Rebuilding Local Authority housing capacity: a design for an apprenticeship guarantee scheme

Introduction

Housing is the main social service provided by local government (Callan 2018), yet since 2019 the number of vacant homes owned by local authorities has stood at around 4,400 annually (NAOC 2019-2022). Given the ongoing housing crisis, this situation has often led to adverse media and political commentary (RTE 2023; Irish Daily Mail 2024).

The report of the Housing Commission (2024) highlighted the need to ensure that local authorities “have the required skills and resources to drive action to address vacancy”. However, local authorities employ few qualified tradespeople and apprentices. This means that housing maintenance, refurbishment and other remedial work is predominantly subcontracted out to private providers through the public procurement process, which can often lead to delays.

This was not always the case. In earlier decades, local authorities employed more tradespeople whilst providing good opportunities for craft apprentices. The government state that increasing the number of apprentices is “crucial” to addressing the housing crisis, although it does acknowledge that the system currently faces significant challenges and is not producing enough qualified tradespeople to meet demand (Taoiseach cited in National Apprenticeship Survey 2024).

The craft apprenticeship system is described as “employer led” implying it is driven by market dynamics. However, the highly cyclical nature and particular industry structure of Ireland’s construction sector, means that the market left to itself is unlikely to provide a sufficient level of output.

Ireland has the most volatile construction sector in Europe that has been plagued by sharp rises and declines in house prices and supply for half a century (Mansergh 2024). This continuous process of expansion and contraction severely impacts the replenishment of the workforce as apprenticeship opportunities can quickly dry up as firms retrench or go under.

The current undersupply of apprentices can be traced to the last property crash and the loss of a significant number of large firms that had been good providers of apprenticeships. The current industry structure is one dominated by small firms, the majority of which are microbusinesses, which can often have difficulties taking on apprentices due to financial constraints.

This paper argues that a key public sector employer – the local authorities – could help fulfil unmet demand and serve as a small countercyclical buffer to ameliorate falloffs in apprentice numbers during a downturn.

It proposes establishing a craft apprenticeship guarantee scheme whereby each local authority guarantees a minimum number of places, set with reference to a specific criterion related to the number of homes in each local authority. This proposal would align with the concept of the Job Guarantee (JG), which is currently being trialled in different EU member states.

The paper proceeds as follows; first a brief overview of the apprenticeship system is provided along with its current challenges. Then the concept of the JG is explained along with the supporting research literature. Lastly, the design and implementation of the apprenticeship guarantee scheme is set out, along with the associated exchequer costs.

Overview and Issues

Over the last decade, the apprenticeship system has failed to provide a sufficient amount of qualified tradespeople. In an extensive survey of construction employers Ó Murchadha and Murphy (2018) found that 86% of respondents stated “there is an inadequate supply of qualified tradespeople, and this figure increases to 94% for large respondent firms”.

Increasing the number of apprentices (broadly defined), is a key government priority as part of its Housing for All strategy. A target of 10,000 new annual registrations has been set for 2025. However, as we can see from Figure 1, targets have not been met in the last seven years for which they were set.

In Ireland, apprenticeships fall into one of two classifications (craft and consortia). It should be noted that the government does not distinguish between the two categories for the purposes of their targets. This is despite them being quite different in how they operate.

The former, which are the focus of this paper, are traditionally understood as more construction-related, encompassing those learning four-year trades in areas like carpentry, plumbing, electrical, bricklaying, etc. The latter is a newer classification introduced in 2016 and designed to provide alternative career pathways outside of the CAO points system. It includes diverse course areas like hairdressing, retail supervision, accounting technician and various others (see Appendix).

As we can see in Figure 2, there has been significantly greater annual growth in the number of consortia registrations versus their craft counterparts since 2016 (79.9% vs 10.5%), albeit the former having grown from a much lower level. New craft registrations have yet to surpass their 2021 peak.

