Oireachtas Joint and Select Committees
Thursday, 10 October 2024
Public Accounts Committee
Financial Statements 2023: Land Development Agency
9:30 am
Brian Stanley (Laois-Offaly, Sinn Fein)
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The witnesses are all very welcome. I remind everyone in attendance to ensure their mobile phones are switched off or in silent mode.
To start, I wish to explain some limitations to parliamentary privilege and the practices of the Houses as regard references witnesses may make to other persons in their evidence. The evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected, pursuant to both the Constitution and statute, by absolute privilege. This means they have an absolute defence against any defamation action in respect of anything they say at the meeting. However, witnesses are expected not to abuse this privilege. It is my duty as Cathaoirleach to ensure it is not abused. Therefore, if witnesses' statements are potentially defamatory in regard to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative 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 outside the Houses of the Oireachtas or an official by name or in such a way as to make him or her identifiable. Members are also reminded of the provision of Standing Order 218 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government, or the merits or objectives of such policies.
The Comptroller and Auditor General, Mr. Seamus McCarthy, is a permanent witness to the committee. He is accompanied this morning by Ms Maria Reck, audit manager at the Office of the Comptroller and Auditor General.
This morning, we engage with representatives from the Land Development Agency, LDA, to examine the following matters: financial statements 2023 - Land Development Agency. This is the first appearance of representatives from the LDA at the Committee of Public Accounts. The witnesses have attended meetings of other committees, including the housing and local government committee. We are joined by the following representatives from the LDA: Mr. John Coleman, chief executive officer; Ms Róisín Henehan, chief financial officer; Mr. Phelim O'Neill, head of property; Ms Dearbhla Lawson, head of strategic planning; and Mr. Enda McGuane, head of asset management. We are also joined by the following officials from the Department of Housing, Local Government and Heritage: Ms Laura Behan, principal officer; and Mr. Danny O'Sullivan, principal officer. The witnesses are all very welcome.
Before I call the Comptroller and Auditor General, I welcome a new member of the committee, Deputy Mairéad Farrell, who represents Galway West. She is very welcome to her first meeting. I hope she finds it useful. I know she will play her part and do her best as a member of the committee. She is very welcome.
Mairead Farrell (Galway West, Sinn Fein)
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Thank you, a Chathaoirligh.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I call the Comptroller and Auditor General, Mr. Seamus McCarthy, to deliver his opening statement.
Mr. Seamus McCarthy:
The Land Development agency was incorporated as a designated activity company, DAC, in December 2021, as provided for in the Land Development Agency Act 2021. It commenced trading at the end of March 2022.
The agency succeeded the previous Land Development Agency, which had commenced operations under a 2018 statutory instrument. All the assets, liabilities, staff and functions of the predecessor entity were transferred to the agency in accordance with the provisions of the 2021 Act. The Act also brought the agency within my remit for audit. The key functions of the Land Development Agency are to acquire, develop and manage land within public control with a view to facilitate and maximise the provision of affordable and social housing.
The Minister for Public Expenditure, National Development Plan Delivery and Reform is the primary shareholder in the company on behalf of the State. The Minister for Housing, Local Government and Heritage holds a minority shareholding. Both Ministers’ equity in the company was paid for from the Ireland Strategic Investment Fund on foot of a statutory direction by the Minister for Finance. In 2022, €100 million from the investment fund was invested in ordinary shares in the company. A further €825 million from the fund was invested in 2023.
The Land Development Agency recorded €24 million in turnover and an equivalent amount in cost of sales in respect of amounts recharged to Dún Laoghaire-Rathdown County Council for the social housing portion of the Shanganagh Castle development. The agency received just over €1 million in rental income from cost-rental units. The related operating costs totalled €275,000, resulting in a gross trading profit of €766,000 in 2023. Other income comprised interest income on deposits of €1.3 million; EU Urban Regeneration and Development Fund grants of €907,000; and grants of €855,000 from the Department of Housing, Local Government and Heritage.
The Land Development Agency incurred operating expenses of €21.4 million in 2023. The most significant items of expenditure related to staff costs of €9 million and professional fees totalling €8 million. In making comparisons of costs, it should be recalled that the 2022 figures relate to a nine-month period of operation only. The company recorded a loss of €17.6 million for 2023. This followed a loss of €11.8 million in 2022.
At the end of 2023, the agency held just under €428.5 million in non-current assets. These comprised mainly cost-rental housing assets valued at €305 million and assets under construction at the year end of €124 million. Just over €400 million of the assets were acquired in 2023, representing a very substantial increase in operations. In addition, the agency held a stock of housing, at various stages of development, intended for sale as affordable housing. At year end, this was valued at €41.7 million. The agency records holdings of cash and cash equivalents of €427 million at the end of 2023.
I certified the financial statements on 14 June 2024, and issued a clear audit opinion on the financial statements. In my audit report, I referred to the fact that a significant number of amendments were required to the draft financial statements presented for audit. This mainly occurred because the agency was reliant on a spreadsheet-based accounting system that required significant manual intervention. The board stated it was satisfied that compensatory controls were in place to mitigate the risks arising from the use of the spreadsheet-based system. Given the very significant ramping-up of the agency’s activities since its incorporation in March 2022, implementing an integrated accounting software package is necessary, and I note the agency’s stated intention to complete this in 2024.
Mr. John Coleman:
I thank members for the invitation to attend today’s meeting to assist them in their examination of the LDA's financial statements for 2023. As requested by the committee’s secretariat, we have furnished some information in advance.
I am chief executive of the LDA, and to assist in answering members' questions, I am joined by: Róisín Henehan, chief financial officer; Phelim O’Neill, head of property; Dearbhla Lawson, head of strategic planning; and Enda McGuane, asset management lead.
The LDA is the State’s affordable and social housing delivery body. Our purpose is to maximise the supply of affordable and social homes on public and other land in a financially sustainable manner to help address the country’s housing need. The year 2023 was strong for the agency as we continued to ramp up our housing delivery while also developing a pipeline of housing projects that will ensure an ongoing, steady and sustained annual supply of affordable and social homes. We deployed or committed almost €1 billion in the delivery of affordable homes between capital spend and commitments through our direct delivery and homebuilder partnerships. This is a significant increase from our 2022 investment and clearly demonstrates the strong upward trajectory of the agency, both in terms of output but also capacity. We expect this trajectory to continue in a manner that ensures value for money for the taxpayer.
At the end of 2023, the LDA had 5,600 homes in the planning and design phase and more than 1,000 under construction. We had planning permission for a further 1,850 and planning applications lodged for an additional 900 homes. We had also delivered over 850 homes, of which 650 were cost rental and 200 affordable for sale.
In total, the LDA has a pipeline of 37 sites for direct development, which will deliver approximately 17,000 homes. Many of these are already under construction or about to go to construction. To sustain and enhance our direct delivery pipeline, we have launched a private land acquisition initiative targeting the purchase of housing sites in the five main cities at prices that would allow for the increased delivery of affordable housing, predicated on value for money being available in the market.
Meanwhile, we have already delivered or are in the process of delivering around 2,800 homes through our homebuilder partnerships with a further 5,000 planned by 2028. These are in addition to the direct delivery pipeline of 17,000 homes. This brings the LDA’s overall housing delivery portfolio, comprising sites already built out, being delivered or in due diligence, to 59 sites across the country.
This continually increasing pipeline will be supported by the work of the Report on Relevant Public Land, completed by the LDA in 2023. This report, for the first time, provides a coherent and comprehensive understanding of the potential for housing delivery on State land based on fact rather than intuition. It advised the Government of the potential to deliver 67,000 homes on 83 State-owned sites.
Just last month, we launched phase 1 of Shanganagh Castle Estate, our first direct delivery project on State-owned land, which we developed in partnership with Dún Laoghaire-Rathdown County Council. It includes 597 homes, involving a mix of affordable purchase, cost-rental and social homes. Construction is ongoing at the former St. Kevin’s Hospital site in Cork and at Devoy Barracks in Naas. We expect to be on site at St. Teresa’s Gardens in Dublin city centre, Cromcastle and Clongriffin, also in Dublin, by year end.
Our homebuilder partnerships are part of our Project Tosaigh initiative, which involves working with homebuilders to identify housing delivery opportunities and providing the stimulus required to get projects under way and completed. As part of this initiative, we have already delivered affordable purchase homes in Cork,
Dublin, Meath and Waterford in addition to cost-rental homes in Dublin, Kildare and Wicklow. We recently concluded a public procurement process to establish a framework of homebuilder partners under Project Tosaigh phase 2, which we now intend to commence forward funding transactions to facilitate the delivery of higher density cost-rental schemes. This involves providing stage payments to homebuilders while also reducing the cost of public housing delivery. These 2,000 homes are being procured through a competitive bid process, which has driven downward pricing tension among developers.
In line with Government policy, our affordable purchase homes are made available at affordable rates through the provision of an equity share scheme overseen by the relevant local authority. This allows households to secure a brand new, A-rated home at a cost they can afford and with mortgage payments they can meet. The households involved also have the option of buying out the equity over time.
Our cost-rental homes are designed to assist people who do not qualify for social housing but who cannot afford to rent at existing market rates. Eligible candidates can secure a new home at rents that are up to 30% below market rates. The rents charged cover the cost of building and maintaining the homes, which are ultimately owned by the State. The average rent for an LDA-provided home is currently €1,350 per month while the average rent on the open market for new-to-market homes €2,395 per month in Dublin.
While there is an ongoing discussion on the affordability of affordable housing to its end users, which we welcome, I make the point that our housing developments are in high demand. There are households actively buying and already living in our affordable homes, and there are others living securely and happily in their cost-rental apartments. Each of these households has a housing need that is being met by our housing delivery.
To date, we have sold 200 affordable homes, with a further 44 homes at sale agreed. The application portal for the houses in Shanganagh Castle Estate went live yesterday and there is huge interest in them. We also rent homes to almost 1,000 households, some of whom have been renting with us for almost a year. Rental collection is strong, further supporting the affordability credentials of our homes.
