Oireachtas Joint and Select Committees
Thursday, 31 January 2019
Joint Oireachtas Committee on Housing, Planning and Local Government
Affordable Housing: Discussion
At the request of the broadcasting and recording service, members and visitors in the Public Gallery are requested to ensure that for the duration of the meeting their mobile phones are turned off completely or switched to airplane, safe or flight mode, depending on their device. It is not sufficient to put phones on silent as this will maintain the level of interference with the broadcasting system.
Before we begin I would like to record our decision on the EU scrutiny schedule, COM (2018) 782, on the composition of the Committee of the Regions. I propose that this proposal does not warrant any further scrutiny. Is that agreed? Agreed.
The next item on the agenda is an engagement on affordable housing. I welcome to today's meeting, from the Economic and Social Research Institution, ESRI, Dr. Barra Roantree and Dr. Conor O'Toole, from the Housing Agency, Mr. John O'Connor and Mr. Jim Baneham, and from the Ó Cualann Cohousing Alliance, Mr. Hugh Brennan and Mr. John Moore.
Before we begin I draw the attention of the witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, they are protected by absolute privilege in respect of their evidence to the joint committee. If, however, they are directed by it to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an entity by name or in such a way as to make him, her or it identifiable.
Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable.
Mr. Hugh Brennan:
I thank the committee for the invitation to attend at this committee meeting on affordable housing, an issue that is very close to our hearts.
Ó Cualann Cohousing Alliance CLG is a co-operative housing organisation with approved housing body, AHB, status. We are a not-for-profit company limited by guarantee and a registered charity. Ó Cualann is governed by a voluntary board of directors-trustees. Our motto is, Building Communities, Not Just Houses, and our mission is to provide co-operative, integrated homes at affordable prices in mixed income, sustainable communities with support from local authorities and other willing landowners and in which owner-members live side by side with social and private tenant members, all sharing common amenities. Fully integrated means a community comprised of people of mixed income, age, mobility, needs and ethnicity living together as neighbours. Co-operative means aventure or enterprise set up and run for the mutual benefit of all its members, namely, the residents of a particular development. Affordable - the important bit - means a rent or mortgage which can be afforded by households and represents a maximum outlay of 32% of net income. People argue that it should be as low as 30% or as high as 35%, but we say around 32%. Housing needs have to be taken into consideration. People always have utility bills to pay and maintenance will be required if they own a property.
Ó Cualann is currently the only AHB in Ireland offering affordable homes for owner occupiers and one of few intending to offer homes for affordable rent, in collaboration with Túath Housing. We have a collaboration agreement with Túath Housing under which the latter will manage both the social houses and the affordable rental in developments we both work on. Our inaugural project, in Poppintree, Ballymun, which has just been completed, comprises 49 well designed and high-spec, A2 rated, two, three and four bedroom homes, with an average price for the three bedroom homes of €170,000. With all the benefits of living in a co-operative community, our initial project is heavily oversubscribed. We currently have 1,300 people on a waiting list for a house in north Dublin. Given that we are a small co-operative body, that is a crazy number. Such is the interest in and demand for affordable housing that the Ó Cualann model has garnered widespread attention from prospective purchasers, local authorities, funders, philanthropic organisations, political parties, elected representatives, Ministers, academics and media commentators.
To date, we have attracted more than €200,000 in philanthropic funding to help us build our capacity in order that we can replicate and scale our model. We are in line to receive additional philanthropic funding over the next three years to continue this scaling process in line with our strategic plan. AIB has also committed to funding our schemes. It has referenced the Ó Cualann model in public utterances, including in its regular housing reports and at various Dáil committees. We have also raised €1.5 million in short-term finance through loan notes, which has been quite an innovative means of fundraising. Private individuals, companies and a charitable trust are now investing in Ó Cualann because they want to see their money used to create a social impact in Ireland and get a reasonable return. Holders of loan notes have chosen to accept varying rates of return on their unsecured loans ranging from 0.5% to 4% per annum, for periods of 18 months or three years.
Our model is de-risked because Ó Cualann pre-sells all units on a phase by phase basis before construction commences. We use a design-build contract, with a strict no variation or maximum fixed price clause, which means there are no nasty surprises for us during or at the end of the contract. The contractor buys out the risk of any variation in our pre-contract negotiations.