It could be argued that the sharp growth in consortia registrations flatters the overall numbers, giving a false sense that the system is nearing the targets that have been set for addressing the housing crisis.

In 2024 (Q1) the total apprentice population was 27,470. This was below its historical peak of 28,500 which was reached in 2007 (DPER 2024). It is worth noting that the 2007 figure comprised solely of craft apprentices, as this was prior to the introduction of the consortia classification. If we assume a rough 70/30 split of the population between craft and consortia apprentices, then that would mean we currently have around 19,229 potential tradespeople in waiting, which is still significantly less than the 2007 peak.

Although a specific output target has not been set for newly qualified tradespeople, a specific target for expanding the size of the construction workforce has been set. SOLAS’ report Analysis of Skills for Residential Construction & Retrofitting (2023) estimated that an increase of 50,831 workers was needed by 2030 to meet our housing targets.

This report used 2019 as the base year for that estimate when an estimated 146,900 were employed in the construction sector. By 2022, the numbers working in construction had fallen to 134,482 (Figure 3). If we add the difference to the report’s target for 2030 then the figure now needs to increase by 63,249.

The government describe the craft apprenticeship system as “employer led”. This indicates a belief that market dynamics will create an equilibrating effect where the supply of apprentices will increase to meet demand. However, the recent historical record casts doubt on this. This can be attributed in significant part to changes in both industry structure and at the firm level, which have taken place in Ireland’s construction sector since 2007.

Firstly, following the property crash, a significant amount of construction firms failed. The period 2008-2011 saw a reduction of 40.9% in the number of active firms in the market (CSO 2013). Many of the big firms which collapsed, those which were engaged in a broad array of construction activities, have been replaced with more medium size firms which pursue greater specialisation. These firms may not wish to bring in-house the kind of broad array of activities that their predecessors once had, choosing instead to subcontract for outside skills.

An additional factor has been the rise in the practice of misclassifying workers as “self-employed” contractors, despite them effectively being employees of the firm.  This practice is commonly known as “bogus self-employment” and can be used by employers to avoid obligations under both the tax regime and employment law.

It has been highlighted in various reports by trade unions (ICTU 2015, Connect 2018), think tanks (TASC 2016, Nevin Institute 2019), Oireachtas Committees (Report on Bogus Self-Employment 2021), government departments (Dept. Social Protection (2022) and at the European level (EU Commission 2018).

Between 2005 and 2014, self-employment in the construction sector went from a low of 24% (near the EU-15 average) growing by over 50% in the intervening period (ICTU 2015). A later study by the European Commission (2018) found “moderate” sectoral effects could be observed. Due to its nature, generally occurring in the black economy, precise estimation through individual-level survey collection is difficult (Nevin Institute 2019).

Regardless of the exact scale of the problem, the largest trade union representing craft apprentices have pointed out that this practice threatens the “future of the industry and its craft employment by starving it of apprenticeships” (Connect 2018). Wickham & Bobek (2016) argue that “Firms which have few permanent employees are hardly likely to provide good apprenticeships”.

As we can see from Figure 4, the industry is now comprised overwhelmingly of SMEs/microbusinesses. A survey by the Construction Industry Federation (2018) of its members found that, for most, “taking on an apprentice is beyond their financial capacity”. In response, the CIF called for greater financial supports to address this, but, as the next section lays out, the state can take a more direct and impactful approach by looking to the concept of the JG as a model for establishing an apprenticeship guarantee scheme.

Relevant Literature

The concept of the JG has a long historical lineage often being first associated with US President Roosevelt’s New Deal legislation and the public works programs it provided in response to the Great Depression. Its theoretical underpinnings are often traced back to thinkers such as J.M. Keynes, Amartya Sen and Hyman Minsky.