The LDA was established in 2018. The LDA Act, which allows us to operate effectively and provides us with the necessary finance, was passed in 2021 and commenced in 2022. As a relatively new agency, we have sought to scale our organisational capacity and size to ensure we are well positioned to deliver on our remit. In this regard, the total number of employees grew by 60% in 2023 to 112. A further 80 roles have been created since then and there are now more than 190 staff employed or being hired by the LDA. New staff have been added to all teams, but particularly within the delivery, construction, development, strategic planning and asset management functions. These additions have continued to strengthen the LDA’s skilled and diverse talent pool.
As we have grown in size, we have placed considerable focus on fostering a culture of strong corporate governance. We constantly review our policies and procedures to ensure we operate to high corporate governance standards and that our activities are consistent with our statutory responsibilities. We continuously seek to act prudently and ethically with an emphasis on transparency, accountability and sustainability. As the committee will be aware from our financial accounts, we have already received funding commitments of €2.5 billion. Based on our strong delivery pipeline, the Government announced a further €1.25 billion in funding in budget 2025 for the LDA and has signalled its intention to raise our total capitalisation to a potential €6.25 billion, including a provision to borrow of €1.25 billion. This is a very welcome development as this level of investment will allow us to proceed with confidence and expand our delivery at scale.
To conclude, I thank the committee for the invitation to attend today and we look forward to answering any questions Members may have.
Brian Stanley (Laois-Offaly, Sinn Fein)
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The first committee member to speak is Deputy Cormac Devlin, who has 15 minutes.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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I welcome our witnesses. I thank Mr. Coleman for his opening remarks. I will start by addressing Shanganagh Castle Estate. It is close to my own heart because, before my time as a TD, I was a councillor on Dún Laoghaire-Rathdown County Council. I know how long that site lay vacant. While there were several plans for it, it was not until the LDA took over the site – the first one it took over – that anything was delivered. That has spanned from November 2022 when ground was broken until the launch of the scheme, as Mr. Coleman referred to in his opening remarks, which is extremely welcome.
He mentioned the portal opening yesterday for the affordable homes at the site. I agree with him that it will be oversubscribed several times over. That just shows the demand and the yearning for affordable homes. It is wonderful to have them back in the market again. I congratulate Mr. Coleman and everyone who was involved in delivering this project on time and on budget. Hopefully, we see more of these projects because they are important to all of us.
The Comptroller and Auditor General referred to the site at Shanganagh. The agency’s income in 2023 was €24.1 million. There was a recharge to Dún Laoghaire-Rathdown County Council for equivalent direct costs incurred for the associated development of social housing at Shanganagh. Can Mr. Coleman briefly outline what that particular recharge to the council entailed? Was that just for the affordable units?
Mr. John Coleman:
The construct in Shanganagh, which is a partnership with Dún Laoghaire–Rathdown County Council, is there are 597 homes in total, of which 200 are social homes. Those 200 homes will be retained and owned by the council or its nominees; it could bring in an approved housing body to fulfil that role. The council will, therefore, operate those homes. We are particularly happy with that because it represents a really good social mix. There are also 91 for-sale homes on an affordable basis and 306 cost-rental homes, which we will hold and operate. We pay the contractor every month to build the social homes. As they will be owned by Dún Laoghaire-Rathdown County Council, however, it is reimbursing us for the cost incurred related to those social homes as we go.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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I see. The recharge relates just to that portion of homes.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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That is fine. As to the negotiations between the LDA and State-owned properties, Mr. Coleman mentioned 59 sites that are currently in negotiation. Is that figure correct?
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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I presume there are other sites about which the agency is in discussion. Mr. Coleman also referred to a report that is being done in order that the LDA can have factual numbers and statistics on sites available to it for development. Is that report completed?
Mr. John Coleman:
Yes, the report was completed in March 2023. It is very comprehensive. It focused on the five cities, that is, Dublin, Cork, Limerick, Galway and Waterford, as well as five main regional centres. There will be an updated version of that report next year to incorporate more towns throughout the country. That report is completed. For the first time, it identified lands owned by State bodies. It identified the size of them, how many homes could be, in theory, constructed on them and any constraints associated with them. A lot of them have significant infrastructural constraints but some are readily developable. For the first time, the public can see exactly what land is held by the State through its various agencies and bodies. It creates a welcome debate on what the best use of those sites should be.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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Does that report or the new updated report that will be published next year, include sites that fall under the Project Tosaigh schemes, or does it only concern direct-build sites?
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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In 2023, the LDA had 5,600 units under planning. Is that excluding units under Project Tosaigh? The reason I ask is I want to delve into Project Tosaigh shortly.
What is the current state of play of those 5,600 units in planning? That figure is from 2023. At what stage are they currently? How many of those units have been given planning permission? How many of them are under construction as we speak?
Mr. John Coleman:
The big milestones for us are to appoint a design team in the first instance, as these schemes are very significant, as the Deputy can imagine, and take quite a bit of time, especially with public consultation, which is very important to us. The second milestone is to lodge planning. The third is to get a clear and implementable planning consent through the system without challenge that we can go ahead and act on. The next milestone is the commencement of construction because the appointment of a building contractor for these large-value contracts takes time to get the right outcome. Those are the big milestones for us. Three of the sites will commence construction before the end of the year. Included in those is St. Theresa’s Gardens with 543 homes, of which the procurement process is almost complete for a contractor. The same applies to the LDA site in Clongriffin, which has just in excess of 400 homes. The third site is in Cromcastle, north Dublin, which will have approximately 150 homes. They will enter construction shortly. Additional projects will enter construction in early 2025 such as the first phase of the site in Castlelands, Balbriggan of more than 800 homes and the site in Skerries with approximately 345 homes. There will be various other sites commencing as planning permissions are secured. We continually try to move the numbers to the right, from being in planning-----
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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To receiving planning. Mr. Coleman spoke about transparency for the organisation. As planning is achieved, is a pipeline visible on the LDA’s website for people to see how many LDA sites there are and which ones what have planning permission in order that the public are aware of these large sites being developed?
Mr. John Coleman:
Yes. We have information on our website. It is a burden for us to keep it current because we are growing all the time. As I mentioned, we have 37 direct-delivery sites, supplemented by 22 sites through home-builder partnerships, which we call Project Tosaigh, that are either delivered, under construction or being underwritten right now. That is what the 59 sites equates to. While the number of sites is growing all the time, we provide information on our website and in our annual report. We put a lot of effort into communicating the key sites we have under way and their status.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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Going back to Project Tosaigh and the sites the LDA has acquired that have planning permission, Mr. Coleman said some of them are not straightforward and I accept that. He said there were 8,000 units proposed to be constructed through Project Tosaigh by 2028.
How many units were delivered under Project Tosaigh last year? How many are to be delivered by the end this year?
Mr. John Coleman:
Under Project Tosaigh, the level of delivery last year was just over 850 homes. In 2024, we will have delivery both directly on our Shanganagh scheme for the first time and with Project Tosaigh. Taking them combined, it will be over 1,000 homes in 2024, of which about 280 relate to Shanganagh and the remaining 740 or so are being delivered under Project Tosaigh. Of the 8,000 homes targeted for delivery under Project Tosaigh by the end of 2038, we have already delivered, are in construction on, have contracted for or have approved 2,800. We are underwriting a further 2,000 units, which we expect to be contracted for before or around the year end. That will take us to nearly 5,000, and we will probably do further calls through the procurement panel that we have assembled to hit the remaining 3,000.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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How are these sites, with planning through Project Tosaigh, acquired? How do they come to the LDA's attention and what is the optimal number involved? What criteria apply in deciding whether a site should or should not be selected?
Mr. John Coleman:
We have done this in two phases. The first phase was pursuant to expressions of interest whereby we put out an open call to the market to propose transactions to us. We underwrote them on the basis of various criteria, including location, track record of the particular counterparty involved and value for money. That was for the first 2,800. The 2,000 that we are currently underwriting have been obtained through a public procurement process. We formed a panel of 15 house builders through an open and transparent process. The mechanism by which we formed the panel was by means of each house builder proposing a particular transaction that we would forward fund. This means that we purchase the site from them upfront, enter a development agreement with them to develop it and issue staged payments along the way while holding a security package to ensure that any cost overruns fall to the developer.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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Is that the home builder partnership as opposed to direct delivery by the LDA?
Mr. John Coleman:
-----Shanganagh or, more latterly, that we would acquire if we could get it at a good price, such as the Clongriffin site we bought from NAMA before year-end. We appoint our own architects and projects are programme managed internally by our teams. We then procure a building contractor as opposed to a house builder and oversee the construction ourselves, with our own resident engineers on-site making sure everything is going according to programme. That is how we have done Shanganagh and how we are doing multiple other projects. These are the 37 direct-delivery sites I mentioned in my statement.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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That makes sense. I thank Mr. Coleman for that clarification. Turning to the C and AG's report, one of the issues - this is also highlighted in the LDA's financial statements - is the reliance on the spreadsheet accounting system. On the basis of what Mr. Coleman said, we know that this is being addressed right now. The LDA was incorporated in March 2022. Obviously, there was an unfunded existing entity prior to that. Will Mr. Coleman outline why it has taken so long to take action in this regard? Given even the recent announcement - again, alluded to by Mr. Coleman - of the more than €1 billion allocated in budget 2025, why has it taken so long to reach the point of getting to a proper or more robust accounting system?
Mr. John Coleman:
During the setting up of the LDA, because you are going through the design and planning phase, the level of money flowing through was, as we and the C an AG have outlined, relatively small compared with what it is now. The number of transactions, invoices to be paid, etc., were relatively small at that stage. Therefore, we introduced a manual accounting system that was accurate and that had the relevant controls in place to ensure that it was accurate and calibrated in line with the scale of the throughput of transactions for the LDA at that time. We always knew that we would need a proper system-based set of accounts or accounting system, which we have now procured and installed. This is in place and operational.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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I am just limited on time. I just need a cost please, if Mrs Henehan would not mind.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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I only have one minute remaining. On the pensions arrangements, for, relatively speaking, a fledging organisation, there seems to be quite an array of pension arrangements for staff. There are 83 in total. Will Mr. Coleman outline the rationale behind that and indicate why there is such variance between the pension arrangements in place for different staff?
