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

There are two values to this session. One of those, certainly for the Chair and I, is that with each of the sessions, including the private briefing, Second and Committee Stages and the earlier session this morning, we are getting a much better sense and understanding of the Bill. That is already very helpful. It is also very important to put some of this on the public record. While Second Stage and Committee Stage allow for some of that, this allows us to go into a little more detail. I have questions on three sections. I will then come back to the LDA capitalisation.

I will make this opening point, however. Even though we describe the homes that are being provided by the LDA and AHBs as cost rental, strictly speaking, they are not actually cost rental. It is important that we fully understand this. In fairness, Dr. McManus, in a slightly more diplomatic way than I will put it, highlighted that. The cost-rental model as it operates in almost every other jurisdiction, and how it was proposed as part of the legislation here, is that it costs X to finance, build, manage and maintain a unit of housing over a period, and there is a principle of full cost recovery, or that the rent paid by tenants over whatever the period is basically washes its face. It gives us full cost recovery. The rent setting is related to that full cost-recovery model. That is not what we have in front of us.

The reason I say that is some of the difficulties we have experienced are because we are calling it one thing but it is actually something else. What I mean by that is the moment, for example, that the STAR investment initiative was introduced, LDA units stopped being cost rental because it is not full cost recovery. The State is taking an equity share forever and a day and, therefore, it is only partial full cost recovery. Once that 20% portion of CREL, which is theoretically debt although very soft debt, is transformed into equity, that is no longer cost rental either. In addition, the rent setting is not cost rental. It is probably better described as market discount. That is relevant because, as I understand it, especially with respect to the Land Development Agency's rent setting, where STAR is involved, the level of STAR is gauged against that 25% below market rent. I understand it can go beyond that in some instances. It is not that the LDA can apply for the maximum applicable STAR to get the rent down to the lowest possible level. It is almost now constrained by that 25% rule, although it can go to approximately 30% in exceptional circumstances.

We are calling it one thing but there is now a subsidy. There is not just a pegging to market rent but in the operation of at least STAR - I hope it does not operate in the same way with the 20% equity share - there is now also a link to market rent that prevents rents from being brought down further, even though a higher volume of STAR could be available. I am absolutely sure that is due to the good people at the Department of public expenditure and reform constraining the public finances, as is their mandate. We can talk about that another day.

With respect to the Bill, my first question is on Part 2. Are the witnesses absolutely satisfied that allowing AHBs not to put that text into their constitution will not have any material impact on their operations as per current public policy on social and affordable housing?

I do not have any concerns about this but I want to get it on the record.