The process of building the community, which is really important to us, starts as soon as we are given the go-ahead for a scheme and is carried out during the section 183 process. We hold several meetings and a common charter is prepared by the residents before they move in. We will start our second development in Ballymun in two weeks. The selling price of an average three bedroom house will be in the region of €219,000. Members might wonder why the first scheme cost €170,000 and the next costs €219,000. The difference is due in part to inflation, but also higher development costs for us in the second scheme. This has been caused by the need to remove 5,000 cu. m of soil, which increases the price. However, €219,000 is an affordable price, according to the criteria we mentioned earlier.
We agree eligibility criteria with the local authorities. Houses are allocated on a first come, first served basis as applicants meet the eligibility criteria, and by appointing an allocation committee where demand exceeds supply at the end of the process, which always happens. Our ideal mix is 60% owner occupiers, 20% social rental and 20% affordable rental, but this must be in agreement with the local authorities, which ultimately determine the mix.
The main obstacle to replication of the model is land. If land is available, the AHB sector can do the rest. We can provide the private finance and build the sustainable communities. We ask that the Government takes a broad view when looking to achieve value for money in the disposal of land.
Some 95% of our members will never buy on the open market. When they buy from us approximately €50,000 from each sale goes back to the Exchequer through VAT and other taxes. That is a windfall gain for the Exchequer. In addition, 60% of our members had been renting at an average rent of €1,500 per month whereas their mortgages cost only €850 per month on average. This leaves discretionary disposable income available for spending in the local area. There are 2,000 plots available in Ballymun. If all of those were used for the affordable model, it would increase income in Ballymun alone by €13 million per year. An economist checked and approved that figure for us and it is significant in Ballymun. It could provide the additional services we need to get the shopping centre up and running again.
I will conclude on that point as I do not wish to speak for too long. I draw members' attention to a table in the statement I submitted which shows gross income, net income and the maximum affordable mortgage of 30% or rent of 32% a person should pay as well as the various houses he or she could afford on an income set at the limits provided. A person earning around €45,000 will find it very difficult to buy a house but he or she can still get a house in one of our schemes with the Rebuilding Ireland loan and with the help-to-buy scheme. If members can get their heads around it, we are arguing for what is a variable subsidy. A person earning only €45,000 will need a full subsidy, whereas someone earning €75,000 or €80,000 - we argue in favour of extending the limits to €90,000 - would need a much smaller subsidy. The difference between the subsidies could be returned to the local authorities to pay for land because that is one of the big issues we encounter.
Dr. John O'Connor:
We are pleased to be here this morning to assist the committee in its examination of the issues facing us in respect of affordable housing. I am accompanied by my colleague, Mr. Jim Baneham, head of housing delivery.
The agency’s vision is to promote the building of sustainable communities. Critical to this is that everyone is able to live in good quality and affordable housing. On affordability, the overall aim for our society is to have housing available that is affordable for households across a wide range of income groups. Housing for purchase and rental are the main elements of that. As a general rule, housing costs should be below one third of a household’s income. For lower income groups, they should be lower again.
There are households on very low incomes which require social housing or housing support to ensure their housing costs are affordable. Other households have sufficient income and finance to purchase or rent. There is then a group on low, medium and moderate incomes that may need some assistance to purchase or rent. I will focus on this group and we will focus on two areas in particular, namely, affordable purchase housing and cost rental housing.
On affordability and access, the first approach is to take measures to keep down the cost of renting or buying housing. The basic elements of this are keeping down construction, land and finance costs. A number of measures have been taken in recent years, for example, improving the planning system; introducing the vacant site levy; providing direct funding for infrastructure; introducing rental controls and rent pressure zones; and making development finance available.
With regard to affordable purchase, the main focus of the State over many decades has been on measures to assist home ownership. This includes various home loan provisions, mainly through local authorities, first-time buyers grants, tax relief on loan interest, affordable housing, shared ownership, and low cost sites schemes. There are three particular measures currently in place. The first is the help-to-buy scheme, which effectively provides a grant by way of a tax rebate of up to 5% of the purchase price of a new home costing up to €500,000. The maximum payment is €20,000 per property. The second is the Rebuilding Ireland home loan, which provides low cost fixed and variable interest rate home loans for certain income groups. The third is the tenant purchase scheme for local authority social housing tenants.