Mr. John Coleman:
Our pension arrangements are, in general, very straightforward. They would be along the lines of other comparable State bodies, including Irish Water and others. It is a defined contribution scheme for staff whereby contributions are made by staff and the employer in the normal way. They are at the level that would be comparable to other organisations such as Uisce Éireann. That is the main scheme. Some of the narrative in the accounts around why some people came through from a different scheme may have focused on technicalities. Some of those staff members were employed by other State bodies beforehand, which gave them an entitlement - or a requirement, even - to having their existing schemes maintained for a period until the new entity was incorporated. Barring the chief executive, all staff are now in the defined contribution scheme.
Cormac Devlin (Dún Laoghaire, Fianna Fail)
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I thank Mr. Coleman very much for all that. I appreciate it.
Mairead Farrell (Galway West, Sinn Fein)
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Gabhaim buíochas leis na finnéithe as ucht teacht os comhair an coiste agus as an bhfáilte chuig mo chéad chruinniú. I thank the guests for being here. I also thank the Chair for welcoming me to my first meeting as a member of the committee.
The LDA has incurred losses in the past two years. There was a loss of €17.5 million last year and €11.7 million the year before. Will the LDA confirm if it has ever operated at a profit?
Mairead Farrell (Galway West, Sinn Fein)
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I am just looking at the finances here. I understand. We will have other conversations and will be going into other matters. I am just asking has there been a profit to date?
Mairead Farrell (Galway West, Sinn Fein)
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I thank Mr. Coleman. Has a dividend been paid to the State?
Mairead Farrell (Galway West, Sinn Fein)
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If there was no profit, I assume then that no corporation tax has been paid on trading income?
Mairead Farrell (Galway West, Sinn Fein)
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I understand the LDA needed an extra €5.7 billion in capitalisation. That was identified last year. I understand that €2.5 billion was agreed by Cabinet last December, that half was due to come from ICIF and, as announced just in the past number of weeks, the other half from the sale of AIB shares. Will Mr. Coleman confirm that there is no commitment from the Government as of now regarding the additional €3.2 billion?
Mr. John Coleman:
The commitment from Government had been, up until the budget announcement, €2.5 billion. There is a further €1.25 billion commitment that had come through as a result of the budget, so that is €3.75 billion in total. We are permitted to borrow €1.25 billion, which takes us up to €5 billion. I understand that the LDA Act will be amended to permit a further €1.25 billion to take us up to €6.25 billion.
Mairead Farrell (Galway West, Sinn Fein)
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Will that last €1.25 billion come from borrowing the additional €1.25 to make up the €3.75 billion?
Mairead Farrell (Galway West, Sinn Fein)
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It would be an equity contribution. Mr. Coleman said the Land Development Agency can borrow a certain amount, has it borrowed previously?
Mairead Farrell (Galway West, Sinn Fein)
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Is Mr. Coleman anticipating borrowing? We know that interest rates are quite high, so is there a plan to borrow?
Mr. John Coleman:
The Deputy is correct on the interest rate point. Sometimes the borrowing does not help when it is in excess of the level of return we would make, which would be very small. The intention would be to establish a borrowing track record. We are in discussions with the European Investment Bank about funding cost-rental schemes, which it is very interested in doing. We hope to advance those discussions in 2025.
Mairead Farrell (Galway West, Sinn Fein)
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Just for my understanding, if the Land Development Agency is looking to advance those discussions, how long will it take until it is actually borrowing?
Mairead Farrell (Galway West, Sinn Fein)
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The Land Development Agency is focusing on the equity capital at the moment rather than the borrowing. Is that correct?
Mairead Farrell (Galway West, Sinn Fein)
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It still does seem at the moment from that €5.7 billion identified last year, that there is an identifiable black hole, given the Land Development Agency is talking about borrowing but is not at that stage at the moment.
Mairead Farrell (Galway West, Sinn Fein)
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Mr. Coleman has no concerns in terms of the delivery of the Land Development Agency's business plan, despite the €5.7 billion that was identified.
Mairead Farrell (Galway West, Sinn Fein)
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Will Mr. Coleman confirm the overwhelming majority of the Land Development Agency's capitalisation is coming from State sources?
Mairead Farrell (Galway West, Sinn Fein)
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It is entirely from State sources. My understanding is that the LDA is a commercial State-owned enterprise and that approval had to be granted by the European Commission to grant it off-balance sheet status. Is that correct?
Mairead Farrell (Galway West, Sinn Fein)
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Given that the Land Development Agency has yet to turn a profit and is reliant on State financing, does Mr. Coleman have any concern about compliance with state aid rules?
Mairead Farrell (Galway West, Sinn Fein)
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There are no concerns at all in the medium- to long-term.
Mairead Farrell (Galway West, Sinn Fein)
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My understanding is that the Land Development Agency would need to be returning a profit. It seems Mr. Coleman is unsure as to when the Land Development Agency will be in position to borrow and that we will be looking at continued long-term capitalisation from the Government. Mr. Coleman just mentioned the extra €1.25 billion in funding he expects from Government but we do not know when. Is he concerned his off-balance sheet status could be removed?
Mairead Farrell (Galway West, Sinn Fein)
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Okay, the Land Development Agency is on-balance sheet.
Mairead Farrell (Galway West, Sinn Fein)
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I thought the Land Development Agency was off-balance sheet.
Mairead Farrell (Galway West, Sinn Fein)
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I am a bit concerned in terms of the long-term nature of the funding but we are in a serious housing crisis. As for the land the Land Development Agency has been seeking for the delivery of affordable homes - I am from Galway where we really are looking for affordable homes - lands where homes are delivered directly can be used or it can consider the purchase of affordable homes from developers. What are the impacts of house prices? In Galway city, for example, we have yet to see any affordable housing delivered at all. In Galway county there is talk about some coming on stream in the near future but not at the moment. A lot of the talk has been in relation to housing in Dublin. How much has the average cost of a unit in Shanganagh Castle in Dún Laoghaire has been? The average cost.
Mairead Farrell (Galway West, Sinn Fein)
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It is €409,000. What is the average cost for the houses purchased from Cairn Homes in Citywest?
Mairead Farrell (Galway West, Sinn Fein)
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Is Mr. Coleman sure that capital expenditure is definitely not off-balance sheet?
Mairead Farrell (Galway West, Sinn Fein)
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It is definitely my understanding that it is off-balance sheet.
Mairead Farrell (Galway West, Sinn Fein)
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Can any of the witnesses confirm that?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Would somebody from the Department explain? Perhaps Mr. O'Sullivan can confirm that? Certainly at least some of the funding was off-balance sheet.
Mairead Farrell (Galway West, Sinn Fein)
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My understanding was that the capital expenditure was off-balance sheet.
Mairead Farrell (Galway West, Sinn Fein)
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Okay, so capital expenditure is off-balance sheet.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Just to clarify, that is all capital expenditure, Mr. O'Sullivan.
Mairead Farrell (Galway West, Sinn Fein)
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It is off-balance sheet.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Off-balance sheet changes things.
Mairead Farrell (Galway West, Sinn Fein)
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That changes things but we will go back to that in a moment because I am still looking at-----
Mr. John Coleman:
My understanding of the Government balance sheet is with reference to whether, if the LDA borrowed money, those borrowings would be included in the Government borrowings. My understanding is that they would. In respect of this expenditure of the LDA, it is outside voted expenditure because of its source, which is the Ireland Strategic Investment Fund, ISIF. They may be the two different things we are talking about. That is why we are not included in voted expenditure but that is different to the balance sheet issue.
Mairead Farrell (Galway West, Sinn Fein)
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Okay, we will go back to Cairn Homes and I will see what I can find out in the meantime. What was the average cost to purchase a unit from Cairn Homes?
Mairead Farrell (Galway West, Sinn Fein)
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It is €435,000. I understand from the NewERA report that the LDA's direct delivery costs are quite similar to the costs for Project Tosaigh. Is that the case?
I am just receiving information that the LDA is off-balance sheet but we will have to come back to this. This is taken aside from what I was going into.
When a buyer wants to buy a house outright, what seems to be required is to pay a higher open market valuation than the actual all-development costs for an LDA unit. Is that correct? I know I have been jumping between the two things. I understand from the NewERA report into the LDA's business plan that the direct delivery costs are similar, or potentially more expensive, than the Project Tosaigh costs. If there is an affordable purchase price, what will happen is when the buyer wants to buy and own a house outright, he or she will be required to pay potentially an even higher open market valuation than the actual all-development costs for a unit.
Mairead Farrell (Galway West, Sinn Fein)
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I want to keep going back to the off-balance sheet issue because I only have a few minutes and it keeps coming up.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Take your time, Deputy. If we need to go over time by a few minutes that is okay.
Mairead Farrell (Galway West, Sinn Fein)
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I know that. It is my first time at this committee. It is my understanding the LDA's borrowing is potentially off-balance sheet too. Can full clarification on that be brought back to the committee? Is that easiest?
Mr. Danny O'Sullivan:
Transfers from ISIF, which is the equity funding being provided now, are off-balance sheet because we are essentially exchanging one asset - which is the ISIF funds - for LDA shares. That is off-balance sheet. However, if the LDA pursues borrowing, that would be considered Government debt and would be on-balance sheet.
Brian Stanley (Laois-Offaly, Sinn Fein)
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If it is useful at this point, the amount that came from ISIF is €1.25 billion. Is that correct?
Mairead Farrell (Galway West, Sinn Fein)
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Yes, and then the €1.25 billion is from the AIB shares sale-----
Brian Stanley (Laois-Offaly, Sinn Fein)
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No, it is only that part of it. To clarify, it is only €1.25 billion. The LDA has to fund a plan with €6.25 billion. Is that correct?
Mairead Farrell (Galway West, Sinn Fein)
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The €5.7 billion. On the issue of the €1.25 billion, will that be off-balance sheet as well?
Mairead Farrell (Galway West, Sinn Fein)
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Is it correct that all is considered off-balance sheet? That is €2.5 billion. Will the €1.25 billion Mr. Coleman mentioned be off-balance sheet as well?
