Oireachtas Joint and Select Committees
Thursday, 10 October 2024
Joint Oireachtas Committee on Housing, Planning and Local Government
Housing (Miscellaneous Provisions) (No.2) Bill 2024: Discussion
1:30 pm
Steven Matthews (Wicklow, Green Party)
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The witnesses are welcome to the Oireachtas Joint Committee on Housing, Local Government and Heritage. We meet today to discuss the Housing (Miscellaneous Provisions) (No.2) Bill 2024. I am delighted to welcome the following witnesses from the Irish Council for Social Housing: Dr. Donal McManus, chief executive officer; Ms Ailbhe McLoughlin, director of policy; and Ms Lyndsey Anderson, housing policy specialist. We are joined by Ms Orla Cleary and Ms Rosemary Hennigan of Tuath Housing and Mr. Brian O'Gorman of Clúid who are representing the Housing Alliance. The witnesses are all welcome and I thank them for their attendance and assistance to the committee.
To provide a bit of background, this Bill originally came before this committee as the Housing (Miscellaneous Provisions) Bill 2024. We carried out pre-legislative scrutiny and produced a report on that Bill. The Housing (Miscellaneous Provisions) (No.2) Bill 2024 has come back to the committee as kind of a subsidiary of that Bill. It deals with two main parts relating to AHBs and cost-rental homes. It has completed its Stages in the Dáil yesterday and will go to the Seanad next week. This meeting, therefore, will be of great benefit to the Senators who will be addressing the Bill next week. It will also be of benefit to TDs who may wish to assist Senators with the Bill.
I will read a short note on privilege before we begin. I remind members of the constitutional requirement that they must be physically present within the confines of the place where the Parliament has chosen to sit, which is Leinster House, in order to participate in public meetings. Witnesses attending in the committee room are protected by absolute privilege in respect of their contributions to today's meeting. This means they have an absolute defence against any defamation action for anything they say at the meeting. Members and witnesses are expected not to abuse the privilege they enjoy and it is my duty as Chair to make sure they do not do so. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks and it is imperative that they comply with any such direction. Members and witnesses are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person or entity outside the Houses or an official, either by name or in such a way as to make him or her identifiable.
I invite Ms McLoughlin to make her opening statement. Will Ms Cleary be making the opening statement on behalf of the Housing Alliance?
Steven Matthews (Wicklow, Green Party)
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Perfect. That is great. There is one hour and a quarter set aside for this meeting. I invite Ms McLoughlin to make the opening statement. We will then turn to members for questions.
Ms Ailbhe McLoughlin:
I thank the Cathaoirleach and members of the committee for inviting the Irish Council for Social Housing and the Housing Alliance to address the committee on this piece of legislation. I am the director of policy for the Irish Council for Social Housing. I am accompanied by Dr. Donal McManus, chief executive officer, and Ms Lyndsey Anderson, housing policy specialist on social and affordable delivery. On behalf of the Housing Alliance, we have Brian O’Gorman, chief executive officer of Clúid Housing; Orla Cleary, chief governance and legal and people officer, Tuath Housing; and Ms Rosemary Hennigan of Tuath Housing.
Housing associations, also known as approved housing bodies, AHBs, work collaboratively with our colleagues in both the local authority sector and the private sector to deliver good quality homes for those who need them. As a sector, we have delivered more than 40% of all new social housing in recent years. In addition, our members have also played a central part in the delivery of the new cost-rental programme, being the first providers to deliver cost-rental homes in the State. As it stands, AHB cost-rental output for 2024 is expected to total 1,168 homes. As part of the roll-out of more mixed tenure developments, more of our members will become involved in the delivery of cost-rental homes.
As a sector, we welcome the publication of this Bill. Part 2 of the Bill, which will amend the Housing (Regulation of Approved Housing Bodies) Act 2019, is hugely important to our sector. We understand the committee appreciates how urgent it is that these amendments to the Act are passed as soon as possible to ensure AHBs remain registered and under the regulator’s remit. Under the current legislation, all AHBs were deemed to be registered, with this designation ending on a phased basis depending on the size of the AHB. For the largest tier-3 bodies, this designation has already ended. Currently all of these bodies are benefitting from an extension, granted by the Approved Housing Bodies Regulatory Authority, AHBRA, due to the restrictive nature of the current registration eligibility process outlined in the legislation. If this amending legislation is not passed before the end of 2024, a larger cohort of smaller-and-medium sized AHBs will be impacted, as their deemed status ends in December 2024. By this date, they must either have registered or requested an extension to do so.
Part 3 will amend the Affordable Housing Act 2021. As the committee is aware, cost-rental accommodation is a relatively new tenure. The AHB sector has been to the forefront of the roll-out of this accommodation. This Bill references multi-occupancy or house share changes, allocations plans and cost-rental tenant in situ. Facilitating house sharing in cost-rental homes is welcome, as it widens access to cost-rental homes to a wider cohort of people. We welcome the commitment made by the Minister in the Dáil this week to allow for the introduction of individual income eligibility requirements for shared households through regulations.
The Bill appears to keep the lottery system in place as a default option while allowing for more flexibility in determining how to allocate cost-rental homes. This is positive in terms of allowing more flexibility for individual cost-rental landlords. We await further detail on all of this, especially the rent and lottery system, and we look forward to engaging with the Department.
Steven Matthews (Wicklow, Green Party)
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I thank Ms McLoughlin. For the witnesses' information, we waived pre-legislative scrutiny because we are fully aware of the time sensitivity of this legislation, as they outlined. However, we held a briefing with the Department, so we are familiar with aspects of it.
Thomas Gould (Cork North Central, Sinn Fein)
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I thank the witnesses for attending. When I originally got into politics, I was not a big fan of AHBs. I believed they were doing the work local authorities should be doing. I just could not get my head around it. However, they do some fabulous work and I cannot understand why local authorities are unable to deliver what AHBs can. That might be down to funding or a number of other issues. I compliment the AHBs. I deal with a lady named Jennifer Ring at the Tuath Housing Association. To be able to pick up a phone, talk to people and sort out issues is a great model.
Something else I must compliment the AHBs on is the role of tenant officers, who check the properties every year. Cork North-Central is my constituency. Cork City Council has 11,000 properties, none of which has been checked since I became a councillor in 2009. It is not a negative that AHBs check every year. For most people and communities, it is a positive. It catches people who dump out the back, build illegal extensions or carry out works on the house they should not be doing. AHBs do great work in this regard and I compliment their staff.
Ms McLoughlin spoke about cost-rental housing, where rents are below market value, but I have a concern. I spoke to a single lady last week – I raised her case in the Dáil – who was earning €42,000 per year, but a single person earning more than €40,000 per year cannot get on the social housing list in Cork. She does not believe that cost rental is an option for her because the rents in Cork are between €900 and €1,100 per month. While that seems reasonable compared with normal rents of approximately €1,500 and €1,700 per month, she cannot afford it.
Ms McLoughlin stated that the Irish Council for Social Housing wanted to see how the legislation affects the lottery system, allocations and rents. Have the witnesses anything to say about rents being truly affordable rather than just reduced market rents?
Ms Lyndsey Anderson:
We acknowledge that the cost-rental charges are still quite high. When it comes to comparing against the private market in the area, we have found, and recently published researched noted, that, although similarly sized properties in similar locations are being compared, they are not always like for like. The cost-rental property is high-standard accommodation with a secure tenancy and a professional landlord. These advantages set the tenure apart, but there is an acknowledgment from the sector that the rents remain high. It is predominantly down to how the cost is calculated. The cost in cost rental is calculated based on the development, capital, acquisition and financing costs, including debt finance costs and interest charges. There are also management and maintenance costs, which are projected over the lifetime of the unit as opposed to just the daily management and maintenance costs. The rents are expensive and the cost of delivery is high, but the product is high quality. The household’s expenditure on rent remains high – we do not dispute that – but the private sector accommodation that the household came from or would otherwise have chosen would not be of the same quality or security. People are in A-rated homes, so while their rent charges are high, they may save on other expenditure items.
Thomas Gould (Cork North Central, Sinn Fein)
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Ms Anderson mentioned that the rent calculation was based on a length of time. Is that 20, 30 or 40 years?
Ms Orla Cleary:
Correct. The calculation is of the management and maintenance costs for a property over a term of 40 years, as that is the term that a property is designated as cost rental currently. All of that is factored into determining what the rent is. There is no profit built into the rents, which is something that the AHB sector can deliver and stands out from the private sector. There is no profit element for AHBs.
Thomas Gould (Cork North Central, Sinn Fein)
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Could a longer period be considered to help reduce costs? There are people who do not qualify for social housing, cannot buy a house and cannot pay market rents. Many people are living in box bedrooms. There is an entire box bedroom generation. Maybe we need to tease out the question of the period more. Deputy Ó Broin will probably do so.
Capacity is another issue. We could do with quadrupling capacity, given the market that exists. If the witnesses’ bodies were asked to increase capacity, what target could they achieve in a reasonable time or would the sky be the limit?
Mr. Brian O'Gorman:
We are trying to build in the capacity for sustainability. Whenever we engage in a scheme, we want to be able to replicate it. Rather than setting a cap on how much we can do, we need the financing and processes so that we can continue replicating and delivering for as long as there is a need to be satisfied.
Thomas Gould (Cork North Central, Sinn Fein)
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We know that there is definitely a need. A cost-rental scheme in Glanmire in Cork ran out of houses. I am not 100% sure about the figures, but I believe there were 1,200 applications for 36 properties.
Mr. Brian O'Gorman:
We had a project in Lancaster Gate, where there was similar demand. As a future tenure, there is significant pent-up demand and it appeals to a number of sections of the population. That will only grow in time as more people become aware of cost rental.
The only other constraint on us is that all of us on the AHB side develop with 100% debt. There is 100% lending on every single unit we develop. We need to see a movement towards a portion of that becoming non-debt equity or grant that we do not have to repay. Otherwise, we will not be able to continue developing. This is the major constraint at the moment. It is an institutional one built into the organisations rather than a capacity constraint.
Thomas Gould (Cork North Central, Sinn Fein)
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Ms Anderson touched on the standard of cost-rental accommodation. In Cork, it is of a very high quality and being managed properly. It is a place people want to live. I spoke to two young women who were sharing a property on Lancaster Quay. One worked in the hospital and the other worked in the city council. They were really positive about the accommodation. They spoke about a community being built in that development even though it had not been around for very long.