A new affordable purchase schemeis being commenced. This follows the commencement of Part 5 of the Housing (Miscellaneous Provisions) Act 2009. Under this scheme, local authorities can provide affordable housing. The aim is to use local authority and State lands and-or infrastructure funding to provide affordable housing. Importantly, the discount from market value is retained by the local authority as equity in the property. When this equity is repaid, the local authority can recycle this to provide more affordable housing. In addition, under the serviced sites fund,€350 million has been provided to pay for infrastructure to help local authorities deliver affordable housing for purchase or rent.
Cost rental is an issue we particularly want to highlight. The focus for affordable housing has been on home ownership. A key element of achieving affordable housing in many countries is the development of a cost rental sector which, over time, provides a significant amount of housing that is affordable to a wide range of households. The Housing Agency is currently supporting the Department of Housing, Planning and Local Government in the development of a cost rental or not-for-profit rental model. This form of rental is common in other European countries such as the Netherlands, Austria and Denmark. There are some points to note on cost rental. The main elements in ensuring cost rental achieves affordability over time are the use of low-cost land, long-term lower cost finance and funding and a not-for-profit approach. Thinking long term - 50 years plus - is key to making this work. It is a more sustainable model where assets and future rental income flows can be used to leverage further investment, building a cost rental sector.
Two cost rental pilot projects are being progressed, one in Dún Laoghaire on the Enniskerry Road and a second in St. Michael’s Estate in Inchicore. The Department is being supported by the European Investment Bank, EIB, to leverage its international experience and advisory and research capacity in the development of an appropriate cost rental model.
There is much more information we can provide on affordable housing. We are happy to answer any questions members may have or provide further details as required.
Dr. Conor O'Toole:
I thank the Chairman for the invitation to the ESRI to appear before the committee. I am joined by my colleague, Dr. Barra Roantree. We are delighted to have the opportunity to share with the committee the findings of our empirical research in the area of housing affordability. In our evidence, we will focus on the findings of two recent studies on the Irish housing market. The first is an exploration of trends in housing affordability, while the second is an assessment of how the housing assistance payment, HAP, affects work incentives. Both studies are publicly available on the ESRI website. I acknowledge that the study on affordability was conducted in conjunction with economists at the Department of Housing, Planning and Local Government under an ongoing research collaboration on housing economics between the ESRI and the Department. This initiative is an excellent opportunity to link research evidence and policy across the range of housing topics considered.
Last June, the ESRI and the Department released our research paper on trends in housing affordability in Ireland. Using detailed household data from the CSO survey of income and living conditions, SILC, the objectives of this research were threefold. The first was to document the housing affordability trends across Irish households split by age, region, household structure and their position in the income distribution. The second was to look at international definitions of high housing costs and evaluate the suitability of these thresholds in an Irish context. The third was to provide evidence to inform policy in terms of targeting specific groups with affordability challenges. All this research is built on measuring housing affordability in terms of the share of net monthly household incomes spent on the housing payment, whether rent or a mortgage.
A number of clear findings emerge from the research. On average, households were paying approximately one fifth of their income on housing costs in 2016, which is only a very slight increase from 2005. However, for specific subgroups significant affordability challenges are evident. In particular, households in the private rental sector, those living in urban centres, particularly Dublin, and those on low incomes face the greatest challenges.
Households in the lowest 25% of the income distribution were paying nearly two fifths of their income on housing payments. This does not include the cost of other housing services or utilities.
Looking at mortgage holders in more detail, we found a sharp increase in housing repayment burdens for low-income mortgaged households between 2008 and 2015. Many of these households received relatively high levels of mortgage credit with poor underwriting during the boom, and this reinforces the importance of strong macroprudential rules on credit access for potential borrowers. We find that over the period 2005 to 2016, low-income renters have consistently faced high housing cost to income ratios. While rental price inflation has been high in the very recent period, the persistent high rent to income ratios suggests affordability challenges are structural rather than cyclical in nature. They have persisted over time.
Using simple thresholds, such as the share of households that spend over 30% of their income on housing costs, it would indicate about one in six households had high housing costs by this metric, but this figure was one in three for private renters and seven in ten for households in the lowest quarter of the income distribution.