Mairead Farrell (Galway West, Sinn Fein)
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No. Obviously there is the amount that can be borrowed but we are not at that point at present. We are talking about the €2.5 billion and then, was it not, an extra €1.25 billion that the Department had mentioned that it could get down the line? Would that be off-balance sheet?
Mairead Farrell (Galway West, Sinn Fein)
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Perfect. I thank Mr. O'Sullivan.
Mr. Danny O'Sullivan:
Essentially, when the LDA was established, it had €1.25 billion from ISIF and €1.25 billion in borrowing. Then, under the Limerick mayoral Bill at the start of the year, there was an additional €2.5 billion added: €1.25 billion through the AIB share sales; and €1.25 billion through the performance of certain functions is the way it was phrased in the legislation. That brought it to €5 billion. The most recent amendment, which is going into the Housing (Miscellaneous Provisions) Bill 2024 at the moment, is another €1.25 billion, and that would be from the AIB shares as well. The total from ISIF, which is what we were talking about, is €3.75 billion, €1.25 billion from borrowing and then €1.25 billion, which was in the Limerick mayoral Bill amendment to essentially say the LDA can raise these funds through the performance of certain functions, and they are specified within the primary legislation.
Mairead Farrell (Galway West, Sinn Fein)
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My understanding is that the borrowing is something that the Department is looking at potentially next year or maybe in the future, but we are not looking at something concrete right now. Is everything we are talking about right now off-balance sheet?
Mairead Farrell (Galway West, Sinn Fein)
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That is what I was trying to get at. I thank Mr. O'Sullivan. I was trying to get clarity on that.
Are there any concerns about the fact that at present that is all coming from State funding, State subsidies, grants or whatever we want to call it, and that it is not turning a profit? Dividends have not been paid back or whatever.
Mr. Danny O'Sullivan:
Our review of the business plan, from discussions with the LDA, is while there might not be an immediate plan to borrow, certainly over the course of the business plan up until 2028 borrowing is factored in. It would be our understanding that borrowing will take place at some point during the business plan.
Mairead Farrell (Galway West, Sinn Fein)
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But it is not absolutely definite.
Mairead Farrell (Galway West, Sinn Fein)
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I am sorry about that now. I just was trying to get-----
Mairead Farrell (Galway West, Sinn Fein)
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Surely profit as well.
Mr. John Coleman:
In time, there would be a surplus that we would reinvest in affordable housing delivery. The equity piece is already included on the Government balance sheet, say, through ISIF. It has just been allocated to another line item, the LDA, on the government balance sheet. Therefore, it is balance sheet neutral. I think the point the Deputy is getting to is if the LDA borrowed, would that be on the government balance sheet and increase the government debt?
Mairead Farrell (Galway West, Sinn Fein)
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No. My question is more that it seems it is totally reliant now on State subsidies and State investment and that there is not that kind of commercial aspect, whether it be borrowing or profits being reinvested, and that it is solely done on a State investment.
Mairead Farrell (Galway West, Sinn Fein)
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I totally get that is what it says on the tin but the point that I am trying to make is that they would not be commercially viable without the State subsidies, which are significant. For example, last year the agency said that €5.7 billion was needed in capitalisation. At this moment in time all the capitalisation is coming either from the ISIF or the AIB shares sale. When the LDA was established, it was seen as a commercial State-owned enterprise but at present that commercial aspect really is not there.
Mairead Farrell (Galway West, Sinn Fein)
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It is operating at a loss.
Mairead Farrell (Galway West, Sinn Fein)
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Did the loss not increase over the past two years?
Mr. John Coleman:
I am talking about looking forward. Obviously, we have a huge amount of expenditure at the moment to produce homes that will produce rents in the coming years and you have to put out that money first to get the rent in future years.
The LDA will be profitable in the years ahead as a result of those rents that come in, but profit is not our first motive. Financial sustainability really is our motive. The LDA will, as a result of that increase in cost-rental income, have many more funding and financing options available to it in the years ahead.
Mairead Farrell (Galway West, Sinn Fein)
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I understand that profit is not the agency's main motive. It is in my head the fact that we have identified that its funding is off-balance sheet, it is reliant on State subsidies and that we do not have a date in terms of being sure when it will be able to borrow. That raises a bit of a flag here because all the agency's capitalisation realistically is coming from State sources. It seems we have identified a bit of black hole that we know exactly where we will get potentially from borrowing at this moment in time. We are not 100% sure because they are only going into the conversations about that in 2025. Has any Irish official or European official ever raised concerns about their operating model?
Mr. John Coleman:
No. The view is taken we are providing a service to people, that is, affordable housing, and there is a cost to that, which the State is happy to fund currently. It will always likely have to require some level of State investment, albeit that we will have further fund-raising options in the future, but that is our modus operandi currently. We are providing a service to the people.
Mairead Farrell (Galway West, Sinn Fein)
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Then why is it commercial?
Mairead Farrell (Galway West, Sinn Fein)
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They probably had profits at some point or are operating at losses and increasing losses.
Brian Stanley (Laois-Offaly, Sinn Fein)
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There will be a second round and I will bring the Deputy back in.
Mairead Farrell (Galway West, Sinn Fein)
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I thank the officials.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I am conscious of people looking in here. There is a lot of back and forth. The Deputy has been trying to tease out the sources of funding and then what is and is not on the State balance sheet. In his opening statement, Mr. Coleman said, "We have already received funding commitments of €2.5 billion.", from Government and half of that is from ISIF. Is that correct?
Brian Stanley (Laois-Offaly, Sinn Fein)
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I am trying to keep it simple. Mr. Coleman said, in his opening statement, that the agency has received a commitment for €2.5 billion. One part of that is a commitment for €1.25 billion. Is that the ISIF money, "Yes" or "No"?
Brian Stanley (Laois-Offaly, Sinn Fein)
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There is €2.5 billion from ISIF. On the next part then, did Mr. Coleman say that there is a further €1.25 billion from budget 2025?
Brian Stanley (Laois-Offaly, Sinn Fein)
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In budget 2025, there is €1.25 billion. Where do the AIB shares fit in there?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Is the AIB shares sum included in either that €1.25 billion from budget 2025 or the original €2.5 billion? Where is it contained?
Brian Stanley (Laois-Offaly, Sinn Fein)
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AIB, that is okay. Let us hope I can get to the bottom of this. Now the agency has €3.75 billion. Then Mr. Coleman stated, "the Government ... has signalled its intention to raise our total capitalisation to ... €6.25 billion ...". The agency is at €3.75 billion.
The agency needs another €2.5 billion, including the provision to borrow €1.25 billion. Mr. Coleman indicated in the opening statement that €1.25 billion will need to be borrowed. Is that correct? Where will the other €1.25 billion come from?
Brian Stanley (Laois-Offaly, Sinn Fein)
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So the State will give a further subsidy of €1.25 billion? Is it non-repayable?
Brian Stanley (Laois-Offaly, Sinn Fein)
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There is €3.75 billion in the bag, and with this €2.5 billion needed now, the LDA will borrow half of that. The LDA will receive an investment from the State of €1.25 billion.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Okay. That €1.25 billion will be off-balance sheet because the LDA will be borrowing from the markets.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Is the LDA borrowing it from the open markets or from the European Investment Bank? Where is it getting it from?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Out of the total sum of €6.25 billion, and there is a bit of hope involved in this from what is being said, there is a €1.25 billion equity investment from the State which is State equity. How much of the total of €6.25 billion will be on the balance sheet and how much will be off the balance sheet?
Brian Stanley (Laois-Offaly, Sinn Fein)
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It is all on the State's balance sheet? All €6.25 billion is on it?
Brian Stanley (Laois-Offaly, Sinn Fein)
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That is what we need to know. All of it is on it.
I remember raising affordable housing in the Dáil a few years ago. Obviously, in the period of austerity it was difficult to start a conversation about social housing or affordable housing. Cost rental had not even entered the equation here and some of us were trying to get this idea of cost rental going. It is a brilliant idea and has been the missing piece in Ireland for a long time; not having a cost-rental model as outlined on a not-for-profit basis. Obviously, it has to pay for itself over a period of time.
They are built through a non-profit organisation like the LDA or through a housing trust, local authority or approved housing body, whatever. There are different models used across Europe and I know the LDA has looked all of these and we have looked at them a bit as well. The concept is very good because it is widely accepted we have a Wild West private housing market and this provides another method of getting houses for working people and for people who cannot get on a local authority housing waiting list and who, on the other hand, cannot get to that magic figure to borrow to buy, particularly in the larger urban areas. We have all come across such people. The concept is very good and I am a big supporter of it.
To get down to the business of what has been delivered to date; at the end of 2023, the LDA had 5,600 homes in the planning or design phase and it had 1,000 in construction. The LDA had delivered 850 units; 650 cost rental and 250 affordable homes. They are in place and either ready to be occupied or they are occupied. Is that number of 850 correct?
Brian Stanley (Laois-Offaly, Sinn Fein)
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There are 1,166 finished, how many are occupied?
Brian Stanley (Laois-Offaly, Sinn Fein)
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There might not be anyone in them yet. How many are occupied?
Brian Stanley (Laois-Offaly, Sinn Fein)
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I understand it takes a while to get it going because the investment is front-loaded to try to get back the rent that will finance the capital over 30 years or whatever way they are done. In some countries it can run over 40 years and different places use different models. There are further units in concept stage or design stage and they are coming through. On the cost of the finished product, Mr. Coleman mentioned the average cost in Citywest was €435,000. Is that correct?
Brian Stanley (Laois-Offaly, Sinn Fein)
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That is the Cairn Homes project. I looked at figures on this that said a one-bedroom home would cost €1,400 a month to rent, and it was an apartment. A two-bedroom unit cost €1,600 and a three-bedroom unit cost €1,800 per month. Is that correct?