We will need a substantial increase in delivery. There are some excellent parts to the model. My main issues with it are delivery and cost. If should be made more affordable. Great work is being done, though.
Deputy Ó Broin will comment further.
Ms Lyndsey Anderson:
I have some forecasts from the approved housing bodies currently delivering cost-rental accommodation. According to their most recent business cases, just over 1,200 units are expected in 2025 and just over 2,000 in 2026. The current business plans project 1,641 for 2027. These are expected from the current providers. In the AHB sector, we also expect an increase in the number of AHBs delivering cost-rental homes. We understand our colleagues in the Housing Agency are working away on finalising the equity agreements and issuing guidance documents on the current CREL iteration. This information will be very valuable to boards of AHBs making a decision to move into cost-rental provision. We expect that by the end of the year.
Steven Matthews (Wicklow, Green Party)
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Like Deputy Gould, I have learned more about AHBs at meetings of this committee in the past four or five years than I ever knew before. Therefore, it is really helpful that the guests come here and share their expertise with us.
Could someone explain deemed-to-be-registered status to me. It is from the 2019 Act. Why have we reached a point that involves the possibility of losing deemed-to-be-registered status?
Dr. Donal McManus:
The sector has been working on this with the Department over several years. If the current wording on eligibility for registration were kept in place, it would be very difficult to get everything done by the end of the year. We have a guillotine at the end of December 2024, by which date we have to get things in place. We do not have the time for that now. The original wording on AHB eligibility was verbatim and very few AHBs had that verbatim wording in their constitutions in the past 40 years. They emerged in the past 40 years. The wording was quite strict and would have created problems. One would have had to go back to the Charities Regulator to makes changes and so forth. That was a reality. When we looked-----
Steven Matthews (Wicklow, Green Party)
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The description indicated the sole purpose of AHBs was the delivery or provision of housing, whereas many AHBs have ancillary activities. The ancillary activities were pushing AHBs out of deemed-to-be-registered status because their sole purpose was not purely to provide housing. Is that correct?
Steven Matthews (Wicklow, Green Party)
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Yes. That verbatim description was set out in the 2019 Act. What change has there been? Has somebody suddenly noticed that some AHBs have activities other than the provision of housing and now fall foul of the Act? Is that generally where we are at?
Dr. Donal McManus:
That is the nature of it at this stage. Obviously, all AHBs want to become complaint under the Act. If the wording limits their compliance, they have a problem. All AHBs and their boards are conscious that compliance is key. Making the legislative changes proposed will help with the whole process, and we very much support that.
Steven Matthews (Wicklow, Green Party)
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It sounds like a sensible amendment to make to overcome the obstacle. I just wanted to be clear that that was Dr. McManus’s take as well. It is what we had in our briefing from the Department.
We have been very much behind regarding cost-rental housing for many years. It has been central to Green Party housing policy for many years. We met our Austrian colleagues prior to the formulation of the programme for Government to learn from their experience. Of course, they have a head start on us of about 80 years where cost rental is concerned. I remember one of the questions I asked when trying to learn from their experience. Generally in this country, renting is seen as something you do until you buy a house, never as a long-term option. Cost rental gives the latter option. It is secure and cost-efficient and can be beautifully designed. The LDA's recent Shanganagh Castle cost-rental development is exceptional and absolutely fantastic.
Ms Orla Cleary:
That is exactly what we found. I do not think people fully understand the cost-rental model. It is seen as involving just a reduction in market rent in new temporary accommodation until the renter purchases their own home. We are actively creating a campaign on cost rental, and I am sure the other housing associations are doing the same. We will have a series of FAQs. We will be advertising the idea of a home for life, emphasising that cost-rental accommodation is not a stepping stone to somewhere else and that someone who moves into a cost-rental home is entitled to stay there for the rest of his or her life and to consider it a home on a longer term basis. The idea is novel in Ireland, I suppose, but we are going to start rolling out a campaign to inform the people who apply for our properties and the public at large. It is supposed to entail a new form of tenure, not a stepping stone, unless people want it to be, of course.
Steven Matthews (Wicklow, Green Party)
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I agree with that. I have roughly totted up the figures and noted there are to be around 4,000 cost-rental homes produced in the next three years by the AHB sector. I am aware that the LDA also has set a target. The more we see, the more people will become aware that the option is available to them.
The 40-year timeline is in the legislation, the Affordable Housing Act. Is the period based just on the ability to borrow for 40 years? Where did the figure come from? We met an Estonian delegation recently whose members spoke about volumetric and modular construction and timber-framed buildings. They said there is a 50-year life expectancy before substantial refurbishment and renovation has to be done. Where is the 40-year figure coming from? Is it related to borrowing?
Steven Matthews (Wicklow, Green Party)
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Is 40 years a term in lending that cannot be gone beyond, even with mortgages for private property? If the period were extended to 45 years or 50 years, it would reduce the monthly rent, but would an extension of this kind add to the cost overall?
Mr. Brian O'Gorman:
There is a diminishing return after a certain period. There is a sweet spot at more or less 40 years. Obviously, the longer the period, the more the rental benefit, but the return is less than with a shorter period.
I want to pick up on the point the Deputy made about visibility and the publicity attached to cost rental. We have a lot of work to do to make it understandable. Although cost-rental accommodation is relatively new, we did some research recently to determine residents’ views. One resident who spoke at the event had moved accommodation seven times in six years, with a family, including two children, in tow. It is these kinds of people who get the notion of a home for life.
The other major cohort we envisage featuring in the future is the older demographic who face rental for the rest of their working lives and into retirement. They are not that old, I suppose. If you get a mortgage now in your 40s, it is almost too late. Cost rental, given its security, is ideal for those in this cohort, who are often in one- or two-person households.
Ms Rosemary Hennigan:
I want to pick up on the point on research. People were asked about their aspirations towards home ownership and how they felt about cost rental. On the qualitative side, some answered that they still wanted home ownership because they had concerns over how they would continue to pay rent in retirement and old age.
Some people had an issue with inheritance and succession. There were questions and uncertainty. Some wanted to buy their current home in cost rental because they were happy with it. I think that comes from that cultural sense of home ownership. Some were reluctant to invest because they did not feel yet that it was theirs. That goes back to the sense that this is the person's home and hopefully changing that culture that the Cathaoirleach is speaking to. That is what cost rental should really be about. It is about moving us away from home ownership purely being something that is set in a contract with the bank and seeing it as something else.
Dr. Donal McManus:
The Cathaoirleach mentioned the Austrian model as being first among equals. The difference in Ireland is that we define cost rental as a tenure whereas in the European Union, cost rental is a rent calculation for social and affordable housing. That is where it differs. There is great learning from those countries but the fact is that most social and affordable housing in the European Union is cost rental per se, not a separate tenure. We are morphing into that era of social and affordable housing being cost rental. That will make us sustainable over the long term, for both social and affordable. We have work to do to define in an Irish way cost rental as a tenure, not just as a rent calculation. The Housing Commission almost said we are moving towards cost rental in the long term as a form of rent calculation to make it more equal. That is the work that we need to do too. The Cathaoirleach is right that there is sometimes confusion about how the rent is calculated as cost rental and if there is tenure. There is work to be done in the future on that.
Steven Matthews (Wicklow, Green Party)
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Cost-rental eligibility is within an income bracket here. When I was talking to the Austrian Greens, they said it was a much wider income bracket, so there is a much greater mix of different occupations and people at different stages in their lives. Again, it is new and in the development stage. Obviously we can aspire to broader and greater production of cost rental. My time is up. I have some questions on rent calculation but I will go to Deputy Ó Broin for his slot next.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I thank the witnesses for being here at short notice and for the opening statement. Part of the reason a number of committee members wanted to do this session is that, while we accepted there was a need for Part 2 to be introduced before the break for Christmas, some of us were surprised at the cost-rental elements coming in. It is not that we are against them in principle but some of these are important areas that probably need more scrutiny than waiving pre-legislative scrutiny would allow. This allows us to almost do a bit of pre-legislative scrutiny but without calling it that. It also helps us to decide whether we want to table amendments in the Seanad. I will come back to that.
I have a couple of questions on the legislation and a couple of broader questions. I will start with Dr. McManus with regard to Part 2. The original legislation obviously required a formula of words to be put in the constitution. The sector had years to do that and could not or did not do that. I am not so interested in why that happened. That does not really bother me. What is the actual material consequence for approved housing bodies for not having that wording in their constitutions? Does it make any difference? I presume, if the wording was very prescriptive, that whoever drafted it thought it was important that it should be in the constitution. In the view of Dr. McManus or members of the Irish Council for Social Housing, does it make any difference at all or is there a reason or consequence for which the verbatim wording is not now required?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I get that. My question is, since most AHBs have not amended their constitution, does it make any material difference that they do not have that wording in their constitution? Obviously, when the folks in the Department drafted the legislation, they had a reason for putting that in.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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The wording was too restrictive. It would have excluded non-housing-related activities and therefore not having it in means they can continue doing those non-housing activities.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I am asking for the benefit of clarity. What would non-housing activities include?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Anything beyond the bricks and mortar.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Perfect. One of the other changes in Part 2 is the deletion of the alleviation of housing need. It is not that I have a problem with that but I think it is important there is public clarity. From Dr. McManus's point of view, what is the purpose or consequence of removing the alleviation of housing need from those sections of the existing legislation? What does that do or allow the AHBs to do that they might not be able to do if it was left in there?
Ms Orla Cleary:
It is just an extension. I think the majority of approved housing bodies would have very similar wording. I know in our constitution, there is the alleviation of housing need. The definition of what that is has just expanded somewhat to allow us to do those other things. For example, we would have education bursaries and so on. The problem is that the wording in the original Act was just so restrictive that it would not have allowed us to continue to do those.