The paper explored how much income households had left after they made their housing payment - the so-called residual income approach - and tested whether this would be sufficient to purchase a minimum standard of living. We find many low and middle-income households would have insufficient resources after housing costs to do so. We also find that for many low-income households, even if their housing cost is low, they have few resources left after making their monthly rent or mortgage payment.
The policy implications of the research are twofold. First, the pockets of high housing cost identified suggest that an increase in the long-term provision of State-supported housing and the development of alternative rental models which limit cost pressures are required to provide low-income households with sufficient financial buffers to withstand economic shocks and market fluctuations. The research suggests there would be considerable benefit from a policy perspective in adopting an affordable housing definition based on international norms that could be used in monitoring of and as an evidence-based anchor for eligibility for schemes. For example, eligibility for social housing, which is also based on strict income limits, could also be linked to a common evidence-based definition of high housing cost. However, this research did not consider any specific scheme in detail.
I ask my colleague, Mr. Roantree, to talk about our research on housing assistance.
Dr. Barra Roantree:
The ESRI has recently conducted research on the specific policy of the newly introduced housing assistance payment, HAP, which the Government plans will eventually replace the rental accommodation scheme, RAS, and rent supplement for long-term claimants. These three payments in 2016 covered approximately a quarter of the private rental market, with this proportion likely to grow in the coming years if the Government’s targets set out in Rebuilding Ireland are met.
New research, as part of the ESRI’s tax, welfare and pensions research programme, finds that in addition to providing support to low-income families for housing costs, HAP should improve financial work incentives for most households that would otherwise claim rent supplement. This is primarily because HAP does not require claimants to work less than 30 hours per week to remain eligible for the payment, as does rent supplement, and is means-tested against other income at a slower rate than rent supplement. These differences will also result in more working households qualifying for HAP than would have for rent supplement.
However, our research looked at the impact of introducing HAP, with tenants’ rent contributions assessed through a unified national rent scheme that was being considered by the Department of Housing, Planning and Local Government in 2014 as proposed by the Housing Agency. Under the version of HAP rolled out nationally, tenants’ rental contributions are instead determined by their county or city council’s rent scheme, which is also used to calculate the contributions of local authority tenants. While, like the unified national rent scheme that we considered, these local authority rent schemes place no restrictions on working more than 30 hours per week and so should strengthen the work incentives HAP claimants face relative to rent supplement, the detail of these schemes differs significantly, meaning that the level of support provided to HAP claimants with identical circumstances can vary substantially across local authorities.
I will give an example of a one-earner couple with two children and earnings before tax of €35,000 who find a two-bed property to rent for €1,275 per month, the maximum allowed before flexibility under HAP or rent supplement limits. If they find that property in the area covered by South Dublin County Council, they will pay about €270 per month in rent. However, under the exact same circumstances in the Dublin City Council area, they will pay about €350 a month, and if they find the property in Bray or Greystones, they will pay €450 a month in rent. It is difficult to justify such differences in levels of support for a national scheme when they arise not because of differences in the quality of accommodation or the desirability of these areas - the market rent for the property is the same - but because of historical choices made by local authorities and HAP using local authority schemes to determine rents.
The anticipated growth of HAP means that issues surrounding the design of rent schemes are likely to be of increasing importance for both central and local government policymakers. Key among these are the limits on the rent that can be paid for a property by someone receiving HAP or rent supplement, which were last revised in March 2017. Since then, the rental index compiled by the ESRI for the Residential Tenancies Board, RTB, suggests average rents have risen by 13%, and even more in Dublin, reducing the number of properties available for rent under either scheme. Given the rate of rental inflation, there is a clear need for more regular review of these limits, analogous to the typically annual increases made to maximum rates of payment for social welfare benefits brought in by the budget and the social welfare Bill.
However, it is important for policymakers to be aware of the potential impacts rent limits can have on the wider rental market. International evidence on the ultimate economic impact of rental subsidies is mixed. For example, a recent study suggested that in 2011, 90% of the burden of cuts to the UK’s main income related support for rental cost, housing benefit, fell on tenants, but a study of an earlier cut to this benefit suggested it was closer to one third. Therefore, the evidence is not particularly strong about where the impact of rental subsidy falls. However, it is important to consider that there may be knock-on implications.