In more recent times, particularly in the wake of the crises of 2008 and the COVID-19 pandemic, there has been a resurgence of public interest in the potential for JG schemes (Guardian 2018; New York Times 2021; Social Europe 2023). Inspired by a new generation of thinkers such a Tcherneva (2018; 2020), Mitchell & Wray (2005), and Mazzucato & Skidelsky (2020), we are now seeing multilateral institutions like the UN (2023) and the European Commission (2024) actively exploring their potential design and implementation.

It is argued that well designed JGs can address issues such as structural unemployment and underemployment, poverty reduction, the green transition, and industrial policy promotion. A range of EU member states have already begun experimenting with such programs at both the national and regional level (Figure 5), although these have been largely confined to addressing the issue of long-term unemployment.

The UN (2023) notes that the JG can help to solve the paradox of structural unemployment and underemployment coexisting with important unsatisfied societal needs, in a situation where neither the state nor the market are currently supplying a sufficient level of public goods.

A strong argument can be made that the craft apprenticeship guarantee would meet such a criterion. By addressing the issue of the structural underemployment of craft apprentices, it could help the government to reach its overall target. In time, this would lead to an increase in the output of qualified tradespeople, thus helping to meet the aim of increasing the size of the construction workforce. It would also help local authorities rebuild their capacity to deliver and maintain a key public good – housing – which the market is not supplying at sufficient or affordable levels.

Craft Apprenticeship guarantee scheme – implementation and design

Where local authorities were once key providers of craft apprenticeship opportunities, today this is no longer the case (see Figure 6). Out of the 31 local authorities in Ireland, only 6 had craft apprentices on their books in 2023. One local authority – Dublin City Council – had more apprentices than the rest combined. Of the 6 providing places, only 2 had construction-related apprentices, the others being in motor/heavy vehicle mechanics.

Despite the glaringly small size of the population of craft apprentices currently employed by local authorities, and the declining number of tradespeople that they employ, it is important to note that the majority of local authorities still employ a “clerk of works”. This will generally be a qualified and experienced tradesperson who is tasked with supervising contractors who are carrying out maintenance and construction work, ensuring that this work is carried out to specification and meets the relevant compliance requirements. As such they would suitable for supervising the apprenticeship guarantee scheme.

Under the scheme, it is proposed that each local authority would guarantee that a certain number of craft apprenticeship places would be available each year (in a designated category)^[ii]. This number would be set with reference to a specific criterion related to the number of homes that were owned by that local authority.^[iii]

On the 31^st of December 2022, local authorities owned a total of 146,438 homes. The number of places available under the guarantee scheme would be set at 1% of this. This works out a guaranteed number of apprenticeship places of around 1,464. Figure 7 provides a breakdown of these places by each individual local authority. As we can see, Dublin City Council would have the largest number of places available under the scheme (268), with Leitrim County Council having the fewest (11).

In terms of a cross-country comparison with those other EU member states that introduced a JG, we can see that the apprenticeship guarantee would be smaller than the Belgian and French models, larger than those of the Dutch and Austrian, but comparable in size to that introduced in Germany. With regard to a comparison of costs, the next section estimates that it would be larger than the Dutch and Austrian schemes, smaller than France but comparable to those trialled in Belgium and Germany.

Craft Apprenticeship guarantee scheme – Exchequer costs

Next, we turn to the Exchequer costs of the scheme. These come in two parts; first there are the training costs, as apprentices are required to complete “off the job” training in a recognised Education and Training Board (ETB) or Technological University, in order to become qualified. Secondly, there are the wage costs that would be directly incurred at the level of each local authority.  In regards to the former, it is proposed that this would be paid out of the National Training Fund (NTF) surplus.^[iv] The cost of registering a new apprentice (Year 1) is €9,877, with €7,159 incurred for years 2, 3 and 4. Under the scheme, the training cost at full take up (1,464 placements) would be as follows:

In regard to the latter, the wage costs would be paid by central government to the local authorities via a “specific purpose” grant allocation. Generally speaking, two forms of grant are allocated to local authorities from central government. In principle, the “general purpose” or “block grant” is for discretionary spending across local services areas, whereas “specific purpose” grants are for a particular project, program or service. The former is believed to give the local authorities more discretion for how this money is spent, with the latter seen as more targeted and controlled (Callan 2018).