On a practical level, there is no intention to change business models. The focus is still very much on the delivery of social housing, and now also affordable housing as well. We do not intend to change our business practices. Our advice is that we do not need to change our constitution and we can continue to carry out the roles. It went back to the information being slightly too restrictive and a lack of clarity as to how it would be interpreted. The other point is that the wording was slightly different from the wording in the Charities Act and the majority, if not all, of the housing associations are also registered charities. Therefore, it added a little bit of confusion. The slight expansion makes things a little more flexible for those AHBs that are solely involved in social and affordable delivery, and probably the care and support from housing associations, since it recognises that not all we do is delivering or managing housing.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I have a number of questions on Part 3. With respect to the change to the definition of household, did the AHB sector ask for this? I know there are different organisations here. What was the rationale for asking for this, from the witnesses' point of view? What from their experience of cost rental so far led them to think this was a good proposition?
Ms Orla Cleary:
It came up in the context of the experience we have had in delivering cost rental. While some of the applications would be from families, which would be normal, there were also applications from groups of people who wish to share an apartment. Our view is that they should not be excluded just based on relationship or marriage status. The intent was to make that process a little more flexible and get more clarity from the housing associations as to how that could be managed.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Is it Ms Cleary's understanding from reading the Bill that these separate households would solely be single-person households or could they be two-person households? Does she have a view as to whether it should only be a single-person household or a two-person household sharing? If there was a two-bedroom unit, for example, could it only be two singles, or could it or should it be possibly two couples or a couple and a single?
Ms Orla Cleary:
We would encourage that level of flexibility. We welcome the flexibility that has been introduced in the amendments. We understand from the Department that there are regulations that will come through that will give a certain amount of clarity. We plan and hope to work with the Department because the devil will be in the detail. Very broadly, we welcome the proposed legislative amendments.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I have a concern with this, although again I am not opposed to the principle and understand the logic. One reason that single people may want to share is that they cannot afford the one-bedroom units because the rent would be more than a third of their take-home pay. While not necessarily a desired option but as a practical solution to their housing needs, two single people will come together. The difficulty is that those two single people could be at an early stage in their career and in five, six or seven years, they may have partners or may wish to have their own accommodation. Is there any concern that we could be creating the possibility of some people ending up involuntarily sharing beyond where they believe it is in their interest, as we are currently seeing in the private rental sector? In the private rental sector, it is not uncommon now for two couples in their 30s to be sharing a property that ideally would be for one household. Is that something any of the witnesses has discussed or is concerned about?
Are there ways of trying to design something in that would make it avoidable five, six or ten years down the line?
Mr. Brian O'Gorman:
It is a concern; there is no doubt about that. We can only take an assessment at the time of letting. We cannot foretell the future, unfortunately. As Ms Cleary stated, it involves treating individuals, as I think they should be, as households in their own right. The more pointed discussion will be on how that affects the overall calculation of accessibility. I take the Deputy’s point that sometimes it is a forced together household rather than one of necessity, but that is similar in the private rental sector.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I have two final questions on the household definitions. Do the witnesses have a view on what the income threshold should be? We asked the Minister and he said it has not been decided yet, but I think they have a ballpark figure. Do the witnesses have a view?
How do we guard against a couple whose combined income might be above the threshold but whose separate incomes will be below the threshold if they present and apply as two singles? For example, let us say Deputy Gould and I are a happy couple in Knocknaheeny and our combined incomes do not get us into a two-bed unit. It is practical problem because the rents are going in the wrong direction, which is not the fault of the AHBs. These are real challenges. Do the witnesses have a view of where the income limit should be? Have they given any thought to the problem of Thomas and Eoin presenting as two singles rather than a couple?
Mr. Brian O'Gorman:
There is always that possibility. Even in social rental, there is always a possibility of hidden members of a household, of subletting and so on. We try to manage and oversee that. From our perspective, and I will defer to colleagues here, we would prefer as wide and broad an application process as possible. There are genuine concerns but not at this point. When we advertise properties, as Deputy Gould said, there is huge demand, but in the future – we are talking over a 40- or 50-year time span – demand might be significantly reduced. When all the housing plans come to fruition and we have ended the housing crisis, we will not want to have a small pool of potential applicants. Unlike social, this is dependent on getting people into the accommodation and paying rent.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I have a supplementary question on that. I have many other questions, but I am over time. One of the concerns I have is, given where the rents are, I suspect that a significant number of people are applying but are being refused on the basis that the rent will be more than a third of their take-home pay. Are the AHBs monitoring the position in that regard? Could they share figures on it? I am interested to know, across all the cost-rental providers, what percentage of the total number of applicants for any given scheme are being refused on affordability grounds. Mick Byrne’s research is very good but it does not really deal with this. Are we seeing a growing cohort of people, by income, who are finding it difficult because the rents have trended up? Do any of the AHBs have figures of the percentage of people excluded on affordability grounds? If not, is that something they would be willing to share with us? We are all big advocates of cost rental here. We have all spent years arguing for it. It is important that we get it right at the start. I know from talking informally to some providers that not only is it a very large number of people who are excluded on affordability grounds. That cohort, with each new scheme, is growing as a percentage of the total number of applicants who apply.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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That would be useful. We should write to the LDA and say that the AHBs are able to provide that, even if it is on a total stock rather than scheme-by-scheme basis. If we had the LDA’s data, that would be very useful too.
Steven Matthews (Wicklow, Green Party)
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I wish to make one point and then I will bring in Deputy Gould. It was kind of in my line of questioning previously and it was mentioned in the opening statements. We are moving to ultra-efficient buildings, like the passive house standard almost or like how Shanganagh Castle Estate was constructed. Conventionally, you would have looked at one third of the income as being pitched around something that is affordable, but we also are pitching higher density and well-designed, transport-oriented developments. People are obliged to deal with the cost of long commutes, the price of petrol and diesel and high heating costs. They must also deal with the cost relating to loss of heat from those houses. Is there a point where we say that this is a far better product that involves far cheaper running costs and that affords people health benefits and quality-of-life benefits? The latter are sometimes more difficult to estimate? Is that a factor that has to be considered, rather than just sticking with the criterion of one third of income? I do not expect the witnesses to be able to answer that question. The calculation needs to be nuanced when talking about a product of that nature.
Thomas Gould (Cork North Central, Sinn Fein)
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I apologise, I am going to have to leave after this. Something struck me when Ms Cleary was speaking about older people and pensioners. We see pensioners who are homeless, which was probably something we never saw previously in the lifetime of this State. There are 224 now, and the number is creeping up slowly. I imagine that the vast majority of people who avail of cost-rental properties will not be getting to their retirement age for a long time, but when they do, what happens? There is no way they will be able to pay the rent for cost-rental units, whenever that will be - whether it is in five, ten, 20 or 25 years. Is there a plan to deal with tenants who reach retirement age?
Ms Lyndsey Anderson:
The housing assistance payment, HAP, is available for cost-rental tenants. As and when your income might decrease, if you have been the cost-rental home for six months, you are eligible to apply for HAP for rental support. There have been some challenges in implementing that but we have talked to our colleagues in the Department about it and we are confident it can be cleared up. It is legislated for that HAP is available for tenants in cost rental whose income comes down.
Thomas Gould (Cork North Central, Sinn Fein)
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I appreciate that. What happens to that lady I mentioned who is on €42,000 who does not qualify for HAP because she is over the threshold? Many people have to pay a lot of extra money over the HAP amount in order to get rental properties. Will HAP be sufficient in order that there will not be pensioners who are struggling? Will it be enough for pensioners to still be able to afford to live in cost-rental properties?
Ms Rosemary Hennigan:
I did not carry out research, but we were involved with the Mick Byrne research. Interestingly, at the moment, the demographics are largely people between the ages of 23 and 38. However, during that research, somebody who was 54 said they had only just started planning for their pension and were worried about their old age. It is definitely an area that needs to be looked at in general, particularly in the context of rent subsidies and how those will work. We also need to look at when people have temporary incomes. In general, much work has been done about the point of entry into cost rental. We need to look again over time and how people’s lives change. They might have families or circumstances might change. They might go into retirement. We will have to move with that. This is very new. Our hope is that there would be regulations and more guidance around that in time.
Thomas Gould (Cork North Central, Sinn Fein)
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I had not thought of what Ms Hennigan said about people who lose their incomes for different reasons, namely losing their jobs or on foot of health issues. It is important that work is being done, so that is good to hear. We are looking at cost rental long term. People are saying we need to develop the Irish mentality to cost rental, and all those things need to be considered.
One of the big positives with the AHBs is housing maintenance. I really see it in Cork. Cork City Council has 11,000 council and social houses. There is no preventative or planned maintenance.
I was talking to a lady who lives in the Glen in Cork city who has been waiting four and a half years for new windows and doors and to another in Mayfield who has been waiting three and a half years. I spoke to the head of the Cork City Council housing maintenance unit on Monday. He told me that it only has funding for emergency works. Cork City Council got money this year to carry out retrofitting. It has done 53 properties. There is a plan to do 116 properties next year. That is out of 11,000 properties overall. The council will be 200 years trying to retrofit houses.
I compare this situation with that of the AHBs. Do not get me wrong - I am not saying the AHBs are perfect. From the information I am getting from the tenants, it seems that the AHBs are much more proactive and that they plan and engage much more. How are the AHBs able to manage the costs of doing this work when local authorities are completely failing?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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They get more money than the local authorities.
Thomas Gould (Cork North Central, Sinn Fein)
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I wanted the witnesses to say that.
Mr. Brian O'Gorman:
To be fair, local authorities have much older stock than we do, by and large, apart from some of our members, like the Ivy Trust, which date back before the foundation of the State. Clúid was established in 1995 and Tuath Housing was established a little later still. As a result, all our properties are relatively new. We also have active asset management. We are continuously investing in the properties and carrying out proactive maintenance. This is mainly done on the basis that if we do not proactively maintain properties and have these programmes in place, then the eventual bill will be much more. The hardship we would be inflicting on tenants would be much greater too. It pays to do this. It is good for the tenants and the properties that we are carrying out ongoing maintenance.
Thomas Gould (Cork North Central, Sinn Fein)
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Even if we were to take the human side out of it, Mr. O'Gorman has made the point about the consequences of having cold and damp houses with mould in them. I have people now whose clothes in their wardrobes are mouldy. The ends of their beds are getting damp because they are up against the wall. The human cost of this is great, but so is the financial cost. When there is a chance to do that work, it then costs much more because of the damage done. The AHBs' model of doing it as they go along, with planned and preventative maintenance, is much better from a financial perspective.