The evidence clearly indicates an increased requirement for social and supported housing in Ireland in the coming years. In this context, long-term investment in and expansion of the public housing stock for rent is key. Policies to provide low-cost rental options for households, such as cost rental or housing co-operatives, can form part of the new rental landscape. Other policies, such as rental price controls or subsidies, can be effective in providing a short-term alleviation of price pressures. Such responses may have limitations, however, especially in the longer run, or possible unintended consequences.
Understanding the structural rather than the cyclical nature of persistent affordability challenges for many low-income households and urban renters is critical to deciphering the appropriate policy response. The research suggests State intervention is required to provide appropriately priced accommodation for these households through the economic cycle. As our economy attempts to navigate the many uncertainties such as Brexit and a potential global economic slowdown, we must ensure a steady provision of such units.
I will ask general questions, and anyone who wants to can answer them. The witnesses have reinforced what everyone in the room knows, the need for State intervention with social and affordable houses. We need a major increase in the output of social and affordable housing.
Mr. Brennan made the point that the issue of land is critical. What is the relationship of the Ó Cualann Cohousing Alliance with the local authorities? I live in Dún Laoghaire-Rathdown County Council area. I am familiar with the area of Shanganagh Castle with the potential for 600 or 700 homes. It was sold by the Department of Justice and Equality many years ago but is still lying idle. Will Mr. Brennan share his experience in dealing with the local authority on access to land. I have heard from other co-operative movements and people involved and smaller charities which have approached local authorities and were told that the local authority is not interested and may do it itself at some stage, but it has not done it.
I am very familiar with the very successful Ó Cualann model. Mr. Brennan sells it well. I have visited some of its units and am very impressed. I am also impressed with the keen pricing of these units and the inclusive model with a percentage of social and affordable units to rent and purchase. Will he share with us his experience with the local authorities and also with other State agencies? I constantly talk about big State agencies with large landbanks. We know a national inventory of State lands is being undertaken, but it is still a long way from completion.
Mr. Roantree spoke about the differential rent scheme. He will be aware that the Government was trying to introduce a national differential scheme. Will he tease out that?
It was stated that the anticipated growth of HAP means that issues surrounding the design of differential schemes are likely to be of increased importance both centrally and to local policymakers. Perhaps the witnesses would elaborate on that point and also comment on the differential scheme and the pitfalls in and around it from their point of view.
The problem with a lot of low-income earners is that because they are above the threshold for social housing, they are caught between not being eligible for social housing and not being able to buy a home. Many of these people are in employment but they are on low incomes, so they are trapped. They are above the threshold for social housing, they cannot access funding to purchase or rent and they are being squeezed further out of the cities. I am interested in the synergy between the housing agencies and the private banking sector. Mr. Brennan spoke about building a relationship with AIB or AIB wanting to build a relationship with the housing bodies. We hear a lot of negatives about banks. I am interested to hear how that relationship is going. Where is the role for private finance and the private sector in all of this? That has to be explored. People may have ideological reasons to oppose it, but bottom line, we have a major housing crisis in terms of affordability. I am very much interested in hearing the witnesses' experiences in terms of the synergies and possibilities with the private sector, both in construction and finance.
I thank the witnesses for their presentations. I will make some opening comments and then put questions to each of the presenters. This is probably one of the most important issues that this committee will consider this year. Alongside meeting social housing need, affordability is an issue of great importance. The committee will hold a number of these sessions and, ultimately, report with recommendations to the Minister and the Oireachtas. I welcome all of the contributions. There was a very interesting conference held yesterday, organised by the Raise the Roof campaign, which a number of us attended. There was broad consensus both from the floor and among many of the speakers that we need a fundamental shift in our housing policy. What we need is far greater levels of investment in a new model of public housing that meets subsidised social housing need but also non-subsidised, affordable rental and affordable purchase need on a scale to meet existing demand. In this context, the ESRI paper is incredibly important. While we all know anecdotally the affordability pressures in our constituencies, it is the first piece of research I have seen that attempts to quantify the number of people involved and the scale of the affordability crisis. This is one of the issues the committee needs to examine in terms of its report.
