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

The point made by Deputy Boyd Barrett it is one of the most fundamental issues in this debate. It frustrates me that the point he correctly makes continues to be misunderstood. I will go back over it with Mr. O'Rourke, for the benefit of those of us who have been dealing with it for a long time. We all know what cost-rental housing is. The rents are set at the full-cost recovery of the all-in cost of the development, management and maintenance of the unit. The crucial point is that if one of the homes in the Shanganagh development costs the LDA €300,000 from a contractor, and if that amount is repaid over 25 years, the rents will be high. On the other hand, if the approach taken is what is done in Vienna, where the cost is paid off over 60 years, the rents will be substantially lower. We know this is the case because of the example of the pilot project of the Respond and Tuath housing associations on the Enniskerry Road. The original rent was to be €1,600 a month in respect of full-cost recovery to pay down the finance involved over 25 years, but because the AHBs rightly said that rent was far too high, a deal was struck to reconstruct the financing.

Mr. O'Rourke will know better than I will from his extensive experience that the price the tenant pays is not just a function of the construction cost of the unit but also how the LDA will structure the full-cost recovery financing package. Therefore, one of the fundamental flaws in the model that the LDA is being asked to implement is that it does not set the target rent at the outset of a project. I am not referring to a differential rent. Deputy Boyd Barrett and I probably do not agree on the finer detail of this point. The great value of cost rental is that it allows projects to be engineered with a degree of flexibility, project by project. If it is decided that a project is being primarily targeted at a cohort of people for whom a genuinely affordable rent is, for example, 29% of their net disposable income, then that cost for a one-bedroom, two-bedroom or three-bedroom unit will be €700, €800 and €900 a month, respectively. If the market price of the unit is "X", the question to be asked then is how it will be possible to engineer full-cost recovery to result in those entry-level rents.

The difficulty is that the model the LDA is employing is doing this in reverse. It is allowing the cost of the delivery of the unit to set a rent, regardless of whether it is genuinely affordable for the targeted cohort of people. The financing structure constraining repayment of the cost within 25, 30 or, in some cases, 40 years, rather than in 50 or 60 years, means the rents will be too high. Therefore, given all Mr. O'Rourke's expertise, especially in the financing of large long-term infrastructure projects, I urge him to use his influence in the board to shift the focus away from the model given to the LDA and to start instead with what we think is a standard affordable rent. Let us see what the market offers in the way of tenders, because I accept there is nothing Mr. O'Rourke or the LDA can do about that issue now. The case should then be made for a different structuring of the finance model to get the rents below €1,000. The rent in Shanganagh should be €800 for a two-bedroom unit. When officials from the Department of Finance were asked at the Joint Committee on Housing, Planning and Local Government during the previous Oireachtas if such an approach was possible, they said it was theoretically possible if the length of the maturity of the loan finance, the interest rates and some level of soft recoupable loan from the State, post the payback of the European Investment Bank, EIB, or Housing Finance Agency loans, was designed to do so.

I am not so much asking a question as expressing my increasing frustration at the reverse and backward way that we are doing this. The consequences in some cost-rental projects, for example, will be that the rents will be higher than €1,200, and may reach €1,300 or €1,400. Mr. Coleman knows that as well as I do. Therefore, we must undertake this process the other way. Major European cities are delivering cost-rental today with rents set at €700, €800 and €900 with broadly the same construction costs and unit sizes. The crucial difference lies in 50-year and 60-year financing. If Mr. O'Rourke has a response on this, I will be interested to hear it. I ask him to please try to advocate that approach in the comfort of a board meeting whose minutes are heavily redacted before we see them, because that is the only way this project is going to work in the long term.