There was another scheme I am interested in. A private company was set up for circumstances where people get into difficulties with their mortgage-to-rent scheme payments. Some of the AHBs were doing that too. Is much of this being done now? How is it going?
Mr. Brian O'Gorman:
We are not doing a lot of it. This is mainly because there are other organisations that do it. We have done between 200 and 300. Interestingly, we are now on to our fourth or fifth buy-back, so four or five of the households in this situation are gradually picking themselves up and getting the means to buy back their properties. A mechanism is built into the mortgage-to-rent scheme which means that those people can resume homeownership if their means change. Generally, however, these are one-off properties and very dispersed. It is difficult for organisations like ours that tend to cluster developments in terms of maintenance costs, etc. It does not really fit. They are very expensive to maintain and manage. We always provide the same level of service, which means they are much more expensive for us to manage and maintain.
Deputy Ó Broin will probably have better knowledge of this than I do, but my understanding is that the problem has been diminishing over time as values have gone up and the economy has recovered. Initially, we were talking about something like 24,000, 25,000 or even 26,000 households being in arrears for more than two years. That number has continuously fallen in recent years.
Thomas Gould (Cork North Central, Sinn Fein)
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I always that the concept whereby an AHB or a local authority would step in when a family was in trouble rather than that family losing its house was a good one. There seems to be a reluctance, however, to get involved in this undertaking. I would like to see more of it being done. I say this because my big worry now is that people are paying so much for overvalued homes that some of them will not be able to keep up with the mortgage repayments down the road. There is always a need, therefore, for this type of safety net to be there. Only time will tell I suppose. Are all the AHBs doing this or is it only a few?
Ms Orla Cleary:
We have not done as much recently, and it is probably the same for Clúid. The focus now is on delivering as much housing as we possibly can. From a legal and development perspective, sometimes it can be as difficult to deliver one mortgage-to-rent property as it can be to deliver 70 or 80 properties in a larger scheme. We in Tuath Housing have chosen to concentrate on the bigger picture and on delivering as much as possible. There is some small delivery of mortgage-to-rent properties, but not a great deal recently. Other housing associations are doing much more than us, however, and may be focusing their business plans a bit more around the delivery of the mortgage-to-rent process.
I agree with Mr. O'Gorman that what we have not heard of as much of a need under the mortgage-to-rent process as we did perhaps five or six years ago. It would not be an enormous element of our business model, but I know other housing associations are certainly filling this gap a little better perhaps. This is exactly for the reasons that Mr. O'Gorman mentioned in terms of the properties. We have some in County Galway where there is nothing around them. It is much more difficult to manage situations like that than a scheme of 80 or 100 properties in a city centre. Again, we look to see where our strengths are and what is the best use of resources. For the larger housing associations, it is not always mortgage-to-rent properties, but that is not to say that some of the other associations are not doing it.
Thomas Gould (Cork North Central, Sinn Fein)
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I thank Ms Cleary.
Dr. Donal McManus:
I wish to address Deputy Gould's point about the mystery of the AHBs having more resources, and Deputy Ó Broin can reinforce this point. I will just reflect that there have been two different funding mechanisms over the years. AHBs never got access to the remedial works scheme in local authority areas. The Deputies know this because they were both councillors. We had a plan over the 30 years. We did not have any real work schemes but plans funded through rents over time. We are funded differently, and we had a plan for the long term. We also kept stock, whereas the idea with local authorities was sometimes to sell off the stock. There is a different mindset. The AHB sector is very much into managing long term, but we never got those big healthy grants under the remedial work schemes over the years. We had to rely on charging rents to pay for repairs and maintenance. We have quite a few legacy issues now where rents have not covered those costs.
On the mortgage-to-rent issue, a small cohort of AHBs is doing mortgage-to-rent properties, but the number has fallen in recent years, as was mentioned. Many AHBs are moving into more work at scale. There is a need for mortgage-to-rent schemes, but it has not had the same numbers involved as it probably had three or four years ago. I just reinforce the fact that we are funded differently than the local authorities and so we have to plan long-term. We do not have access to the remedial works scheme and we have legacy issues with older stock that we will have to address in future.
Thomas Gould (Cork North Central, Sinn Fein)
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What I am taking from that is that we are saying local authorities cannot plan in the long-term.
Steven Matthews (Wicklow, Green Party)
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We will have to allow representatives from the local authorities to come in to answer that question. It is unfair to-----
Thomas Gould (Cork North Central, Sinn Fein)
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I will say that local authorities, to be fair to them, are not being funded long-term. This would be the way to look at it. I must run, so I thank the witnesses very much. Go raibh maith agat.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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On that point - it is important that we are all very clear - Dr. McManus is right about the AHB homes that were funded through the old capital loan and subsidy scheme, CLSS, and are currently funded through the capital assistance scheme, CAS. It must be said, though, that the capital advanced loan facility, CALF, and the availability agreement is the most advantageous of all. It is not just in regard to the general needs of AHBs being funded through CALF getting more money. They are getting more money. It is also important to point out that the smaller AHBs, which are still funded through CAS, do not get that benefit either. While I appreciate the grants may look generous, if we go and talk to the local government sector, we would find they do not come anywhere close to meeting the cost of response maintenance, let alone cyclical maintenance.
There is an important point here, though. Of all the different funding models, the CALF availability agreement is the most efficient. The Housing Commission has strongly recommended that in general we need to be moving towards that model for all the housing being delivered, regardless of whether it is local authorities or the AHBs delivering it. I know that local authorities do look enviously, as do CAS-funded AHBs, at the availability agreement funding. I know it is not perfect and it is not like the organisations are awash with money, but there are real material differences.
Steven Matthews (Wicklow, Green Party)
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I thank the Deputy. I have just one question and then I will go back to him.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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That is perfect. I thank the Chair.
Steven Matthews (Wicklow, Green Party)
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When AHBs engage with local authorities and partner up with them, sometimes a local authority will provide the land and an AHB will do the construction. Where is the decision made on to day these 46 units, for example, will be AHB or cost-rental properties?
Does the housing need and demand assessment team negotiate that with the local authorities by indicating what the demand is and the range of tenures to be provided? Where is that decision made?
Mr. Brian O'Gorman:
It is usually made in consultation with local authorities. They will say there is demand in particular areas. Some local authorities have development plans which insist on mixed-tenure development. They have it right down to prescribing proportions, for example, 50% social; 25% cost and 25% affordable for sale. Often the local authority dictates the mix in particular schemes and so on. It is down but it is in consultation. Ultimately it signs off the need and what we are going to build. At the end of the day, it mediates what gets built and for whom it is intended.
Steven Matthews (Wicklow, Green Party)
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There was a recent Government-produced report on the total costs in construction. We have also had good engagement with the Society of Chartered Surveyors Ireland which has been doing a series on costs in construction every couple of years. The costs in the two most recent reports seemed to align quite closely. Is the Housing Alliance in agreement that that is generally the cost of building high-quality housing in this country?
Mr. Brian O'Gorman:
Costs undoubtedly are significantly increasing; we are seeing it year on year. If we take all of our portfolio, we have an average cost of approximately €345,000 but that is based on building in the country and building in Dublin, where it can be as high as €500,000 per unit. It is hugely mixed but that is the average across the country.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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The average cost per unit is €345,000?
Steven Matthews (Wicklow, Green Party)
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That is depending on the site. It could be much higher, as different sites incur different costs for preparation development, etc.
Steven Matthews (Wicklow, Green Party)
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The figure we were seeing in those SCSI reports was approximately €400,000 and something for total cost of construction.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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It was. The other report is on the unit-cost ceilings from the Department, which are not average costs. That is the upper limit to which one can go. It was poorly reported. It gave the impression that everything is costing at the upper end, whereas Mr. O’Gorman’s figures are similar to those of the local authorities. There is a range depending on delivery type, location and size. If a person is purchasing a turnkey, he or she is paying private land value whereas if it is local authority land, it is set.
Steven Matthews (Wicklow, Green Party)
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This is a discussion for another day and I do not expect Mr. O'Gorman to be able to crack this nut today but most of us across the political spectrum are more or less in agreement on the number of housing units that need to be produced over the next number of years, whether new builds or refurbishments. How do we make something affordable that costs a lot of money to make? That is the crux of the matter. With regard to the limiting factors with AHBs and those figures of 4,000 cost-rental units over the next three years, what are the limiting factors for our witnesses if we want to turn that figure of 4,000 to 8,000? Is it the availability of funding or capacity? What are the limiting factors?
Steven Matthews (Wicklow, Green Party)
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Explain that to me. Both the gearing and changing the funding mix.
Mr. Brian O'Gorman:
At the moment, we develop on 100% debt. We lend from the Housing Finance Agency, which is a subsidiary of the Department of housing and we also get a CALF or CREL payment in this case of cost rental, which again is repayable at the end of the loan period. The whole thing is 100% debt. It is not a sustainable model. Most AHB boards have at the most an 80% gearing limit, or debt as opposed to assets. To compare with many of the REITs, they also have gearing limits and theirs are in the 60s. It is because of the P and A, payment and availability, nature of the payment that lenders allow us to go higher as in a sense it is a Government-backed payment but really, 80% is too high anyway and most boards would not want their organisations to go above that as it is too risky.
Steven Matthews (Wicklow, Green Party)
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To go back to cost rentals, that is having an impact on the level at which the witnesses must set rent. Is the point that this is a more expensive model for the bodies?
Ms Orla Cleary:
It is a two-parter. The first point is that we borrow 100% of the funding, as Mr. O'Gorman said but with social housing, we have the benefit of the P and A income. We have a guaranteed income stream that is used to repay the loan. Cost rental is a riskier model because the income we have is tenant rent and there is always a risk. With regard to board appetite, it is different as it is a different risk model. There is that element. Ultimately it comes down to cost of delivery. We have to find that balance between how much it is going to cost to deliver homes and being able to balance that out with the rent that is affordable and that falls at a minimum of 25% below market value but is also something that can be sustained. There is a tension between those factors together. Resources and space are always valuable. Those are the two main things, namely, the funding element and the risk in terms of repaying that funding in the future.