My first question is to Mr. Brennan. One of the question marks over not only Ó Cualann Cohousing Alliance but the sector in general is, if the Government was of a mind to spend a lot more money on this model of affordable housing, does the sector have the capacity to meet that spend? This is not an argument against the sector delivering more units. I would just like Mr. Brennan to talk us through the capacity in the sector. On the serviced sites fund, the increase in the fund, or the equity stake that is now apportioned to it, should mark some type of change on what the sector was doing before. Has the sector noted any change? For example, are the local authorities that are in the first round of bids for that fund engaging with the sector?
What is Mr. Brennan's view of the equity stake element of the serviced sites fund? Does it complicate things more or does it not? On the land, my preferred option is that the land is not sold and remains in public ownership. This would allow the units to be in the affordable housing system in perpetuity. If the purchaser of one of Ó Cualann's units wanted to sell, he or she could not do so and make a windfall profit from the rising value of the land. Rather, that purchaser would have to sell back into the scheme. I would like Mr. Brennan to talk us through his views in this regard. Also, did he at any stage examine the possibility of not allowing the tenants to sell the properties into the market but back into affordability, and what were the obstacles in that regard?
My next questions are for the ESRI and the Housing Agency. The research is very good. There are two points I would like the ESRI witnesses to elaborate on in regard to affordability. Many people think that the affordability crisis came about following the crash in terms of the rental market. Will the witnesses elaborate on the reference to structural rather than cyclical and to use plain English rather than economic speak such that there is clarity. If I understand it right, what it means is this problem has been around for a very long time. If we or the State wanted to quantify the numbers of households involved, how would we go about doing it? There are estimates in the research but I am interested in hearing how we would quantify the numbers.
Will Mr. Brennan update us on the pilots, including Enniskerry Road, which we have been told for two years is a pilot? I acknowledge the sector is as frustrated as we are about how long it is taking. Will he also talk us through the tension between the cost rental element of the scheme and the affordable element? My understanding is that Enniskerry Road will be provided at approximately 80% of market rent, which means the entry rents in the Enniskerry Road pilot will not be affordable for the target group. Will Mr. Brennan talk us through how an affordable cost rental model can be delivered? For example, could it be done using the capital advance loan facility or soft loans by the State alongside other loans?
On the issue of land, the housing bodies have land and they are engaging with people in that regard. Is the Housing Agency's view that land should be held onto publicly and leased out? What kind of conditions should be attached to it if it is disposed of? My concern is that if public land were to be released to, for example, approved housing bodies, when all of their loans would be repaid, they would own that land. While it might not be the view of the people running the approved housing bodies today to change the use of those properties, they might have different boards of directors with different business models in the future. How can we protect the State's interests when we are putting significant financial investments into public housing? Is controlling the land element one way of ensuring that in perpetuity?
Mr. Hugh Brennan:
As I said, Dublin City Council has been very supportive. It recognised that our model works in Ballymun and it has said directly to us that it would like to keep us in Ballymun, which is fine for Dublin City Council. We are engaging with Cork City Council in regard to a very interesting scheme in that area.
My next response also answers Deputy Ó Broin's question on the serviced sites fund. It is a scheme that was put out for public expressions of interest in Boherboy. It is 80% affordable and 20% social. There are 147 units in the scheme. They are making full use of the serviced sites fund, which is around €50,000 per site. They want to recoup the value of that land at €2 million and they mentioned charging developing levies, although I would say that would probably be up for negotiation. When we do our figures, if we are paying the €2 million, we are adding around €13,000 per unit. If we are also paying development levies, that adds probably another €5,000 per unit. That would push our selling price from around €200,000 to €220,000. The inclusion of the serviced sites fund brings the price back down a bit. It seems as though one fund is being used to offset another, but that is okay because the aggregate is that we can still provide affordable housing in that area.
With other local authorities we can get the closed door. There is a protocol in place. When local authorities are dealing with approved housing bodies, they will identify a piece of land and put it out to a number of approved housing bodies, depending on the use they want for that land. Usually, that is not for affordable housing. Dublin and Cork city councils are exceptions. We identified a piece of land at Mullinastill Road, which members may know is a large piece of land of approximately 4 ha with room for approximately 400 units. We have put a proposal in relation to that land to the council. The council told us that the site is not serviced and it has not submitted an application for it to the serviced sites fund. However, as there would be 400 units on the site and the services currently stop about 200 yards down the road, we would be willing to run the services in and spread that cost among the houses and still be able to deliver at an affordable rate. What we are asking of the local authorities is more engagement with us. If there is a piece of land that can be used, we can help them to bring it into use.