Brian Stanley (Laois-Offaly, Sinn Fein)
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A one-bedroom apartment cost €1,400, a two-bedroom apartment cost €1,600 and a three-bedroom apartment cost €1,800 to rent per month.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Okay, I am €20 out on some of those but there or thereabouts. Those rents are still relatively high. A three-bedroom apartment is coming in at €430 or €440 a week. That is the weekly rent. The monthly rent is €1,750. It is a high rent.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Even assuming that-----
Brian Stanley (Laois-Offaly, Sinn Fein)
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I know that. That is in the Wild West and we accept that. Okay.
I want to talk about the Shanganagh development in Dún Laoghaire. I have a spreadsheet in front of me. One thing that struck me is you need to have a very high gross income to afford the ones that are for sale. For a two-bedroom apartment, you would need a gross income of €96,795. Accounting for the 10% equity provided by the State, similar to the first home scheme and you avail of the equity scheme. I am going to buy one of those and I earn €96,795. The State gives me 10%, which is a loan, the State buys that 10%. That results in an equity amount of €47,800. The mortgage then is i€387,000. You have a deposit of €43,000 and the purchaser pays €430,200 in total. Could Mr. Coleman confirm that the overall value of the two-bedroom units in Shanganagh in Dún Laoghaire, which I have on a spreadsheet, is €478,000. Is that correct?
Brian Stanley (Laois-Offaly, Sinn Fein)
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I can see that is written at the bottom. I want to start at the top. We will take the example Mr. Coleman is talking about. Let us consider someone earning €66,000. The higher the subsidy, the lower the income. Somebody who is earning €66,000 is effectively borrowing the other 30% equity that the State puts in. If the person wants to buy the State out, he or she has to pay for it but does not have to do anything for six years. It is like the other scheme. The State gives that person 30%. He or she might want to buy the house but the overall cost is still €478,000. That is what this spreadsheet states. Regardless of income, that does not change. The income does not change the overall value. The purchaser pays €334,00. Mr. Coleman is correct in that regard. To be accurate, the purchaser pays €334,600. There is a deposit of €33,460. There is a mortgage of €264,000. There is an equity of €143,000, which is the lien on the property. The total borrowing is €407,000. Is that correct? That is the sum of €143,000 and €264,000, which amounts to €407,000. Is that correct?
Brian Stanley (Laois-Offaly, Sinn Fein)
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I am trying to get to how the policy is working or not working.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Did the LDA buy these as turnkey properties?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Who owned the land before the LDA got it?
Brian Stanley (Laois-Offaly, Sinn Fein)
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There was a nominal fee.
Brian Stanley (Laois-Offaly, Sinn Fein)
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How much was it? Was it €100 per acre?
Brian Stanley (Laois-Offaly, Sinn Fein)
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I do not want to trivialise €10,000 but in the greater scheme of things, that is minuscule. We will accept that. Let us consider these properties and include the subsidy that the State invests. I buy the house and borrow €30,000 from the State. I take out a mortgage of €364,000. I now have borrowings of €407,000. The overall value of the house is €478,000. We have established those facts. Despite the facts that the land was attained for a nominal value and it is a turnkey development, the cost to the buyer still works out as €407,000. Is that the nub of it? That is regardless of what pay scale a buyer in on.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I know. That is the amount that has to go in on the first day. Mr. Coleman is ignoring the fact that 30% is borrowed through the State equity piece. If Joe Bloggs buys and wants to sell the house, that 30% has to be paid back. Mr. Coleman and I know that. It will be on the title deeds that the lien is on the property and cannot be removed. The transfer of that property is dependent on that being cleared.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I accept that prices are higher in the area these properties are in because of its location. People have this thing about addresses. I never got it myself but some people do. The point I am trying to make is that it is irrelevant. The LDA almost got land for free and contracted a builder. That is fine, and there is nothing wrong with that. The prices, however, are still sky high despite the subsidies and all the moving around of figures. The scheme simply moves one piece of debt to the State and the owner has to pay it in the end before he or she can sell the house. He or she also has to pay a mortgage of €334,000. That is the case according to the spreadsheet. I am reading directly from it. In the case of people earning less than €74,000, there are shortfalls listed. They are shortfalls ranging from €5,140 for those on a gross income of €74,000 to over €37,000 for those on a gross income of €66,000. Is that correct? That is what is stated on the spreadsheet in front of me. Those are the figures. Will the witness confirm that or am I reading it wrong?
Mr. John Coleman:
I am not sure if I am looking at the same schedule as the Cathaoirleach. Cost rental is based on the cost. Affordable purchase is based on a different mechanism, which is the open market value, In Shankill, open market values happen to be higher than normal. In other locations where we sold affordable homes, including Navan, Waterford and Mallow, the values are much lower.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Who is getting the extra cash? There is a notional thing involved. I do not mean to be dismissive of Mr. Coleman and I do not mean it that way but because there is this notion around certain areas, they are more expensive. The hard fact is that this land was acquired from the local authority for a nominal sum. A builder comes in. Concrete blocks cost the same to build in Shankill as anywhere else. I do not want to pigeonhole areas but concrete blocks cost the same in areas that have the lowest house prices in Ireland. Timber, windows and doors are the same price. A plasterer will be paid roughly the same wages. The brickies will be earning €1 or a bit more per block. The electrician will cost so much per socket and fitting. That is the way it is done. Is that not the truth of the matter?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Who is getting the cash?
Brian Stanley (Laois-Offaly, Sinn Fein)
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That is because there are notions around where properties are.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I am trying to deal with these affordable homes. These are apartments. We are not talking about mansions.
Mr. John Coleman:
We have done other affordable schemes in Navan, Hollystown in Dublin, Kilbarry in Waterford and Mallow in Cork. We have operated those schemes on a cost-recovery basis. We support the developer to build them out and we just recover what we paid from the end user. In respect of the properties at Shanganagh in Shankill, the Cathaoirleach asked about any surplus from the equity. It is owned by the local authority. That is an asset of the local authority.
Brian Stanley (Laois-Offaly, Sinn Fein)
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It goes to the local authority.
Brian Stanley (Laois-Offaly, Sinn Fein)
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When you look at value, €378,000 is very high when we are talking about affordable homes. That is the point I am trying to make. The prices are still coming in high.
The opening statement was informative. The committee sometimes hears opening statements that are not very informative. In his opening statement, Mr. Coleman said, "The average rent for an LDA-provided home is currently €1,350 per month while the average rent on the open market for new-to-market homes €2,395 per month in Dublin." I am not an expert, but many rents in the Dublin region would be over €2,000. At nearly €2,400 per month, we are talking about the upper end of the market. We need to accept that. In Citywest, the average cost rental is €1,350. I know Mr. Coleman wants to talk about that and I am interested. How do we have a model that brings the best value that the LDA can deliver and that will require the smallest amount of borrowing? We want people to be able to rent properties at the best price they can and, I hope, be able to recover the cost over that 30-year period to backfill the investment. In Citywest, the cost is nearly €1,800.
You are saying the average rent for LDA homes is €1,350. Was Citywest very expensive?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Overall, Mr. Coleman, is it one of these sought after locations or what was the situation with the land there? Who owned the land before the LDA built there?
Brian Stanley (Laois-Offaly, Sinn Fein)
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It was a greenfield or a brownfield site.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Tell me how that worked and explain to me what happened. The LDA entered into an arrangement with Cairn Homes for the design and build. The LDA still owns the land and owns the property at this stage. Is the development finished?
Brian Stanley (Laois-Offaly, Sinn Fein)
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I imagine it is an area of high demand because there is a lot of commercial activity around it.
Brian Stanley (Laois-Offaly, Sinn Fein)
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It is a strategic location, I get that, and it is a welcome development. I am trying to determine the reason for the discrepancy between the €1,350 average rent and yet we have these modest two bedroom apartments in Citywest running up to almost €1,800. They are running at up to 25% more than the average.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Where are the units that cost €990?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Where outside of Dublin? That could be anywhere. Outside the Pale?
Brian Stanley (Laois-Offaly, Sinn Fein)
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They are in Limerick city.
Brian Stanley (Laois-Offaly, Sinn Fein)
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That is good. That is for a one-bed.
Brian Stanley (Laois-Offaly, Sinn Fein)
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How many square metres are they?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Will they be A-rated?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Are they turn-key properties?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Okay. Is that working out cheaper?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Everything is predicated on the actual cost of delivery - rents, the amount of equity if you are using the help-to-buy scheme, which is effectively what is happening here for the purchaser and all of that. In cases where people are buying affordable housing, if some of them are that, all of that is predicated on the cost. That will determine the rent going forward, or the mortgage in the case of a purchase.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Would it be cheaper in some cases to buy a turn-key because the cost of delivery through this model we just discussed for ten minutes seems to be very high?
Mr. John Coleman:
Just to clarify, the Limerick scheme has been referenced and we have multiple schemes. I refer to the schemes we have delivered to date. Shanganagh is obviously our first direct development scheme but our intention is that as we build that pipeline, all of our direct development will eclipse what we do through house builders over the next few years, which is always the strategy. These schemes have been pursuant to our Project Tosaigh framework so its through house builders. The rents are derived from the cost but ultimately land at approximately 25% to 30% lower than the market value. The market value rent in Limerick is lower than it would be at Shankill.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I propose to suspend the meeting for ten minutes and we will resume in public session.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I call Deputy Farrell, who has ten minutes.
Mairead Farrell (Galway West, Sinn Fein)
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I have a few fairly straightforward questions. We identified that the cost of the average unit in Shanganagh Castle is €409,000. The average cost of those purchased from Cairn Homes in Citywest is €435,000. What is the price per square metre for each such purchase? Can Mr. Coleman deal with Shanganagh first because I have it arranged that way in my notes?
Mairead Farrell (Galway West, Sinn Fein)
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I am just trying to get the information.
Mairead Farrell (Galway West, Sinn Fein)
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If those figures can be brought back to the committee, that would be ideal.
The Chair may have potentially already asked this but for the Shanganagh properties, what are the rents for the one-bedroom, two-bedroom and three-bedroom properties?
Mairead Farrell (Galway West, Sinn Fein)
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I got confused there. The one-bedroom unit rent is €1,250 and the three-bedroom units cost €1,700. What, then, is the rent for the two-bedroom units?
