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

Before I go to my questions, it would be nice if HBFI would just lend to the people it was originally intended to lend to, which is small- and medium-sized builders. I will not ask the witnesses to comment on such a policy matter. I want to make a general comment about rent setting and then I have a number of questions which we might go through one by one since we have all the time in the world.

I want to pick which Mr. O'Leary up on one matter. He used the phrase "nirvana of lower rents". I want to explain why the rent setting is so important, not just for the tenant but also for the HFA in terms of its management of loans and for Mr. Jordan as well in the Housing Agency. The problem is a lot of our conversation on this is not a criticism of either of the organisations in front of us today. The conversations about cost-rental have started with the very odd idea that you take market rent and you apply a discount. That is not cost-rental. It is a particularly Irish way of approaching the issue. Cost-rental is exactly as Mr. O'Leary has outlined from the very start. It is the very boring process of the thing has to pay for itself and that does not have any relationship to the market rent in the private rental sector. We have two if not three possible dangers in the way in which this scheme has been set up that I want to put on the record. The first is there is a whole cohort of people for whom cost rental is meant to be viable, for whom it currently is not. They are either single people, single income households or very low-income households just above the threshold for social housing. At €1,200 or €1,300 a month, they would be paying up to 50% of their net disposable income on rent. That is not my opinion; it is the result of a very detailed analysis given to its elected members by Dublin City Council on the basis of a number of cost-rental projects.

Cost-rental cannot be affordable if it is 40% to 50% of people's net disposable income. I completely understand that is not Mr. O'Leary’s primary policy concern. The problem is, however, that just as the old shared ownership schemes at the latter end of the Celtic tiger era were very risky for the lower-income households that bought into them - there was four times more mortgage default on those than on mainstream mortgages - we have a parallel risk here with cost-rental. If we set the rents too high and if we allow modest income households into those tenancies, if and when there is another recession, we know that those workers are more likely to lose their jobs first and that is going to cause a problem for the landlords of those cost-rental facilities and the issuers of the debt.

In the first instance, the conversation about bringing the rents down to a more affordable rent level for one of the core target groups is key to the viability of the scheme. I am appealing to the Housing Agency to understand when some of us in this room call for the reduction of rents, it is not because we want to be popular with the people who live in those. It is because we want cost rental to grow, as well as to be large and sustainable over the long term. If we accept - and I do not accept this - that entry-level rents are €1,200, €1,300 or €1,400, in the case of Oscar Traynor Road or O'Devaney Gardens, it will be even higher on the basis of current cost configuration, then we have a problem. I want to emphasise that first.

Second, we have another danger. If we look at the first round of the cost rental equity loans, CREL, out in the suburbs where I am, the gap between the CREL rents and the market rent is dangerously close. While it is within the 25% threshold, there will be a cost rental equity loan out in Citywest, for example, of €1,200. Out there, some market rents are €1,600, €1,700 or €1,800. We know how volatile our private rental sector is. We saw what happened to rents after 2010.

There is a genuine concern among many, and the Housing Agency will know this because this has been said to them in other quarters, that if the private rental sector takes a nosedive over the next ten years, we could have the bizarre situation where cost rents become more expensive than market rents. Let us not forget, and the Housing Finance Agency appreciates this more than most, what happened with the unsold affordables, which were 2,000 units at the end of the crash. The local authorities were tied into their cost. We still have not resolved that problem. Nobody knows how we are going to fix it. Therefore, if we are simply pegging the target rent at 25% of the market rate, that will create a danger if there is a downturn in the private rental sector.

My third point goes back to Deputy Flaherty's question about affordability in rural areas. The idea that we would peg affordability to 25% of market rent in areas where market rents are low - they still might be unaffordable - will cause a problem in the rural areas. I am not looking for a response to that. I am just appealing to the witnesses’ good offices to take the issue that the entry-level rents are important. I am not naive enough to think that this is all about the interest rates or that it is easily solved. Yet, I am worried that if we just blindly accept the entry-level rents as they are currently being proposed, we could end up having problems in five or ten years. They, like the old shared-ownership schemes or the unsold affordables, could come back to haunt us. That is why I am making an appeal. I made it to the new chair of the LDA and I make it to the Minister at every opportunity. I still think that there is a bit of work to be done to bring down those entry-level rents. I am encouraged by some of what Mr. Jordan said earlier. They have to be brought down below €1,000, particularly for single people, for the single-income households and those who are two deciles above the entry level for social housing eligibility. If they are not, we will be designing in a problem at the start.

I want to pick up on the Acting Chair’s question about the circular with respect to the drawdown of the Rebuilding Ireland home loan, as it was back in June or July 2020. It stipulated that one had to have exited the employment wage subsidy scheme, EWSS, for at least three months, but there was some flexibility on the parts of the local authority and the Housing Agency. Maybe a simpler way to answer the question is that no new circular has been issued since then, is that not correct? It is still that circular.