That is what we would like from the local authorities. Other local authorities around the country have been in contact with us. We were talking to Galway County Council recently. It has a scheme in Ballinasloe. Ballinasloe is interesting in that probably every house being built in Ballinasloe for the open market is affordable anyway. The council wants a mixed tenure project. We are more than happy to talk to it provided we know that we can pre-sell, because that is important to our model as it allows us to attract funding.
With regard to other landbanks, we have been arguing for a while that the IDA needs to make some of its land available for affordable housing. It is attracting big companies into the country, but where are their employees going to live? It would be a huge incentive to companies coming in if they knew that land was available for affordable housing in the area. There is an IDA park in Bray, which I have mentioned before. A couple of big companies in that park have approached us to say that their employees cannot rent or buy in the area. They are going out as far as Kilcock, Maynooth and so on and it is taking them whatever amount of time to travel out to Bray. These companies know that they are going to lose those employees. There are approximately 30 acres of IDA land available 8 km away in Greystones. We do not want 30 acres. We would take 12-----
Mr. Hugh Brennan:
-----and we would build 200 top-quality houses there for people in the area. How about a policy change in the IDA? Where it is suitable, let us make 20% of IDA land available for affordable houses.
In terms of our finance arrangements and relationship with the bank, AIB came on board at the start and has been very supportive of what we are doing. We told it that we are getting interest in loan notes through which others want to invest in us. These are at a maximum interest rate of 4%. Those investors' rates range from 0.5% to 4%, because some of them just want their money to have a social impact. In fairness to AIB, it brought down the interest rate it was offering to us by a full 1% to keep us on board. We are happy to work with AIB, but also with our private loan note holders.
To respond to Deputy Ó Broin's questions on capacity and our ability to scale, we are effectively developers. That is a bad word, but we are social developers. That nun in Ballymun calls us "soft developers". The other approved housing bodies, AHBs, in the sector are also social developers. We have spoken to the other AHBs. As the Deputy knows, at the moment all of the other housing associations, with the exception of the one on Enniskerry Road, focus entirely on social housing. They have the capacity to do what we are doing and they have the money, which is great. They have the balance sheet to invest in affordable housing if the land is made available. We do not. We are talking to these bodies and we will also be talking to the Irish Council for Social Housing to see if such a remit can be included in its work. As far as we concerned, practically all housing is social housing. It is in our homes that we start our socialisation as human beings. We say that the only house that is not a social house is the big gated mansion. That is anti-social housing, but we will not go there.
I mentioned the serviced sites fund. The issue of the equity stake is interesting. As I said before, we would like it if anybody selling the house had to sell it back to us so that we could sell it on again so that it would remain affordable in perpetuity. We had difficulty with financing in that area, not with construction financing but with financing individuals' mortgages. The bank will say that there is a restriction on the sale of the house and, if that person gets into serious arrears, the money the bank would get for the house from us might not match those arrears. We have said that would, in effect, be a charging order on the folio. We have said that we are more than happy to postpone that charge in favour of the bank so that the bank would always have first charge and that, if it needed to repossess because someone was in serious arrears and it needed to get the money back, it could get it back through sale on the open market. We do not mind that, but in the general run of things we would love it if people were to sell back to us. We think we will get there eventually. If we get more private finance support, it might give us the independence to be able to work something in there. That covers the matter of the clawback.
On the local authority's equity stake, I do not have any serious objection. I would prefer to keep using our own method if we could, but I know that there are different regulations coming in that area. We would also argue that the upper income limits should be raised, especially in the Dublin area. I do not think €75,000 is sufficient.
Mr. John O'Connor:
To respond to Senator Boyhan's point on State intervention in social housing and cost rental housing, there is no question that we need to do a great deal more. With regard to Ó Cualann specifically, the Housing Agency has various sites around the country. Although we have not told it yet, we will be making a number available to Ó Cualann to work on in conjunction with a housing association. We will be making a number of sites available.