Steven Matthews (Wicklow, Green Party)
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I will leave the final slot to Deputy Ó Broin and we will finish in nine minutes.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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To go back to the Bill, the next thing I want to talk about is the allocations. My understanding of the Bill is that the Minister, by way of regulations, will set down the criteria against which allocations can be made. Individual cost-rental landlords will be able to apply either for the scheme or more generally, as to which of those they apply to that particular scheme. While the Minister has given us some indication of what might be in the criteria, what would the Housing Alliance like to see in the criteria?
Second - and Mr. O'Gorman has more experience of me hassling him on this than others - is that we already have a significant problem within the transfer element of the allocation schemes within AHB social housing as its stock is smaller and therefore, its ability to offer transfers to tenants who may well need them is very limited. That is not a criticism but it seems to me this is an opportunity to design that out from the very beginning. What criteria do our witnesses want to see in the regulations? How do they see that being applied in real terms and have they any thoughts or considerations, given that they have the ear of the Department in the back of the room, regarding the issue of transfers? I have already raised it with the Department and I will be raising it again afterwards. This is a good opportunity to tackle that. That includes the possibility of transfers between cost-rental providers and not just within the stock of an individual cost-rental landlord.
Mr. Brian O'Gorman:
The idea of a special arrangement with regard to allocations is welcome in some ways if it gives the landlord more autonomy. My understanding is that it is more targeted at particular locations. I heard an example recently of a cost rental-scheme being built quite close to a hospital, where an allocation scheme could be introduced that favoured medical workers. As a personal view, I am not in favour of any kind of designation of key or special workers. All workers, whatever they might be, are workers and should be treated the same way. A person should not be preferred for schemes just for having a particular job. In general, the AHBs would prefer a broader application of these rules as if people are not housed, they are not housed. There is a huge housing need and while there is the issue of applying scarce resources as they need to be applied, for AHBs, in terms of managing the units and long-term demand, the broader those can be left, the better.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Without putting words in Mr. O'Gorman's mouth would it be fair to say that whereas the definition of "households", was something the alliance was asking for, the current proposition around the allocations as set out in this Bill is not something that was initiated by the AHB sector?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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On the transfer issue, because that is a slightly separate issue, we are already beginning to encounter some people coming to us as constituency TDs and raising the issue about transfers within cost rental because their household composition or work location might have changed. Is that something the Housing Alliance welcomes or would be positive about engaging with?
Mr. Brian O'Gorman:
The big difference I would highlight, and I will ask for Ms Cleary's comment as well, is that the cost-rental allocations are made an awful lot more speedily because they are in our control. We can do them very quickly, which means we do not get voids. We cannot afford to have voids either. The question about momentum or motivation to introduce similar systems for social rental is unanswerable at this stage. We need to have a system which allows us to allocate properties very quickly.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Might a mutual transfer system, for example, assist in that? If there were two tenants and one happened to be in Tuath and one in Clúid and income and household composition, etc., suited, do the witnesses think that would be operable?
Ms Orla Cleary:
To be honest, it is not something that has been discussed at length between ourselves and Clúid. In principle, it is a good idea as it goes back to that whole point of cost rental being a home for life. If somebody moved into a two-bedroom apartment originally but it no longer suited his or her housing needs then there is room for those discussions. It is not something we have concentrating on because it is such a new model.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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My final question on the Bill is about the last bit of Part 3, which related to the tenant in situ. We know a small number of properties have been bought by the Housing Agency and a slightly larger number of properties are in train. None of the have been acquired by approved housing bodies, which was the original idea of the scheme. In some senses it is not unlike what was said about mortgage to rent, in that the dispersed and older nature of the properties makes them a bigger challenge. This legislation removes a potential legal impediment to allowing the property to be allocated as cost rental. I know I am asking a very awkward question given that the Department representatives are in the room but this is important. If this change goes through, will it really change or reduce the level of challenge approved housing bodies currently have with acquiring those properties - albeit a small number of properties - the Housing Agency has acquired? Will this turn the dial on it or will all of the other problems still be there? I am not looking to put Mr. O'Gorman on the spot but I think we need to be straight that if there is a problem here and if this is not a fix to it, we also need to work out what is the actual fix. I am not saying we oppose this measure. The folks in those properties are delighted they will not be made homeless but they are in a kind of limbo and we need to find a way of getting them and those properties out of limbo. If this does not fix it, from the witnesses' point of view because ultimately we will be asking them to buy the properties, what else could we do so it would be an easier proposition? Mr. O'Gorman does not have to be diplomatic because the Department representatives are nice enough.
Mr. Brian O'Gorman:
To be perfectly honest, I do not think it will make a material difference. We still will have the challenges of them being one-off properties. The additional piece is not just the cost of managing and maintaining single units but also the condition they are in, as the Deputy pointed out. One of the issues with regard to mortgage to rent which is not, as the Deputy said, a million miles from this if that often people would have stuck dodgy extensions on the back of the property, and this kind of thing. We can see the situation. I have two daughters who bought houses recently in Cabra and it would have been better if nobody had done anything to the houses and just left them as they originally were. They would have been much better off. Inevitably there is the dodgy extension at the back, the attic extension which there is no planning for, as the alleged third bedroom and this kind of stuff There are also those issues. The mortgage to rent properties are often expensive and require extensive remodelling to even make them compliant in a lot of cases and to get lenders to lend on them. I suspect there will be the same issues with these properties.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I will ask for one clarification. Ms McLoughlin gave a figure for projected cost-rental delivery next year in her opening statement. Will she give us the figure again?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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With regard the remaining figures for 2025, 2026 and 2027, is that just AHB delivery of cost rental? Just so I am clear about that?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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It will be 1,200 homes for 2025; 2,000 for 2026; and for 1,641 2027.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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With the Chair's indulgence, is there any clarity on how what is currently not equity will become equity? I will ask counterparts that question in a few minutes when they take the hot seat. Has that issue been resolved or is it still under consideration?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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that is a terrible politician's answer to a tricky question.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Apologies, is the importance of that, that it speaks to the gearing issue Mr. O'Gorman spoke about, that is, it eases a bit of the borrowing?
Ms Ailbhe McLoughlin:
Yes. There has been a lot of back and forth between the Housing Agency and the approved housing bodies that are currently operating the model. My understanding is that when it is finalised, it will have been finalised with all of the current experience taken into consideration and in resolution towards the challenge of gearing.
Ms Lyndsey Anderson:
Could I make one other point? With regard to checking or considering numbers around affordability grounds, the Deputy mentioned about bringing in the LDA and getting numbers from it as well. That speaks to a broader issue with the cost-rental model in general. Mr. O'Gorman made the point previously that for the public to really understand the cost-rental model and for us to be able to communicate it in a way people outside of the housing realm will understand, we need to keep it as simple as possible. What we have seen over numerous years with the CSO, for example, is that people who occupy their homes in social rental are not aware of how exactly they are occupying their homes all the time. They do not necessarily know that it is through an AHB or which AHB it is, or if it is w local authority. The same will ring true for cost-rental. Treating all cost-rental providers equally or as close to equal as possible will be really beneficial for ensuring our communication around the tenure, generally, to the public and to potential applicants and later tenants, will be really useful. At the moment, we are delivering in urban areas. Mr. O'Gorman mentioned how careful we need to be in ensuring there is a continued and ongoing demand and need for those units. What we do not want to do is create different tiers of cost rental where then there is a competition within a local area between schemes and the different rents and structures that are applied. All of that just speaks to that general approach whereby if we can keep it as simple and straightforward as possible, it would really help us with all of that communication.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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To add to that, I agree. For that to happen, there needs to be a single financing structure for all cost rentals. There are now three different financing structures between the AHBs, the local authorities and the LDA. There needs to be a single rent setting methodology. There are different rent setting methodologies within the witnesses' sector and again within the local authorities and the AHBs. We also have to pay very close attention to that cohort of people who are excluded from social housing because of income thresholds and who are increasingly excluded from cost rental. That is not a criticism of anybody in this room. That is a policy and a financing matter. In some senses, if we do not resolve those problems at this early stage it will be too late when we start to see them manifest themselves. Again, this is not for the witnesses but for the benefit of the Department officials who we will come to in a moment, we also have to stop linking the rents to market rents because we are only linking the rents to a portion of the market rent, which is new market rents. In most cases the rents are above the existing rents for existing long-term renters in the private rental sector.
I know that has a risk element to it. None of us are being critical of the emergence of cost rental but if these issues are not resolved early, the tenure will not have the level of success that it could and should have, but they are questions for the next session.
Steven Matthews (Wicklow, Green Party)
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Thank you, Deputy Ó Broin. I thank you all for your attendance here today. I found it very helpful. We will now suspend the meeting for five minutes to allow the witnesses to leave and to allow the witnesses for the next session to prepare.
Steven Matthews (Wicklow, Green Party)
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Good afternoon everybody. You are all very welcome back to the Oireachtas Joint Committee on Housing, Local Government and Heritage. We are resuming the discussion on the Housing (Miscellaneous Provisions) (No. 2) Bill 2024. We are joined by officials from the Department of Housing, Local Government and Heritage. I welcome: Mr. Vinny Colgan, from the AHB policy and agency governance business unit; Mr. Liam Murray, AHB policy and agency governance; Mr. Danny O' Sullivan and Mr. David Crowe, from planning, governance and oversight; and Mr. David Healy and Ms Sarah Cooney from the cost rental unit.
I acknowledge that they have already given us a briefing on the Bill and we agreed to these meetings to assist Senators at this stage, given that the Bill has gone through the Dáil.
Mr. Vinny Colgan:
I thank the committee for the opportunity to discuss the Housing (Miscellaneous Provisions) Bill 2024. I acknowledge and thank the Deputies and Senators for their engagement with officials on this Bill on Committee and Report Stages in the Dáil. I am also conscious of the contribution earlier today by representatives of the AHB sector to the committee and would like to note the important role of AHBs in delivering social and affordable housing under Housing for All.
There are currently two Parts to the Bill, the first relating to amendments to the Housing (Regulation of Approved Housing Bodies) Act 2019, and the second relating to amendments to the Affordable Housing Act 2021. As announced by the Minister on the Second Stage reading of the Bill in the Dáil on 8 October 2024, a further amendment will be brought forward in the Seanad in respect of the National Treasury Management Agency (Amendment) Act 2014.