Figure 9 gives a breakdown of the wage costs which would be incurred at the level of each local authority and paid via the “special purpose” grant. As we can see, the wage cost of the scheme in year 1, assuming full take up, is €21.7m which rises to €58.9m in year 4. This graduated increase is due to apprentice rates of pay being tied to the number of phases of “off the job” training that they have completed.[v]

It is worth noting that these estimated costs would likely be lower, as it would take time for these places to be filled up as the scheme was promoted and awareness of its existence was raised. This means that these estimates serve as a ceiling for these wage costs in years 1 to 4. The budgeted expenditure for local authorities in 2024 was over €8bn. Based on that year, the scheme in year 4 (€58.9m) would represent less than 1% (0.7%) of their forecast expenditure.

Conclusion

In recent years, the debate around Ireland’s housing crisis has focused on the need to increase state capacity. Trade unions and political parties broadly of the left have long made such arguments, but now even business groups like IBEC (Budget Submission 2024) and the American Chamber of Commerce (Budget Submission 2024) have joined the chorus.

IBEC’s 2024 budget submission devoted an entire chapter to “Building State Capacity”, where it was pointed out that the “social implications of our low levels of infrastructure development” were particularly evident in the housing system which was having a significant impact on business. Acknowledging the ambitions of Housing for All and the National Development Plan they nevertheless recognised that what was required was “building capacity across the public sector to deliver on these projects”.

The implementation of the apprenticeship guarantee scheme could represent one element of a practical strategy for rebuilding capacity. The Local Government Information Unit (LGIU 2024) point out that despite local authorities being “significant public investors, carrying out more than half of public investment”, their “role as public employers is very low”. There is clearly scope for local authorities to hire more apprentices through a guarantee scheme.

By helping to train the next generation of qualified tradespeople, as opposed to immediately competing with the private sector for the current generation, it is less likely that the scheme would have unintended inflationary wage costs. Considering the sizeable Exchequer spending which has taken place in recent years in relation to housing, and the frequent questions around value for money, a good argument can be made that this would represent a prudent investment.

Over time, vacancy rates would be reduced. Improvements would be seen in the waiting times for housing maintenance, refurbishment and repair services, and there would also be savings in terms of the time spent on running public procurement competitions. Not only would it provide a practical path toward rebuilding local authority housing capacity, it would assist the government in reaching their wider apprentice and construction workforce targets.

Appendix

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[i] The author would like to thank Michelle Norris and Cíaran Nugent for reviewing the paper and for providing feedback.

[ii] The focus would be on those areas related to maintenance, retrofitting, construction, and ancillary construction-related activities. The appendix sets out those craft apprenticeship types qualifying for the scheme.

[iii] The term ‘ongoing need’ is derived from the Parliamentary Budget Office (PBO) and it refers to those households that desire – though are not yet in receipt of – long-term social housing with the associated security of tenure. This definition includes households whose needs are deemed to be met under the official classification i.e., their tenancy is supported through Local Authority funding, but who do not have an ongoing or continuous right to have their housing need met should their tenancy cease.

[iv] The NTF surplus is set to reach around €2b in Q1 of 2025. Under Section 7 of the NTF Act (2000) “the Minister may make payments from the Fund for that purpose of such amounts as are determined by him or her with the consent of the Minister for Finance.”

[v] Year 1 apprentices are paid at €7.16 an hour (33% of qualified craft rate) which works out annually at €14,829. Year 2 are paid €10.75 an hour (50% of qualified rate) working out at €22,360 annually. Year 3 are paid €16.12 an hour (75% of qualified rate) working out annually at €33,529. Year 4 are paid €19.34 an hour (90% of qualified rate) working out at €40,227 annually.

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