Mairead Farrell (Galway West, Sinn Fein)
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For the purchased homes, can Mr. McGuane provide the full market value for the two-bedroom and three-bedroom properties if one wants to own them outright?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Who will take that question, will it be Mr. O'Neill?
Mairead Farrell (Galway West, Sinn Fein)
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That is not a problem.
Mairead Farrell (Galway West, Sinn Fein)
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Part of this is my last question because I wanted to know how much the two-bedroom and the three-bedroom properties cost in their own right and then I would like to know what that open market value cost is in comparison to delivery.
While we are waiting, I had a few other questions in my extensive notes. On the secure tenancy affordable rental, STAR, investment initiative, is that the initiative by which one brings down rents? Is that correct?
Mairead Farrell (Galway West, Sinn Fein)
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Is that a subsidy from the State?
Mairead Farrell (Galway West, Sinn Fein)
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Would the Land Development Agency be able to provide affordable rents without that subsidy?
Mairead Farrell (Galway West, Sinn Fein)
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I thank Mr. Coleman. That very much leads me back into the earlier conversation which I do not want to return to.
The main thing I noticed on note 14 in the financial statements is that the Land Development Agency reclassified the site which was identified as an investment property to being property, plant and equipment. I thought that that was quite intriguing because I had never seen that before.
Mairead Farrell (Galway West, Sinn Fein)
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That is interesting. As a matter of interest, what exactly does that mean and how does something go from an investment property to property, plant and equipment?
Mairead Farrell (Galway West, Sinn Fein)
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What is the site then? Is it a particular site?
Mairead Farrell (Galway West, Sinn Fein)
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That changes it in that way.
Mairead Farrell (Galway West, Sinn Fein)
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That is interesting, as I did not know that. Does Mr. Coleman have the other figures to hand?
Mairead Farrell (Galway West, Sinn Fein)
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The full market value.
Mairead Farrell (Galway West, Sinn Fein)
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Is that for the two-bedroom unit?
Mairead Farrell (Galway West, Sinn Fein)
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That is the full market value where if I-----
Mairead Farrell (Galway West, Sinn Fein)
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In order to own it outright, that would be the right price.
If you wanted to own it outright, that would have to be because of the affordable nature of it. You would have be-----
Mairead Farrell (Galway West, Sinn Fein)
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No, I think I understand the scheme. I just meant if I moved into the LDA's affordable two-bed in Shanganagh - though obviously, I would never leave Galway so I do not know why I would do that - and I wanted to own it outright, I would pay the €478,000. Is that right?
Mairead Farrell (Galway West, Sinn Fein)
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How much is it for the three-bed?
Mairead Farrell (Galway West, Sinn Fein)
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Will Mr. Coleman confirm that the open market value is more than the cost of delivery?
Mairead Farrell (Galway West, Sinn Fein)
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What is the cost of delivery then for the two?
Mairead Farrell (Galway West, Sinn Fein)
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Which one does this relate to now?
Mairead Farrell (Galway West, Sinn Fein)
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Let us we are talking about the two- and three-beds, will Mr. Coleman relate it exactly to them because it would be easier?
Mairead Farrell (Galway West, Sinn Fein)
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So the cost of delivery of the €478,000 two-bed houses is €426,000
Mairead Farrell (Galway West, Sinn Fein)
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What is the distinction?
Mairead Farrell (Galway West, Sinn Fein)
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If I was buying it outright, I would be paying more than the cost of delivery.
Mairead Farrell (Galway West, Sinn Fein)
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That has come from the Government side rather than from the LDA's own side. Is that correct?
Mairead Farrell (Galway West, Sinn Fein)
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I thank Mr. Coleman. I just wanted to get that. Go raibh míle maith agaibh.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Mr. Coleman mentioned the tenants and how they are generally happy. The security of tenure is a big factor. I know from dealing constituents in the private market, they are on the edge of their seats the whole time as to when a lease will run out, when will the landlord decide he wants the home from one of his or her family, or when will the landlord decide to sell because houses are at their premium price in the area. There are notices for the termination of tenancies - this being the nice phrase with eviction notices being the more blunt one for it - being served left, right and centre. Some of the witnesses may come across people in those circumstances but it is an awful situation particularly for people who are pushing on in years. I dealt recently with a couple in their 80s. They were subsequently housed by the local authority. They were in a private rented house for years and it came to the point where the landlord said he was selling the house and that was that. Had they been in one of these houses, they would have been secure, once they kept to the terms of the tenancy. The LDA would get it back when the people passed to the next life. It would be repainted and allocated again and the wheel keeps turning around. Obviously, this is a great system. The security of tenure is fantastic; I acknowledge that.
Regarding the breakdown of the rents people pay, these multi-unit developments have to have a management company. It is not like a house. If there are 100 apartments in a block, there has to be a management company and there is maintenance. It is all very important. We could do with improving the legislation. A lot of improvements could be made to the way that system works but that is not something we can deal with here. At the point a management company is needed in the likes of Shanganagh or in Limerick, does the LDA undertake the management of them or does it contract a company to do it? How does that work?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Is it the same company for all of them or has the LDA a number-----
Brian Stanley (Laois-Offaly, Sinn Fein)
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How many has the agency?
Brian Stanley (Laois-Offaly, Sinn Fein)
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There are six. With the framework, presumably the LDA has a system where it works out it is so much per unit, this is a service that is provided and within that framework it would have been procured. Is that correct?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Regarding how does the cost the LDA is paying under the framework agreement compare with the cost charged by management companies in the open market?
Mr. Enda McGuane:
Obviously the purposes of the public procurement process in the framework is to endeavour to get best value while also ensuring we maintain the quality of the homes and the living environment for people. The benchmark I would utilise is that my understanding from other sectors would be that the equivalent costs vary in the region of 15% and upwards. Ours in approximately 6% of the total rent collected at this point.
Brian Stanley (Laois-Offaly, Sinn Fein)
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If someone's rent is €1,000 per week, the management fee would be 15% of that.
Brian Stanley (Laois-Offaly, Sinn Fein)
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So €150 per week would be going towards the management company.
Brian Stanley (Laois-Offaly, Sinn Fein)
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The LDA is not paying corporation tax at the moment because the pipeline has not reached the point where it has matured enough-----
Brian Stanley (Laois-Offaly, Sinn Fein)
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I understand. How much interest is the LDA paying on the CEF funding?
Brian Stanley (Laois-Offaly, Sinn Fein)
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The LDA is not paying any interest.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Is it paying any interest on any of the money it has at the moment?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Mr. Coleman mentioned about having a gap to fill of €1.25 billion that the LDA needs to borrow.
Brian Stanley (Laois-Offaly, Sinn Fein)
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What are the current rates with the EIB? At one stage it was flat but what are they at the moment? What would the LDA be hoping to get?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Mr. Coleman has some idea of what the agency will be charged out there. What is it at the moment?
Brian Stanley (Laois-Offaly, Sinn Fein)
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How much would Mr. Coleman be talking about? He said it would not make sense to borrow at the moment------
Brian Stanley (Laois-Offaly, Sinn Fein)
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He is right to have a figure. What is the figure in his head?
Brian Stanley (Laois-Offaly, Sinn Fein)
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It might even be a bit over 5%.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Because of having the backstop of the State.
Brian Stanley (Laois-Offaly, Sinn Fein)
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In that situation, a lender might be looking at it that the State would step in.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Regarding rentals, management companies will become more expensive in years to come. The wages they pay staff and their operating costs will go up. The rates on financing the capital may change. Corporation tax will kick in.
I am trying to get my head around the likely increases in the rent relating to the cost-rental model. What sums has the LDA done in terms of annual increases in this regard? How is it working those out?
Mr. John Coleman:
We make assumptions whenever we sit down and work out what the rent can be. Our workings and spreadsheets are always targeted at making the rent as low as possible. We would bake in the costs relating to upkeep and sinking funds. We would factor in increases in operating costs over time when setting our models at the outset, which ultimately set the rent.
Brian Stanley (Laois-Offaly, Sinn Fein)
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What kind of percentage annual increase is Mr. Coleman talking about?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Mr. McGuane said the LDA is reviewing matters. Could it go beyond the 2%?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Is the LDA satisfied enough that it will be able to keep it under 2%?
Brian Stanley (Laois-Offaly, Sinn Fein)
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I understand that. Legislation can change. Governments can change. I am trying to factor that in. Politics follows the money; that is the way it works. Needs must. At this stage, does it look like it is viable to retain the rate at something between 1% and 2% into the future?
Brian Stanley (Laois-Offaly, Sinn Fein)
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I was just trying to get a figure for attendance.
I will go back to the management fee issue. Did the LDA design the framework agreement or did it have assistance with that from management companies? Where did the LDA get that model from?
Mr. Enda McGuane:
For the scope of services, we utilised the expertise of the asset management team, which has experience in that area. Obviously, we took best practice from across the industry to draft a scope of services. We used examples and learned from previous procurements we could find in that space.
Brian Stanley (Laois-Offaly, Sinn Fein)
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How much of the management fees does that the sinking fund for block A account for? Obviously, things change as a building gets older and repairs, refurbishment and all the rest are required. My understanding is that they are high quality. What percentage would be factored in for the sinking or depreciation fund?
Mr. Enda McGuane:
We have taken life-cycle costings out for 50 years as to when we will have to replace various elements of the asset. We are looking right out into the future in the context of the whole fabric of the asset and the fact that roofs, etc., will have to be replaced. We have budgeted all our costs. It is not a percentage per se, but we have key milestones as to when a roof has to be replaced or when white goods have to be replaced. The key focus is on ensuring we have the ability to keep the quality of the homes up to their high standard as of day one. Our model includes those interventions all the way through the 50 years in terms of the life cycle.
Brian Stanley (Laois-Offaly, Sinn Fein)
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What percentage of the fees is it? Say it is factored into the management fee, normally the management fee-----
Brian Stanley (Laois-Offaly, Sinn Fein)
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It is not collected by the management company.
Brian Stanley (Laois-Offaly, Sinn Fein)
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How much would go into each apartment every year in Citywest for the sinking fund?