In order to support the discussion today, I am accompanied by colleagues who cover all three aspects of the Bill, namely, Mr. Liam Murray, AHB policy and agency governance unit; Ms Sarah Cooney and Mr. David Healy, from the cost rental policy unit; and Mr. Danny O’Sullivan and Mr. David Crowe, from the planning governance and oversight unit, regarding the LDA amendment.
I will now bring the committee through the proposed amendments to the first Part, which will amend the Housing (Regulation of Approved Housing Bodies) Act 2019. On 26 January 2024, the Government agreed to proposals to provide for amendments to the Housing (Regulation of Approved Housing Bodies) Act 2019 as part of the Housing (Miscellaneous Provisions) Bill 2024. These amendments had the objective of resolving issues in the original Act that were preventing AHBs from registering with AHBRA, the regulator. The Oireachtas Joint Committee on Housing, Local Government and Heritage met on 23 April 2024 with stakeholders and Department officials to commence pre-legislative scrutiny on the Bill. Due to delays in the progression of other Parts of the original Housing (Miscellaneous Provisions) Bill and the urgent requirement to amend the underpinning legislation before the end of 2024 in order to prevent the cancellation of 20 of the largest AHBs, elements relating to the Housing (Regulation of Approved Housing Bodies) Act 2019 were removed from the original Bill and are now brought forward in this Bill. On further consideration of the matter, the Department believed that in order to prevent AHBs falling out of regulation due to a failure to meet the timelines set out in the 2019 Act, a more appropriate approach is to amend the Act to permanently register deemed AHBs, thus removing the need to meet the eligibility criteria, rather than to require an active apply-for-registration before the end of the timelines.
The main provisions related to this section of the Bill are to provide for permanently registering AHBs that were deemed registered on 1 January 2022 by removing the requirement to apply for registration for the aforementioned deemed AHBs; removing references linking specific AHB constitutional objects to AHBRA’s powers and instead link AHBRA’s powers to a definition of the alleviation of housing need regardless of the content of an AHB’s constitution; and amending the definition of the alleviation of housing need to include cost-rental properties.
The second element of this Bill brings forward amendments required to the Affordable Housing Act, which I will now bring members through. The new cost-rental sector in Ireland was given a statutory footing in Part 3 of the Affordable Housing Act 2021. This legislation introduced a new form of rental tenure targeted at middle-income households above the eligibility thresholds for social housing supports, which are struggling with often acute affordability pressures in the private rental market. The introduction of the cost-based model represents a significant contribution to the rental system and was an action set out in Housing for All. Having been launched in late 2021, cost rental in Ireland is at an early stage of implementation, with almost 1,800 homes delivered nationwide to the end of quarter 1 of 2024. While good progress has been made so far, with tenants already enjoying the benefits of tenancies in these homes, the key policy goals and impacts for cost rental are understood as primarily framed over the medium term. As such, the Department of Housing, Local Government and Heritage has been engaging with stakeholders, including cost-rental delivery partners, to assess the lessons learned to date since the launch of cost rental.
A number of measures have been identified in order to refine cost-rental policy and strengthen the legislative framework for the sector. First, the Bill provides for the Minister to set different eligibility criteria for different compositions of households, which will assist in making a reality of multi-occupancy cost-rental homes, whereby two or more unrelated adults come together to access the benefits of cost rental and share the cost of overall rent. Following this amendment, the detailed arrangements for multi-occupancy tenancies will be implemented through regulations, and the Department will work closely with cost-rental providers to draw upon their valuable practical experience when drafting this secondary legislation.
Second, the Bill provides for cost-rental landlords to prepare and submit to the Minister allocation plans for cost-rental homes. This will give scope for greater flexibility and efficiency in the sector where this is judged to be appropriate. When cost rental was first launched in late 2021, the legislation set a one-size-fits-all approach to tenanting these homes because simplicity was the primary concern. Now that the sector is up and running, there may be cause to allow a broader range of tenanting practices for individual projects. For example, cost-rental providers may seek to prioritise those with a link to an area though previous residence, place of employment or children’s education. This was not possible under the existing legislation. At the same time, there may be merit in varying the standard tenanting approach in order to handle very high numbers of applications and avoid long delays in filling tenancies. These allocation plans will always be subject to the approval of the Minister, and the general practices set out in existing legislation will continue to be the default for the sector.
Third, the Bill provides for the unique case of a tenant in situto be allocated a cost-rental home. These provisions allow a tenant in situto remain in place through the cost-rental designation of a property, dispensing with the advertising of a vacancy in that case, but at the same time ensuring that over the long term all the general provisions governing the cost-rental sector will apply as normal. In combination, these amendments to the Affordable Housing Act regarding cost rental, just over three years after that legislation was enacted, represent a widening of scope for Ireland’s newest housing sector.
Last, as announced on Second Stage, the Minister intends to include an amendment to this Bill on Committee Stage in the Seanad. This amendment will permit the Minister for Finance, at the request of the Minister for Housing, Local Government and Heritage, with the consent of Minister for Public Expenditure, National Development Plan Delivery and Reform, to direct the NTMA to pay a further €1.25 billion to the Land Development Agency from the proceeds of the disposal of directed investments. This amendment will make statutory provision for the LDA to access up to €6.25 billion of capital, split between €3.75 billion equity investment from the NTMA, €1.25 billion in debt and €1.25 billion from sources associated with the performance of certain statutory functions related to the provision of cost-rental and affordable accommodation, the development of public land, provision of socially integrated housing and engagement with local authorities. This amendment is required to protect the delivery of the 12,900 homes projected by the LDA’s 2024-28 business plan. The increase in ambition envisaged in Housing for All requires the investment of additional resources over what was originally provided for in the LDA Act to support the delivery of these homes. The board of the LDA cannot approve the agency entering into commitments for the delivery of these homes until they are confident they can meet their financial obligations as they fall due. The additional equity funding provided for in this amendment will ensure the LDA has access to a total of €6.25 billion in capital and will be well-positioned to provide affordable and cost-rental housing in communities throughout Ireland and to support the delivery of the national planning framework well into the lifetime of the 2024-28 business plan.
On behalf of the Minister, I again thank members for their time and engagement with this Bill to date as it enters the Seanad for further debate. I and colleagues from the Department welcome any questions they may have on the Bill.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I thank the officials. They are sick of looking at us, at this stage. It is the third time this week.
Steven Matthews (Wicklow, Green Party)
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They might not have to look at us much longer.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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There are two values to this session. One of those, certainly for the Chair and I, is that with each of the sessions, including the private briefing, Second and Committee Stages and the earlier session this morning, we are getting a much better sense and understanding of the Bill. That is already very helpful. It is also very important to put some of this on the public record. While Second Stage and Committee Stage allow for some of that, this allows us to go into a little more detail. I have questions on three sections. I will then come back to the LDA capitalisation.
I will make this opening point, however. Even though we describe the homes that are being provided by the LDA and AHBs as cost rental, strictly speaking, they are not actually cost rental. It is important that we fully understand this. In fairness, Dr. McManus, in a slightly more diplomatic way than I will put it, highlighted that. The cost-rental model as it operates in almost every other jurisdiction, and how it was proposed as part of the legislation here, is that it costs X to finance, build, manage and maintain a unit of housing over a period, and there is a principle of full cost recovery, or that the rent paid by tenants over whatever the period is basically washes its face. It gives us full cost recovery. The rent setting is related to that full cost-recovery model. That is not what we have in front of us.
The reason I say that is some of the difficulties we have experienced are because we are calling it one thing but it is actually something else. What I mean by that is the moment, for example, that the STAR investment initiative was introduced, LDA units stopped being cost rental because it is not full cost recovery. The State is taking an equity share forever and a day and, therefore, it is only partial full cost recovery. Once that 20% portion of CREL, which is theoretically debt although very soft debt, is transformed into equity, that is no longer cost rental either. In addition, the rent setting is not cost rental. It is probably better described as market discount. That is relevant because, as I understand it, especially with respect to the Land Development Agency's rent setting, where STAR is involved, the level of STAR is gauged against that 25% below market rent. I understand it can go beyond that in some instances. It is not that the LDA can apply for the maximum applicable STAR to get the rent down to the lowest possible level. It is almost now constrained by that 25% rule, although it can go to approximately 30% in exceptional circumstances.
We are calling it one thing but there is now a subsidy. There is not just a pegging to market rent but in the operation of at least STAR - I hope it does not operate in the same way with the 20% equity share - there is now also a link to market rent that prevents rents from being brought down further, even though a higher volume of STAR could be available. I am absolutely sure that is due to the good people at the Department of public expenditure and reform constraining the public finances, as is their mandate. We can talk about that another day.
With respect to the Bill, my first question is on Part 2. Are the witnesses absolutely satisfied that allowing AHBs not to put that text into their constitution will not have any material impact on their operations as per current public policy on social and affordable housing?
I do not have any concerns about this but I want to get it on the record.
Mr. Vinny Colgan:
We think it is quite a positive development, having consulted the sector, and the direct answer is yes. I will outline the reasons. It will ensure AHBs do not have to go through complex organisational restructures to meet that constitutional objective, which would divert the resources away from housing delivery.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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To be clear, Mr. Colgan is referring to the requirement that would then arise of having to split the AHB function from the support or other functions.
Mr. Vinny Colgan:
Requiring AHBs to make a commitment that they devote all of their property towards the alleviation of housing need effectively would require care and support organisations, for example, to create designated housing bodies at a time when we need them devote all of their resources to housing. The second bit of comfort I can give the Deputy is that we are future-proofing the Act regarding the regulator's powers that had been linked to the act of making a constitutional amendment. In other words, a regulator power comes into effect on the date an AHB makes the application with that constitutional object. We are breaking that link and instead linking it to their functions as alleviating housing need, updated with a more modern accurate function as well.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I asked this question in private session but again it is important it is put on the record. That means, for example, after this Part is enacted and commenced, the powers the regulator currently has over an AHB will apply to all of the activities of the AHB. I ask specifically in relation to the challenges that arose in the Peter McVerry Trust because of the blurring of the housing and non-housing functions. There would be no limitation on the AHB regulator to fulfil its functions post the enactment and commencement of this Part, as per how it operates today. It will still have the same scope and powers.
