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Housing for All?

Paddy Smyth
25/02/2021

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Ireland

The Housing Minister and the Department of Housing have proposed a number of measures in an attempt to tackle the shortage of housing in Ireland and to provide additional social housing supports. The increased challenges created by Covid-19 have exacerbated a system already in crisis.  The rise in unemployment levels and uncertainty in the economy has heightened the need for new initiatives to increase the availability of homes.

THE AFFORDABLE HOUSING BILL 2020

The latest effort by the Department of Housing is the Affordable Housing Bill 2020, which was introduced on 20 January last. The Bill provides for 3 new schemes to deliver support to those who do not meet the criteria to qualify for social housing but are in need of additional support to meet their housing needs through the following measures:
 
  1. Local authorities are to deliver affordable homes for purchase on their lands for the first time in more than a decade;
  2. A new Affordable Purchase Shared Equity scheme is to be introduced whereby the State will provide equity support to first time buyers seeking to purchase new homes in the private market but unable to secure the full mortgage to do so. The State will take an equity share in the purchase of a new home. It is intended that the income criterion for eligibility to purchase a particular dwelling will be that the applicant cannot secure a bank/financial institution mortgage for 90% of the market value of the unit. In relation to classes of dwellings, it is intended to target the scheme at new build homes and the scheme may set other conditionality linked to price, geography and minimum/maximum levels of equity support.
  3. The introduction of a new form of long-term tenure, a ‘Cost Rental Tenancy’.  A cost rental tenancy is a tenancy whereby the rent is set at a 'cost-covering' level. The cost rent is not linked to the rental market and should therefore be cheaper than market rents and more affordable for tenants. Cost rent will cover delivery/capital development costs, financing costs, management costs of the properties and maintenance costs. The proposed legislation provides for annual rent reviews linked to the Consumer Price Index or similar “or as otherwise prescribed by the Minister". HAP recipients will not be eligible to enter into a Cost Rental Tenancy and it is envisaged to target the scheme at those who are above the threshold for social housing but are unable to afford to buy or rent on the open market. 350 homes are intended to be provided by the end of 2021, through the scheme.
REBUILDING IRELAND

Rebuilding Ireland is the Government's Action Plan on Housing and Homelessness. The plan is divided into Five Pillars as follows –
 
  1. Address Homelessness
  2. Accelerate Social Housing
  3. Build More Homes
  4. Improve the Rental Sector
  5. Utilise Existing Housing
SOCIAL HOUSING

Some of the measures introduced under Pillar 2 of the Government's scheme to accelerate social housing include the goal of delivering 50,000 homes under various social housing programmes, together with an expansion of the Housing Assistance Payment ("HAP") scheme nationwide. The Social Housing Construction Project Status Report Q3 2020[1] confirms that over 138,000 additional social housing homes are to be delivered by the end of 2021. This will include 83,760 HAP homes, 3,800 RAS homes and over 50,000 new homes, broken down as follows: Build: 33,617; Acquisition: 6,830; Leasing: 10,036.

In July 2020 the Minister launched the “Call for Housing 2020” – a new national call for property owners and developers with vacant properties to make them available for use as social housing. The initiative is overseen by the Housing Agency and properties are requested, to be either leased or sold to meet the increased demand for social housing in the wake of COVID-19.
 
  • Property owners are encouraged to offer vacant properties for sale to their local authority. There is a particular focus on attaining housing that can fulfil specific social housing needs such as one bedroom properties, larger family homes or homes that can be adapted for disability or older person's accommodation. Property located in urban centres is especially sought after by local authorities.
  • The Minister is also recommending use of the Social Housing Leasing Scheme, which allows a property owner to lease their property to a local authority for a fixed term, for an agreed amount which is based on a discounted market rent. The local authority will manage and support all aspects of the tenancy. The property owner therefore has no relationship with the tenant and can rely on a stable rental income. Properties for this scheme should be located in an urban area. Owners will be paid up to 80-85% of the open market rent over the term of the lease.
  • The Department has also launched the Enhanced Long Term Social Housing Leasing Scheme in order to target property developers and investors who are in a position to deliver housing at scale. The scheme provides the opportunity for Local Authorities to lease from institutional developers. A higher proportion of market rent is available for landlords willing to undertake management and maintenance for properties under the scheme, for proposals of 20 units or more only.  The Housing Agency administers the scheme on behalf of the Department of Housing. In the Enhanced Scheme the lease term is 25 years and the Local Authority will pay up to 95% of an agreed market rent at the commencement of the lease. Rent will be reviewed every 3 years, linked to the Harmonised Index of Consumer Prices ("HICP").
This Scheme may attract investors and developers who would develop housing stock and then lease the entire development to Local Authorities to be sub-let to individual tenants. CBRE Ireland in its 2021 Market Outlook advised that social housing continues to attract both debt and equity investment.[2] CBRE has confirmed that "the appetite to invest in social housing since the second half of 2020 has been enormous due to the underlying quality of the income stream."  There has been an increased demand from investors, both domestic and international, keen to acquire residential units and schemes let to local authorities on long-term leases. The report concludes that a combination of both public and private sector involvement is critical to the delivery of the quantum and calibre of housing stock of all tenures that Ireland needs.

The demand for investment in social housing is still strong as Ireland's largest ever social and affordable housing scheme has recently been approved – the development of 597 new sustainable homes at Shanganagh, Shankill, Co. Dublin.

INCREASE TO REPAIR AND LEASING FUNDING

Minister O' Brien has also announced an increase in funding to the Repair and Leasing Scheme ("RLS"), which will assist further in bringing vacant properties back into use for social housing. The RLS was developed under Rebuilding Ireland to assist property owners in bringing their properties up to the standard required for the rental market. Under the scheme, property owners are paid up-front for the cost of the repairs in return for making their properties available as social housing for a period of at least 5 years. The cost of the repairs is repaid by owners by offsetting it against the rent due to the owner for the property over the period of the lease agreement. The maximum funding now available under the scheme is €60,000. In order to meet the requirements for the scheme the following conditions must be met:
 
  • The property must be vacant for at least 12 months before entering the scheme;
  • There must be a social housing demand for the property in the area;
  • The property must be assessed as being viable to provide social housing.
CONCLUSION

The above measures are intended as practical steps to address Ireland's acute shortage of housing. It will remain to be seen whether implementation will lead to the necessary increase in affordable and social housing stock.  

It is clear that significant reform is required in this area, given that 2019's figures reveal that 27% of all qualified households have been waiting for more than 7 years for social housing support. The proposed collaborative approach between the public and private sector may provide a more efficient model for the provision of housing, and it is encouraging that programmes such as the Enhanced Leasing Scheme appears to be attractive to investors as a stable source of income. This together with the Department of Housing's €6 billion spending announcement should go some way towards delivering housing at the levels needed through 2021.

A link to the government's Rebuilding Ireland programme can be viewed here.
 
Written by Paddy Smyth and Aideen Farrelly. 
[1] "Rebuilding Ireland - Action Plan for Housing and Homelessness Quarter 3 of 2020: Social Housing Construction Status Report", December 2020
[2] CBRE Market Outlook, Ireland 2020, cbre.ie/outlook2021

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