2.8 2.6 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 1960-2016 change 1960 urbanization Ireland Italy Germany Greece France Spain OECD Norway Canada USA UK Finland Denmark Australia Luxembourg Netherlands Iceland Japan Belgium Portugal Portugal Greece Spain Italy Luxembourg Belgium UK Switzerland France Netherlands Austria Sweden Norway Denmark Germany Finland Ireland Average Source: Author calculations, based on Hypostat (2016), UN WUP (2014)

Ireland’s under-urbanization is a housing market problem, not a labour market one Lorenz curves of place of residence and work, Ireland (2016) 100% Top 650 EDs account for: 65% of residents 83% of work/school 80% 60% Equality Residence Work/School 40% 20% 0% 0% 20% 40% 60% 80% 100% Source: Author calculations, based on CSO POWSCAR dataset (2016); excludes WFH/no fixed place of work; includes EDs with fewer than 10 returns

Little evidence that Dublin’s population share is too big – smaller populations mean bigger share in largest city Share of population in largest city, European countries (n=42) 100% R² = 60% 80% Ireland (Rep) 60% Ireland (Island) 40% 20% 0% 13 13 = 0.4m 16 Population in logs 19 19 =178m 12 14 15 17 18 20 Source: Author calculations, based on jakubmarian.com, Wikipedia/CIA World Factbook

Over the last two decades, our housing output has been increasingly out of sync with our household structure Number of households (000s), by size and Census year New dwellings completed in Ireland, 1996-2015 (thousands) 1,800 1,600 1,400 1,200 1,000 800 600 400 200 75 741 125 228 120 505 215 237 53 499 886 Urban/GDA apts Rural apts Other rural Urban/GDA houses Rural one-offs 1996 2016 1-2 persons 3-5 persons 6+ persons Source: Author calculations, based on CSO Census and Dept of Environment/Housing statistics

As suggested by its under-urbanization, Ireland is “missing” roughly 0 As suggested by its under-urbanization, Ireland is “missing” roughly 0.5m apartments Fraction of dwellings in apartments Households by number of persons and related dwelling stock, 2016 Latvia Estonia Italy Spain Switzerland Lithuania Iceland Finland Poland Germany Austria Slovakia Czech Rep Bulgaria Sweden UK Greece France Liechtenstein Portugal Luxembourg Romania Hungary Denmark Croatia Slovenia Cyprus Norway Belgium Netherlands Malta Ireland 600,000 1-2 households 1-2 dwellings 500,000 3-5 households 3-5 dwellings 400,000 300,000 200,000 100,000 0% 20% 40% 60% 80% GDA Ex-GDA Source: Author calculations, based on Eurostat and CSO Census 2016

The 550,000 new homes planned in Ireland 2040 will not be enough to lower household size in coming decades Average household size in Ireland, by Census year Number of extra dwellings required (000s) for a population of 5.8m vs. 4.8m, for different average household sizes (relative to 2.75) 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 1200 1000 Ireland 2040 800 600 400 200 1966 1971 1981 1991 2002 2011 2016 2040e EU2014 2.75 2.65 2.55 2.45 2.35 2.25 Source: Author calculations, including those based on Census of Ireland (various returns) and allowing for annual obsolescence of 0.5%

Policy needs to recognise trade-offs: second tier cities, not third, and apartments, not houses Ireland 2040 recognises the role for Ireland’s ‘second tier’ cities By the 2060s, Ireland’s five largest cities are likely to have a population of 5 million Policy is unlikely to have much impact ‘redirecting’ growth from Dublin to second tier – but can prioritize those four cities relative to the ‘third tier’ Far more important than ‘Dublin vs. rest’ this is the prioritization of urbanization (of residence – urbanization of work is far ahead of this) As population grows, Dublin’s share is likely to fall, based on patterns seen in other countries Key to accommodating population growth efficiently will be the construction of apartments, to reflect demographics Two alarming stats: Dublin (inside the M50) needs 20 extra homes per acre by mid- century – translating into an apartment block every week for decades Solutions: audit of construction costs and regulations, cost-rental (budget), LVT

Thank you! Key themes: Ireland's long-term economic performance is very much in line with its peers – but it remains a demographic outlier Unusually among high-income countries, Ireland faces faster population growth in 21C than in 19C/20C Taking account of Ireland’s size (and island nature), Dublin is not too big Ireland's “under-urbanization” reflects housing market problems, not labour market ones Its high household size also reflects housing market problems - in particular not building enough apartments This is supply, not demand – and thus one of the principal challenges for Ireland 2040 is to reform policy and taxation in order to provide the “missing” 500,000 apartments