Mr. Vinny Colgan:
The envisaged powers of the regulator would remain in terms of regulating those organisations. What is more, the Act as previously written required the AHBs to undertake the act of applying for registration and making a constitutional change. The default has been changed in that they are now registered so all of the powers of the AHBRA apply. The risk in how the Act is currently written is that AHBs simply cannot apply and fall out of regulation. In this way, the AHBRA's powers apply now on the enactment of this legislation. If an AHB wants to cancel thereafter, AHBRA can use its powers throughout that act of cancellation.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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For clarity, there is no power that AHBRA currently exercises over a registered AHB that it will not be able to exercise over the same AHB after this change in the registration process.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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With respect to Part 3, I have well-rehearsed the concerns I have so I will not go back over them. The witnesses know what they are. Is the Department in a position to share with the committee on the record any information about where income eligibility thresholds for single person household sharing will be? I know the Minister does not have the actual amount. What can the witnesses tell us about that?
Ms Sarah Cooney:
As the Minister said in the Dáil yesterday, the individual income eligibility limits for cost rental have not been decided yet. However, the Department is looking at this issue in the context of the income levels in place for households, average income levels nationally, the issues the Deputy raised about affordability, and what would be affordable within the context of individual income limits. That is the context in which we are coming up with it.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Without pressing on a number - I know Ms Cooney cannot provide one - I presume there will not be a huge change between the current income limit for a household for a two-bedroom property versus two separate households. There will not be a huge gap between them.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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My next question is about allocation schemes. I know Brian O'Gorman was only speaking for Clúid but nobody in the session earlier said they had asked for this change. I am not opposed to it in principle but so far only one hypothetical case has been discussed. We all know it is not a hypothetical case and that it is based on a real potential live project which Senator Cummins mentioned in the private briefing. Where has this come from? It seems it is not an attempt to put in place a comprehensive allocation scheme but that there is a particular issue, challenge or problem in a project which this legislation tries to facilitate or fix. Is that a fair read?
Ms Sarah Cooney:
No. This came from consultation with our cost-rental delivery partners. They include various AHBs, AHB representative bodies, local authorities and the LDA. They raised concerns about the lottery system as it is, some of the administrative burdens there may be in it and, as the sector evolves, the ability of cost-rental landlords to target some of their homes to specific groups.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Targets were an issue that came up in the previous session. I took from our session this morning that the AHB sector was not looking to do the targeting. I am not against targeting in principle, it is just to understand. In those consultations with various providers and potential providers, has that targeting been raised by the LDA or potential private sector deliverers of cost rental? Who came up with that suggestion? My understanding from this morning's session is it is much more specific. It is not about a general set of criteria. It seems to be coming from a very specific ask.
Ms Sarah Cooney:
It did not particularly come from a specific ask or development but was part of broader consultations on cost rental delivery. Some of the cases we looked at related to the area or residency or where someone may live and the cost-rental dwelling. If a scheme were to be developed in Waterford, Carlow, Dún Laoghaire or wherever, it may be a case of being able to look at selecting residents from the area, depending on the scheme. There was also consideration of employment and that, if there were a scheme near a hospital, not just the workers in that hospital but the proximity of those cost-rental dwellings to the employment of the individuals applying could be taken into consideration.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Am I correct in saying there is no allocation scheme for the affordable purchase units and that there is a lottery of whoever applies? This could be a mixture of something similar to affordable purchase but also with some categorisation of key workers or workers in proximity to places of work.
Ms Sarah Cooney:
The lottery is in place under section 31 of the Act. It is the only allocation system. That would remain the default and only if proposed to the Minister in certain circumstances. The next part of this process is to engage with stakeholders on the regulations we would have to develop to set out the process by which these allocation schemes would be prepared.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I have no issue with the change in the part of section 16 that deals with tenants in situ. Ms Cooney explained clearly that she believes it is legally necessary. I am not challenging that. The Department heard from the largest AHB in the country this morning that it will not change the current challenge in getting AHBs to purchase those units stuck with the Housing Agency because the problems, not unlike with mortgage to rent, are about the dispersed nature of the properties and the management and maintenance costs. If we make this change, the Department could be back before this committee in six months and I could be giving the witnesses a hard time because I could be saying this has not solved the problem. Is anything else being done by the Department to fix that? I know it is not a big number of properties but it can be appreciated it would be great to get that fixed. Can Ms Cooney tell us anything else the Department is working on to resolve those matters? Is there an option, for example, for local authorities to take them into stock as tenants in situ? They would not necessarily have the same challenges in dispersal. They would have the financial challenges. Is there any consideration, if there is a financial gap, that there might be a mechanism to bridge it?
Ms Sarah Cooney:
This amendment was to make sure there is no legislative barrier to the allocation of the homes as cost rental and the designation of them to tenants in situ. It is important we brought this amendment in as part of this Act. The Deputy is absolutely right. More broadly, we are working closely with the Housing Agency on the cost-rental tenants in situ scheme, looking at those homes that have already been acquired and what programme could be put in place to transition those out of the Housing Agency, and looking to engage with our colleagues in the AHB sector and, as required, other cost-rental delivery partners. We are also looking at what might be the future of cost-rental tenant in situ. We are reviewing it to see how we could refine it for any future iteration of the scheme.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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At the risk of sounding like a journalist asking Simon Harris when he will call the election, is there any notional timeline for when that work might be concluded or there might be some move? I ask because the situation has been stuck for quite some time.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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On LDA capitalisation, Mr. Colgan talked at the very end of his presentation about how there was €6.25 billion of capitalisation from the three tranches. That is very clear. He talked about the €1.25 billion in debt and then he talked about €1.25 billion and gave a longer explanation. My understanding is that the changes we made to the LDA Act on foot of the Cabinet decision last December to get the second €1.25 billion from ISIF not only doubled the capitalisation, along with the original, but doubled the borrowing capacity. Have I misunderstood that or is that what the second €1.25 billion of those three figures referred to?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Of commercial borrowing.
Mr. Danny O'Sullivan:
Exactly. Then we had the amendments in the Limerick mayoral Bill at the start of the year which allowed for €1.25 billion directed investment from, essentially, ISIF and the NTMA generally. Also, there is a €1.25 billion allowance the LDA can raise through the performance of certain functions, and they are spelled out.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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This is the bit I did not understand. Explain that to me in plain English.
Mr. Danny O'Sullivan:
They are listed in the amendment and I will go through them. Basically, it is through a performance of its functions listed in section 14 of the Land Development Agency Act 2021, among which are:
(j) to enter into commercial contracts and other commercial arrangements (including joint ventures) with local authorities or other parties for the purposes of performing its functions;
[...]
(n) to create investment vehicles to facilitate the development of relevant public land and land owned by the Agency;
(o) to enter into commercial arrangements for the development of relevant public land and land that is privately owned in order to achieve the purposes of this Act and to expedite the provision of social and affordable housing.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Let me try to put that in plainer English. I appreciate Mr. O'Sullivan reading out the legislation. It is really helpful. In addition to the first tranche of capitalisation of €1.25 billion, the LDA had the capacity to borrow another €1.25 billion on the commercial markets. What Mr. O'Sullivan is saying is that the amendment to the Limerick mayoral Act earlier this year allowed for another €1.25 billion in capitalisation and a capacity for the LDA to draw in private or public sector investment in a variety of ways, for example, if it entered into a joint venture and a delivery partner from the private sector brought development capital, examples being if the LDA entered into an arrangement such as Shanganagh Castle or if it were doing social rental on a turnkey basis or St. Theresa's Gardens. Is that what Mr. O'Sullivan means? It is development capital either from the public or private sector where they are partners.
Mr. Danny O'Sullivan:
Essentially, it is. For example, the NARPS portfolio from the NAMA wind-down could be-----
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I thank Mr. O'Sullivan for the reminder. That still has not been transferred from NAMA.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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This is one of the things that I never understood, although I have my suspicions. Obviously NARPS is a special purpose vehicle, SPV, and has the units in it. The debt on those is essentially being repaid by the leasing arrangement between local authorities and approved housing bodies. When NARPS and its units are moved into the LDA, which is a weird thing to do because they are social leases and that is not the LDA's function as it does not do social leases, we always assumed the idea was it would leverage the value of these for the attraction of investment in. Again, in plain English for a poor, lovely TD who does not understand the financial world, how does that actually work? What does that look like in real terms? They do not sell those units but hold them.
Mr. Danny O'Sullivan:
They hold those units. I am reluctant to go into detail in that there is a future funding working group at the moment, chaired by the Department of Finance, on which are officials from the Department of public expenditure, the Department of housing and NewERA. The group will produce a report by the end of the year to look at that.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Could the following scenario be the kind of thing we are talking about? The LDA has these units, there is a guaranteed rental stream coming in from the payments but the debt remains. Who holds the debt? On the point of transfer of NARPS to the LDA, where is the debt that is currently being paid off by the leasing payments from the Department of housing and the local authorities?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Is it that the agency has a rental income stream coming in for those units and it could acquire private sector capital against the value of that to develop?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Exactly. That is from the AIB shares sale-----
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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-----through the NTMA but with no additional borrowing. I appreciate that the figure of €6.25 billion has been quoted. However, we know John Coleman and the LDA are on the record repeatedly, including at the public accounts committee this morning, saying that, right now, the cost of borrowing commercially is too high. The authority is not, therefore, in the market for commercial borrowing until such time as the cost comes down. Sure, in theory, there is €6.25 billion but there is not really until those interest rates come down to a sufficient level. Regarding the €1.25 billion I was querying, do we have a simple name for that?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Let us call it "other sources", because it is not borrowing.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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On that €1.25 billion of other sources, is there any visibility on the period over which that €1.25 billion is attracted? How much of that has been attracted in so far? Again, the agency says it has that €1.25 billion, but if it is not there now, somebody might say that is misleading. I am not at all suggesting the committee has been misled, but it is not money to hand to commit now to, say, Project Tosaigh contracts.
