Eoin Ó Broin (Dublin Mid West, Sinn Fein) | Oireachtas source

I want to make two separate or distinct arguments with respect to this. Obviously it is related to No. 1 in the sense that I am arguing that the cost rental equity loan should not be available to private developers, and there are two key elements here to make that case. The way cost rental works is twofold. As members know, you look at the financing, development, management and maintenance costs of the unit and the idea is that whoever provides the unit has to get full cost recovery over a period of time. However, you can make the rent more affordable if you structure the finance in such a way as to allow the full cost recovery to happen over a longer period of time, thus bringing down the entry level rents to an appropriate point. This is really significant because the current cost rental schemes that are under development, including the Enniskerry Road cost rental pilot scheme, for example, will have rents of between €1,200 and €1,300 per month. Other cost rental projects in Dún Laoghaire could have rents of €1,300 per month and, in Cork city, of €900 per month. That is going to cause a very significant problem for a large cohort of working people not eligible for social housing and for whom we would like to have cost rental as a viable option. These are often workers who are just above the income threshold for social housing, and we know from very detailed research by the ESRI that they are people who do not experience significant levels of wage growth. Therefore, the entry level rent of cost rental projects is really key if this is to be affordable. Mr. Brendan Kenny, the director of housing at Dublin City Council and officials from the Department of Finance told the Oireachtas Joint Committee on Housing, Planning and Local Government in 2019 that if the financing of this is structured correctly, we could bring entry level rents down to between €700 and €900 per month for a one, two or three-bedroom unit, which is substantially below what is currently being proposed as the guiding rent of about €1,200 per month.

The difficulty with bringing in private developers is twofold. First, it adds a significant additional layer of cost above the cost of financing, building, managing and maintaining because developers are required to have a 10% to 15% profit and risk margin. That is an extra layer of cost that makes things more difficult. That 10% to 15% cost margin is taken from four separate reports by the Society of Chartered Surveyors Ireland of private sector development and it is a well-established principle. There is a more significant consequence of bringing in private developers. The key about cost rental is that once the financing loans are paid down, let us say over 20, 30 or 40 years, the accommodation generates a surplus. It generates a revenue stream for the housing provider. That is how, for example, the not-for-profit and voluntary sector providers in other European jurisdictions actually have a housing stock that is self-financing after a period of 20, 30 or 40 years. The revenue surplus on the cost rental side helps providers to cross-subsidise social rental as well as to fund future stock. The best way of delivering cost rental, whether it is through local authorities or other public agencies or not-for-profit entities, is to have social and cost rental units together and when the cost rental loans are paid down, the providers will benefit from the surplus. Those of us here who have been councillors know the great difficulty our local authorities have had getting adequate resources from central government for the management and maintenance of social housing stock. That is why they often have to opt for very expensive refurbishment projects and so on.

If we say that private developers can have access to the cost rental equity loan, what we are essentially doing is giving that revenue surplus, which would be about half of the rent that would be paid at that stage, permanently to the private sector at a future point in time. In that way, we are denying the not-for-profit sector, particularly the local authorities but also the Land Development Agency, LDA, which I do not support, and the approved housing bodies, AHBs, access to that surplus. Again, this will make the rents more expensive and will deny our local authorities and other not-for-profit providers access to a really valuable revenue stream into the future. It is completely contrary to the logic of cost rental. I am not aware of any jurisdiction where for-profit private developers deliver cost rental because the whole point is that it is meant to be about full cost recovery and is not profit driven. I do not see why we should use taxpayers' money to deliver more expensive rental accommodation and cross-subsidise private developers indefinitely into the future when that funding could be used for more affordable accommodation to the benefit of our local authorities indefinitely.