Brian Stanley (Laois-Offaly, Sinn Fein)
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I knew Mr. McGuane was going to tell me that. I am curious about it because, obviously, we know from other models of housing - and this has been discussed by this committee - that sometimes when things are being designed, 30 years out a problem can be found. One of them is going to be the unencumbered - it has arrived at our door - properties that came through the AHBs. When they are out of the financing period, we are in a different situation, which, at the time, seemingly was not thought through and nobody will have done anything about it in the interim. Worse still, we will have continued on our merry way over the 30-year period and not done anything to correct it. We are told that somebody is looking at them; whatever that means. Obviously, to get away from the short-termism, there will have to be people looking into the future to make sure there is enough in the kitty to ensure that there is enough for the substantial works required for what Mr. McGuane termed "key milestones" in 20, 30 or 40 years. Roofs will need to be re-covered. When it comes to the life cycle, the LDA is probably talking about 100 years.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Generally, when talking about solid structures, the life cycle is usually 100 years, but the maintenance plan models for 50 years. In the context of instances where the LDA can upgrade, I understand that it has to be settlements with a population in excess of 30,000. The LDA does not go into small or medium-sized towns.
Brian Stanley (Laois-Offaly, Sinn Fein)
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If it is defined as 10,000 or more, the LDA could come into Portlaoise.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Portlaoise's population is nearly 30,000. It was almost 26,000 in the recent census.
Brian Stanley (Laois-Offaly, Sinn Fein)
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One of the things with the census is that sometimes the entirety of a town is not taken into account because it is based on old boundaries. It certainly does not capture all the new greenfield developments and that can be an issue. It is tied to that. I understand it may be challenging to provide cost rentals because market rents are generally lower, but the level of rent being charged in many of those towns is catching up fairly quickly with Dublin because they are deemed to be within the commuter belt. If settlements with a population greater than 10,000 people are eligible, has the LDA looked at any of them? Are any of them under consideration at the moment? Is Kilkenny under consideration? Portlaoise actually has a bigger population than Kilkenny.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I have been trying to prompt Mr. Coleman about Portlaoise. Has the LDA looked at it? Yes or no?
Brian Stanley (Laois-Offaly, Sinn Fein)
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What are the five regional towns?
Ms Dearbhla Lawson:
The five regional towns are Drogheda, Dundalk, Athlone, Letterkenny and Sligo. There are also the five cities. That was following the national planning framework to try and concentrate and look at compact urban development. We started that because the job we had was to look at what public land might have potential for affordable housing development into the future. Much of these lands might be underutilised or might have potential. It is a big job. We published a register of public lands that identifies all the public lands in towns.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I read that in the LDA's briefing document.
Ms Dearbhla Lawson:
There is no prioritisation. It was just about the mammoth task we had to do to look at the potential for all those lands. What will actually happen is that we will pull the information into a comprehensive report. That pipeline of public lands is there. It is not just for the LDA to deliver, it also looks at the potential for local authorities and others.
Brian Stanley (Laois-Offaly, Sinn Fein)
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The local authority in Laois is developing some cost-rental and affordable homes. They are delivering a very small number, but it is a start, which is good. Obviously, we wish the scheme were different, but we have to accept that the policy is where it is.
In terms of the land aggregation scheme, which was a version of NAMA for local authorities, when the financial crash came, many of the local authorities had tracts of land on their books that they had bought to develop housing on.
I remember their transfer to the land aggregation scheme, LAGS, being passed in the council chamber. It was a way to take the debt from the financing away from the local authorities because nothing was going to happen with the land. Because of the financial crash, local authorities were in the same situation as others in the wider economy. The LAGS was set up. There is a large number of sites. We dealt with that and included some of the information we got from a meeting with the LAGS in a report we did the other day on housing supply. Approximately half of those sites have not been developed and nothing is happening. There are some in Laois. Have there been any discussions with the local authorities, now that those lands are back with them, or with the LAGS? Perhaps Ms Behan would come in on that question.
Ms Laura Behan:
All of the land from the LAGS was transferred to the Housing Agency. Two of those sites are now under transfer to the LDA for delivery of housing in Balbriggan and Skerries. The sites that were transferred into LAGS and which have housing potential for the LDA are actively being transferred. The Housing Agency is also concluding a further process whereby it is examining each of the LAGS lands and looking to ensure their transfer to housing delivery or their use for other community purposes and so on as quickly as possible. The agency will be providing a report early next year as to how to conclude that process.
Brian Stanley (Laois-Offaly, Sinn Fein)
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On only 50% of that land has there been any activity. The potential of some of the larger sites is not being used at all. I cannot remember the exact figure but we extrapolated a figure for the percentage of homes that have been delivered on those lands compared with their potential, and it was very small. There is a lot of pent-up land that could potentially be built upon under the control of the State or the local authority, through the Housing Agency or LAGS. Ms Behan said that two sites are being transferred to the LDA and they can be utilised. That is the point I am making. Those lands could be used. Is that correct?
Ms Laura Behan:
Two sites in Balbriggan and Skerries are actively being transferred at the moment, as I said. The Housing Agency and the LDA have examined those lands to see which are the most suitable for transfer to the LDA. The rest of the lands will be used for housing or community purposes as far as possible. We hope that process will be concluded early next year.
Mr. John Coleman:
I will give the committee a further update on that issue. Ms Behan is correct that some sites have been earmarked for transfer to the LDA and those transfers are happening at the moment. In fact, one of schemes, Devoy Barracks, Naas, has transferred. The LDA is constructing 219 homes and the first homes should be built next year. We achieved planning permission for 817 homes on the Balbriggan site. That will go under construction in the coming months. The same is true of land at Skerries, a third LAGS site, for 345 homes. We have secured planning permission for that land and construction will begin in the next few months.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I am looking at those assets that could be utilised. While we are on the subject of land, a question that local authorities ask relates to compulsory purchase order, CPO, powers. Sometimes the threat of CPOs is what makes them effective. The LDA does not have that power.
Brian Stanley (Laois-Offaly, Sinn Fein)
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In what circumstances might they be used? Will Mr. Coleman talk about that?
Brian Stanley (Laois-Offaly, Sinn Fein)
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That would happen if I owned the strip of land in front of a field that the LDA owned and prevented access.
Brian Stanley (Laois-Offaly, Sinn Fein)
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What if I owned 1 acre of land and the LDA had 10 acres behind it?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Has the LDA used that power?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Would it be beneficial if the LDA had the same CPO powers as local authorities? Because it is a commercial company, it cannot have those powers. There would be legal issues around that.
Mr. John Coleman:
Broader CPO powers are probably more useful, as the Cathaoirleach said, through the threat of their use as opposed to their actual use. Other jurisdictions have found that approach successful. Broader CPO powers for the LDA could be beneficial in some circumstances but it would not be a panacea for land access.
Brian Stanley (Laois-Offaly, Sinn Fein)
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It might be a part of the tools needed.
Brian Stanley (Laois-Offaly, Sinn Fein)
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When the LDA is buying land on the open market, roughly how much does it cost per home? I have heard figures being quoted of €40,000, €60,000 or €70,000. I know the LDA is building apartments, which is different because they are being stacked and it is higher density accommodation. That is required in large urban areas, provided where it is done in a sensible way and consideration is given to future occupants, facilities and so on. We are not talking about situations where land is being transferred from a local authority, as is the case in Dún Laoghaire. We are talking abut situations where the LDA has to buy land. How much per unit is that working out?
Mr. John Coleman:
The main site we have bought to date came from the National Asset Management Agency, NAMA, and was bought before Christmas 2023. It worked out at approximately €19,000 per home. That is not material in the context of delivery costs of in or around €400,000. The cost was approximately €19,000 per home. We are looking at other opportunities at the moment, which are in or around that mark. We assess those opportunities on the basis of scale and on the buildability of the existing permissions. One planning permission is not necessarily the same as another. Some may be inefficient or more expensive to build. We are looking at a number of opportunities at the moment. We think that makes sense for the LDA. The State land bank is not always available to build housing on. It is finite and has to be replaced. We think it makes sense to acquire land when there are opportunities and value available in the market. We are interested in other opportunities at scale, similar to the development in Clongriffin, which could yield approximately 2,300 homes.
Brian Stanley (Laois-Offaly, Sinn Fein)
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When the LDA is buying from another State body, semi-State companies are included in the LDA reports. Those companies might include CIÉ, Bord na Móna, the Electricity Supply Board or whatever else. When the LDA is buying from such a company, am I correct that the company has to charge the market price?
Brian Stanley (Laois-Offaly, Sinn Fein)
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It is existing use value.
Brian Stanley (Laois-Offaly, Sinn Fein)
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If it is, for example, a parking lot for Bus Éireann buses, the assessed value would be the value to the company. It would not be the price for housing.
Mr. Phelim O'Neill:
The Cathaoirleach is exactly right. It is the underlying existing use value. Part 9 of the regulation of the LDA Act sets out that existing use value is as per Part V of the Planning and Development Act. Part V relates to the social and affordable aspect. There is a significant amount of case law and a valuation mechanism to determine the existing use value. The Cathaoirleach makes a relevant point. The existing use value for a green field is essentially agricultural value whereas a bus depot has an intrinsic value. There is a mechanism to value those. As the CEO mentioned, the costs are quite nominal in many cases in the context of the overall cost of the delivery of schemes.
Brian Stanley (Laois-Offaly, Sinn Fein)
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From reading the information supplied before the meeting and other information that is available, I understand that the LDA has to provide a minimum of 40% of cost rental or affordable purchase properties in any development it goes into.
In other words, there has to be 40% developed under those two models. Is it correct that 60% can be sold off by a private developer?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Is that black and white? Can it change?
Brian Stanley (Laois-Offaly, Sinn Fein)
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That is okay. Outside of Cork and Dublin, for example, what of Limerick?