Mr. Danny O'Sullivan:
Again, that future working group will be able to put some meat on the bones of the other sources and provide that detail, and that report is due by the end of this year. That will give us a greater sense of that. For the LDA business plan for 2024 to 2028, we are in and around that figure of €6.25 billion capitalisation the agency requires from the Government. Once that future working group reports, that will put a bit more flesh on the bones for the other sources.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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My maths and my ability to add and subtract is far inferior to that of Mr. O'Sullivan. We have not had access to the full copy of the NewERA report that looks into the business plan. We got a very redacted copy of it. One of the interesting things about that is it was saying last year it needed an extra €5.7 billion of capitalisation. That is not the borrowing requirement or the other sources. It needed €5.7 billion. It has now been given €2.5 billion, which was agreed at Cabinet in December, legislated for in January, and it got the other €2.5 billion that has just been announced and will be in this Bill. My maths says that means it is €3.2 billion short of the €5.7 billion capitalisation it requires. Am I wrong?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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But it is not the funding it was saying it needed.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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It does, but one of them was €5.7 billion of capitalisation, not borrowing, because it has scaled its potential borrowing requirements down to less than €1 billion, probably about €700 million over the lifetime of the plan. The only reason I ask, with the indulgence of the Chair, and it relates to cost rental, and I hope to get clarity on what is happening with the equity in CREL in a second, but it is because, obviously, there are very significant targets for the delivery of cost rental. The funding position of the LDA will be key to that because it will deliver far more of the cost rental. As it stands, from my reading of it, and again we do not have access to the full NewERA report, there is a funding shortfall for its business plan of €3.2 billion on the capitalisation side.
We could theoretically argue that if the LDA upped its borrowing intentions from €700 million to €1.25 billion and secured that entire €1.25 billion of other sources, it might not need the capitalisation. However, last year it asked for capitalisation of €5.7 billion. Correct me if I am wrong but is the Department saying the LDA will not need the extra €3 billion of capitalisation because it will come from borrowing if interest rates fall and it will get funding from these other sources?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Nothing I am saying is factually-----
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I have a question on equity. It is very obscure but important. I do not share the gearing concerns about the approved housing bodies with respect to social housing because they have a guaranteed repayment. There is clearly a risk challenge with cost rental. I understand that. Why not increase the CREL to 55%? It is the same thing either way. What is the value of equity? Is it just to satisfy their gearing requirement or is there some other logic from the Department’s point of view? I know the officials said it would take a couple of months and be done by the end of the year. I do not want to accuse either of them of being like Simon Harris avoiding the election question but do we know when that will be settled? When will it be decided if it will be 20% equity and what the terms and conditions are? Will that be retrospectively applied to any of the cost-rental units for which the CREL is 55%?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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In order that we are clear, for anybody who has accessed CREL since that increase, it is not equity but a full CREL?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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They have not yet gone beyond 35%.
Ms Sarah Cooney:
Yes, in general. As soon as the final legal contract is agreed, it will be retrospectively put in place. There were two reasons around the equity element. Under the cost-rental or cost-recovery model, when equity is put in it has the effect of enabling a reduction in the rents because of the way the calculations are made. The Housing Agency does the financial modelling around this and then determines the appropriate rents. That is one side. The other relates to the concerns AHBs about the ability of this equity to be gearing neutral or even gearing positive in terms of their balance sheets.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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The officials’ heads must get very sore from the constant proliferation of schemes and amendments to schemes. STAR was supposed to do the same thing from the point of view of the LDA. The difficulty the LDA had was that through Project Tosaigh, the all-in acquisition costs were so high that it would not be able to deliver rents of 25% below market rent. As a result, it sought and obtained a subsidy. I know the officials cannot describe it that way but that is more or less what happened. That subsidy is very significant. Apparently we cannot be told what it is per project for reasons of commercial sensitivity but with the first round of the STAR, it amounts to €140,000 or €150,000 per unit. It is in or around that ballpark. It is not that I think this is a good idea, but does it make sense to have two different schemes, namely, STAR for the LDA or any other private provider that decides to get involved, and then equity addition to CREL? As we discussed earlier, if we have different funding models and different rent-setting models, people are moving into something different depending on what is provided. That is very complex. Why put equity on top of CREL rather than access to STAR? I am not advocating that because I think STAR is a terrible idea.
Ms Sarah Cooney:
On STAR, I do not have overall responsibility for the scheme so I do not have information to hand on some of the Deputy's questions about the levels. I could talk to colleagues in the Department about that.
The reason for the different funding models in place for cost rental is sometimes related to the different characteristics and structures of the different providers. The affordable housing fund, AHF, is a grant available to local authorities, whereas with CREL it is loan and equity and then STAR covers private developers, the LDA and AHBs, if they wish to apply for it. That is an equity model. However, in terms of consistency and the impact that has on the rent, the Housing Agency assesses all applications under those schemes and has oversight and an understanding of the rents that come out of them. It, therefore, provides consistency in terms of what the rents might be coming out of the different schemes. The different schemes that are in place all provide that the rent must be at least 25% below market rent.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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By way of understanding, part of the challenge is that because many of these models have been evolving in real time around schemes and the challenges of schemes, the LDA, which is purportedly a commercial entity, has to pay the passive rate of corporation tax. There is a 25% tax charge which is essentially adding to the rent of the tenant. In an average LDA property that is an extra €2,500 per year. Its ISIF funding is coming in at approximately 2.8%. Again, that is allegedly commercially sensitive information but that is our understanding. The cost of finance for the AHBs, even from the HFA, is significantly higher and we know it has increased. CREL is obviously much more advantageous in terms of interest rates. With local authorities, it is a mixture. Some use the affordable housing fund but South Dublin County Council has used some of its own reserves and imputed a return of 2% a year on that. There are, therefore, three different delivery agents with three fundamentally different financing models, all of which means that people renting one of those properties from one of the three different cost-rental landlords, even if the properties were identical and had exactly the same build costs, could be paying different rents. Is the Department fully cognisant of the impacts of those different financing and rent-setting models?
The rent setting is also really important. This is something the Chair might be interested in. If I am in an AHB I have my HFA loan but I also have CREL. One AHB, in its rent setting, is charging the tenant for the pay-down of the HFA loan and when that loan is paid down, the AHB will start charging the tenant, as part of the rent setting, whatever is required to pay down the CREL. That is very sensible because the CREL does not have to be paid down until after the HFA loan has been repaid. Another AHB is charging its tenants the full cost of both the HFA loan and the CREL because its board thinks it is better financial governance to put that money away. I believe the Department should decide which of those models is the best model and apply it everywhere. Otherwise, this means that one AHB is paying the loans consecutively and charging the tenants the rents in that manner, while another is charging rent for both the loans at the same time. One tenant is, therefore, paying a higher rent than the other tenant.
Every time I look at these models, they become increasingly confusing and complex. That is why I am saying the officials’ heads must be pickled from looking at this in the Department. As we are trying to scale this up, would it not be better to have a single model insofar as possible? I appreciate that because the LDA is allegedly commercial, it has to pay corporation tax and that anomaly will persist. Is there not a better way, however, where we try to simplify this and provide a level of consistency so that the rents people are paying is consistent?
Ms Sarah Cooney:
As the Deputy will be aware, cost rental is a new tenure in this country. We have been focusing on scaling it up and bringing forward delivery on it. There has been a lot of momentum in that regard. In that context, the Housing Agency regularly engages with all the stakeholders, including the Department, and looks at some of these issues. The schemes in place are the ones that have been put in place by the Government under Housing for All. We are always conscious of the medium-term strategy that needs to be put in place around cost rental and particularly around rents and the calculation of rents.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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My question is a different one and, again, I do not mean to be awkward.
All of what I have said is the current state of play and these are the things people are talking about in the private rooms the witnesses and others are in. Is now not the time to sit down, look at the range of projects that are there and try to find what is the optimum model, inasmuch as one is possible, for both the financing and rent setting? If we do not do it now, we will end up with the situation we have with social housing. Right now in social housing there is a proliferation of different ways of funding. We heard the discussion earlier. Local authorities get differential rent and they may also get a bit of grant funding from the Department for adaptations and retrofits, but maybe not. A special needs AHB will get CAS funding but no availability agreement and the differential rent will not cover the costs. A general needs AHB will get CALF and the availability agreement and will be better off than the other two entities. That is not a great approach. One approach has to be optimal. Is there or will there be an attempt to sit down and look at what is the optimum way to do the financing, funding and rent setting?
Ms Sarah Cooney:
Absolutely. I am thinking of the recent Housing Commission report and some of its recommendations and, more broadly, the work of the Department under Housing for All. It is currently looking at pathway one and the affordable housing mechanisms within that. There is an opportunity in that context to look at the issues the Deputy has raised.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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That means it is not being looked at but it could be looked at.
Steven Matthews (Wicklow, Green Party)
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That sounded like a programme for Government negotiation-type question. Deputy Ó Broin may get an opportunity to make a further input on that.
I will raise a point with the officials. This is a second Bill and part of the first Bill the Department brought to us. I will raise the matter of the community-led housing groups we allowed for in the Affordable Housing Act. During our discussion of the planning Bill, I tabled an amendment under Part 7, which relates to housing strategies. It provided that community-led housing groups and three other types of groups - land trusts and something along those lines - would be entities that would be engaged with when a housing strategy is being put together. I was told that if these organisations registered with the Approved Housing Bodies Registration Authority, they would fall within the criteria. I do not know when we are going to see that part of the Bill. It is not going to be done in this part.
In the event that I am not here to advocate for those organisations over the next couple of months, I would like the officials to take on board the need to include those community-led housing groups. While this would not produce thousands of houses, it would produce some. There are a couple of groups out there that are stuck in limbo. For local authorities to be required to engage with such organisations established in their area as regards housing strategies, needs, demand, etc., the organisation would have to be registered with AHBRA. That is my understanding. At the moment, I do not believe they can engage. I ask the officials to consider that before the other part of the Bill comes forward, which is unlikely to happen in the term of this Government but who knows? I am sure Deputy Ó Broin will take up the mantle at that point.
I am going to wind up our discussion now if there are no final questions.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I have a final question.
Steven Matthews (Wicklow, Green Party)
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The Deputy is like Columbo coming back with just one more thing.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I will leave it for another day.
Steven Matthews (Wicklow, Green Party)
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I thank the witnesses for their time and for engaging with the committee on this. We are obviously supportive of this legislation and we understand the time constraints that apply. We hope to see it passed in the next couple of days. It will assist AHBs. Mr. Colgan wishes to make a final point.
Mr. Vinny Colgan:
We want to put on record our appreciation of how engaged Deputies and this committee have been in such a short timeframe. We appreciate them giving up so much time from their diaries, whether in the last couple of weeks or in the weeks ahead, to help us meet this cliff edge and get the matter resolved.