Brian Stanley (Laois-Offaly, Sinn Fein)
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In anything you have delivered to date, there has been no-----
Brian Stanley (Laois-Offaly, Sinn Fein)
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All those ones in the pipeline will be 100% cost rental or affordable to purchase.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Sorry, yes. Okay. Is it anticipated that this will cool the housing market, for want of a better term, and that, particularly in these high-cost area, it has a cooling effect because if there are homes being provided at a moderate price, and more stable one, the option of cost rental obviously reduces demand out in the wild west or the open market?
Mr. John Coleman:
You are absolutely correct, Cathaoirleach. A good way to illustrate that is in January this year we released 620 cost-rental homes on the market on the same day. They just happened to come together at that point. On that same day, there were around 1,300 rental properties available for sale in Dublin altogether on the market. We increased, on that day, the available rental stock on the market by 50%. Unfortunately, we cannot do that every month but you can imagine that if we could consistently do that more and more, it would have a brake effect on the rising rents or maybe even a more moderating effective on rents in the private sector as well.
Brian Stanley (Laois-Offaly, Sinn Fein)
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The theory is good but my only concern is with how it is working in practice. I take on board what Mr. Coleman is saying in relation to some factors he does not have control over but the overall cost per home is still coming in at, there or thereabouts, what it is on the open market. For the apartments in Dún Laoghaire, for example, one is looking at up to nearly half a million euro. One is looking at close to €450,000 to €500,000 per unit. That is the only concern. Obviously, to go back to Mr. McGuane's contribution, the rents have to be predicated on that or the sale price. We understand that because, as the years move on, the project has to wash its own face. They money has to come back in to make up the shortfall which is happening at the moment because you are not far enough down the pipeline. As you get further on in it, there will be more rents coming in. There will be more bought. It fills up the coffers, which then can be reinvested. That is the only concern. A number of Deputies expressed that here this morning - we really have to try to get the overall cost down.
We live in the real world. If a public body wants four windows replaced in a development or if they want a bicycle shed or a security hut erected, it costs a lot of money to get things done at the moment.
Mr. John Coleman:
If I could respond to that, Cathaoirleach, I think you are absolutely correct. We have to focus on cost management. We have an entire team of QSs in the LDA that do that day in, day out.
The apartment delivery costs out at Shanganagh, as I mentioned, were for about €409,000, on the completed ones. It would be very much in line with or maybe slightly less than the market rates. We compare ourselves to the market all the time. We have good visibility into tenders and prices that are out there in the market and we pay a lot of attention to that.
A couple of other factors and initiatives that we have to manage and moderate costs are that we have standardised the design of our apartments. We have a booklet that we have produced. These things have been designed to within an inch of their lives. We give that to every architect that we engage as a brief and they have been market tested and peer tested.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I have raised standardised designs with the Secretary General of the Department every time he has come in over the past four years.
Mr. John Coleman:
The second piece of interesting information as well is that with Project Tosaigh, our house-builder partnerships, we have for the latest round run a public procurement contest which is a competitive-bid process which has driven pricing down. It has forced developers to compete against each other. That has had a significant effect on pricing that we have seen come through as well.
Brian Stanley (Laois-Offaly, Sinn Fein)
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The people in Citywest will not mind if their apartments look like the ones in Kingstown.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I know the background. Of course, not. The point I am making is that this thing that you have to start with a completely blank sheet every time has been raised here repeatedly by me. Mass production is cheaper, if you want to try to change every plan. I have not figured out the reason, with every school project, you start from scratch. I have not worked out why that is. Most of them, at least in my area, look the same. I do not know why that is done. When you are trying to provide a lot of housing - I have said here many times we do not want everything looking like the Soviet Union in the 1930s or 1940s, or some of the horrible buildings that were built during that period in other countries - it is a matter of a good quality finish but there is nothing wrong with having basically the same. What works is good and keep using it.
When you go in and do a direct build, are you competing there with approved housing bodies and even local authorities or maybe private buyers who are trying to buy turnkeys? Are you in direct competition with them or are you buying ones that have run difficulty where the developer has poured all the concrete but has not got much further than that?
Mr. John Coleman:
The LDA is probably the main or the only State body that directly builds itself. We would engage building contractors on the direct delivery sites. We would not be competing with AHBs on that.
In relation to dealing with house builders, we engage with the Department extensively in terms of visibility and what is coming through from house builders so that there can be no situation that State-funded bodies can be played off against each other. We would take a very dim view on that. The protection that we think is very beneficial is running competitive processes when acquiring from the market through house-builder partnerships.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Have you taken on any projects where a development has got so far and for whatever reason, maybe difficulty financing the next stage, they have the concrete poured but maybe the roof is not on or the internal works or the first or second fixes are not done?
Mr. John Coleman:
Once you can get comfortable on the quality and the track record of the developer, the lens that we look at things through is that if something is going to happen any way then we should not get involved but if it will not happen without our intervention, that is when we get involved. We would look at schemes that are mid-development that have run into financing difficulties that-----
Brian Stanley (Laois-Offaly, Sinn Fein)
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Have you got involved in any?
Mr. John Coleman:
Where it had got to a level, we were satisfied with the quality that was there. There was a financing difficulty. We stepped in and got very good value, as a result of that, let us say, vulnerability. Now the scheme is built out and is being fully let at the moment. It is a well-built scheme. Generally speaking, we look to get in earlier on schemes before construction but we will step in where, if we did not, they would not get delivered otherwise.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I have one more question. The witnesses have dealt with the issue of management companies and the CPO powers. In its design, the LDA has to operate according to what has been ordained by the Oireachtas and the Government. At the start, a lot of people thought the agency would just be a land development agency to ready land for development. Mr. Coleman said in the past few minutes that the LDA is the only State agency that builds directly. The local authorities are separate units of government. I am not saying the Land Development Agency is not successful but might it be more successful if it were just a land development agency. How would that sit with it?
Mr. John Coleman:
There are two ways I can answer that. The first relates to the existing momentum and trajectory we have built up, with 37 direct-delivery schemes and a further 22 schemes operating through house-builder partnerships. We are working on a total of 59 schemes. We have billions of euro in capital and nearly 200 staff. To my mind, it would not make sense to do anything that would upset that. Let us keep going with that trajectory and delivery. There will be thousands of homes coming on stream per annum as a result, all of them affordable.
On land aggregation and land assembly, we do engage in that activity. It is mandated. It is more under the radar because it takes a long time, because of infrastructural and other constraints on the land, to yield results. We have been engaging in the activity in question somewhat under the radar. Probably the best examples are the schemes at Sandy Road, Galway, which can yield around 750 homes, and at Colbert Station, Limerick, which can yield around 2,500 homes. These are thousand-piece jigsaws, with so many parts to them that they are very difficult to pull together, but we have produced master plans in both cases. We anticipate lodging planning applications for them next year. This is a major milestone because-----
Brian Stanley (Laois-Offaly, Sinn Fein)
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Directly under the LDA? Is it not through Project Tosaigh?
Mr. John Coleman:
No, directly by the LDA. That is a major milestone because, when we lodge a planning application for a development, it means that, in all likelihood, it will get built when we receive the consent. It is much slower to do this. It is a significant area of ours. It is what the strategic planning area, led by Ms Lawson, is mainly focused on. We want to continue to put resources behind that. I would say it is not an either–or but the Cathaoirleach is correct that land assembly comprises a very significant role and mandate of the LDA and that we should continue to place a lot of focus on that.
Brian Stanley (Laois-Offaly, Sinn Fein)
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I have a final question for Mr. Coleman. With regard to pounds, shillings and pence, at the moment there is a loss. Mr. Coleman explained why. When does Mr. Coleman hope that the LDA will have reasonably significant income? It has obviously done projections for the next five years. How does Mr. Coleman see it working out? I do not expect him to give me exact figures but I just wish to know the projections he has.
Mr. John Coleman:
There are two things that are driving the losses. Our main costs that we put through in our profit-and-loss account are staff costs and professional services costs. Sometimes, up to a certain point in a development, you have to expense professional services costs, such as those of architects, through your profit-and-loss account. After you reach a certain milestone, these costs can just be capitalised and allocated to each project so they do not result in losses coming through. We think that once the cost-rental income starts building up, in the next three years or so, the LDA should turn profitable. The benefit of that is not necessarily the profit. We are not profit oriented in that we are all about delivering affordable housing-----
Brian Stanley (Laois-Offaly, Sinn Fein)
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At what point does Mr. Coleman envisage there will be a substantial ability to reinvest? Does he see it kicking in within maybe six or seven years? Obviously, it will or should ramp up.
Brian Stanley (Laois-Offaly, Sinn Fein)
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Costs have to be taken out of that, including management company costs and interest repayments. However, the remaining portion would allow for significant investment.
Brian Stanley (Laois-Offaly, Sinn Fein)
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With regard to financing, the LDA had the €1.25 billion and was hoping to get €2.5 billion from last year’s budget. Maybe the LDA was not hoping for it but many others were. It did not happen. Do I recall that the Minister announced €2.5 billion on budget day? Maybe Ms Behan or Mr. O’Sullivan could help me with that. Was there an announcement on budget day, separate from the budget announcement, that €2.5 million would be available?
Brian Stanley (Laois-Offaly, Sinn Fein)
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That was announced in December last year. Is that correct?
Brian Stanley (Laois-Offaly, Sinn Fein)
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Maybe that would be useful. People watching will say there has been a lot of back-and-forward on it here this morning and that they are still confused as to whether the money is on the balance sheet.
Brian Stanley (Laois-Offaly, Sinn Fein)
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That would be useful. Essentially, all €6.25 billion is on balance sheet.
Brian Stanley (Laois-Offaly, Sinn Fein)
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It does not affect it but it is still technically accounted for on the balance sheet. All €6.25 billion is on the State balance sheet. That is good to finish on - total clarification.
This is the first outing here of the witnesses and staff of the LDA. I thank them and the officials of the Department of housing for their work in preparing for today’s meeting and the briefing notes supplied. I thank the Comptroller and Auditor General and his staff for assisting the committee today.
I take it as agreed that the clerk will seek any follow-up information and carry out any agreed actions arising from today’s meeting. I also take it as agreed that we will note and publish the opening statements and briefings provided for today’s meeting. I thank everyone very much. Go raibh míle maith ag gach duine.