Mr. John O'Connor:
On the idea of a national differential rent scheme, there is provision in the Housing (Miscellaneous Provisions) Act 2009 for a national framework for rents. The Department has been working on that. It is critical that a national framework be brought in to have consistency throughout the country. Bringing it in is an issue politically, because there will be winners and losers from the perspective of both tenants and local authorities in terms of income. We do need to bring it in, however. It needs to be transitioned in over a period of-----
Mr. John O'Connor:
On winners and losers, if consistent differential rents were brought in throughout the country, some tenants would see their rents increase and some would see theirs decrease. For example, in the area of South Dublin County Council rents would increase, but they would decrease in Wexford County Council's area. Those are just two examples of how tenants would be affected. From the perspective of local authorities, South Dublin County Council's rental income would increase while that of Wexford County Council would decrease. Introducing this measure would have effects on both tenants and local authorities, but it is needed. It is very important.
With regard to our dealings with the banks, we have dealt with all of the banks and they have been helpful. One bank I would compliment is AIB. We have had a lot of engagement with AIB and it has been supportive in respect of the provision of housing.
Deputy Ó Broin asked a number of questions. Building up the public housing sector, including both social rental and affordable or cost rental homes, is critical. We need to build that up on a big scale if we are to assist households throughout the country. Many households will not be able to afford to buy, but we need to provide them with affordable and secure rental accommodation for the long term.
On the site servicing fund and the question of land ownership, it would be ideal to maintain State control of State lands because there is a danger that we could develop it and that it could then be lost to the State. From the Housing Agency's perspective, where we have transferred lands, we have put in controls in respect of retaining the land for social housing or, in some cases, cost rental housing. That can be done in two ways. There can be conditions as covenants in the title. A much stronger way is to provide a long-term lease. One can include many controls in that case. We need to tease out how the State can retain long-term control.
It is easy to do with rented housing. When we get to home ownership, however, it is more difficult to have a lease in place owing to the common law system and our legislation and rights with respect to freehold. If we are to utilise State lands on a large scale over the next number of years, we need to think very carefully about how we retain appropriate control from the State perspective. That is what a number of countries do. Very specifically, the Netherlands is one example where the state never sells the land. There are various forms of leases backed up by the legislative system. Controls are very important and from the Housing Agency perspective, we have been trying to put those controls in place, in some case with an amount of resistance. We get many solicitors in trying to convince us otherwise but we have been putting those in place.
I can give some details on the Enniskerry Road and Mr. Baneham can elaborate. On the Enniskerry Road in the Dún Laoghaire-Rathdown area, there is a site where there will be 155 apartments and houses, of which 105 will be for social housing and 50 for the cost-rental scheme. We are very interested in getting the cost-rental scheme operating. The site has been provided at no cost to two housing associations, Respond! and Tuath, and Dún Laoghaire-Rathdown County Council has been very involved. At this point, it is ready to commence on site and tenders have been submitted. It is a question of giving an instruction to the contractor to commence. We want to get the rents on the cost-rental side as low as possible. The site has been provided at no cost and we have been looking at how the funding of the site and the long-term finance can be got with as low a cost as possible. We are looking at every way to get the rent on the cost-rental housing as low as possible. In the long term, there would be very low increases in rents as they would only relate to maintenance costs. There will come a time, after 25 years, when rents could be reduced very significantly as borrowings will have been paid.
Most countries manage to get down the cost, even at that initial stage, by looking at funding over 50 years. There might also be secondary State loans with favourable terms that would not have to be paid off for a period. We need to develop the cost-rental sector and provide rental to a much wider cohort. That would be in public ownership or the ownership of not-for-profit organisations like the Ó Cualann alliance.
Mr. Jim Baneham:
I can provide a little more detail. I raised the land control point earlier. There was a degree of legal complexity when we did that. We put both leases and covenants in the transfer. The long-term use of the land has been confined to both social and cost-rental units. The length of lease is 150 years but the transfer goes beyond that in terms of time. There was a comment that it has been nearly ready for quite some time. Tenders came back in the late autumn of last year and they have been assessed. A designated contractor has been selected. Currently it is at a stage where we are trying to finalise the financing and funding side. The site has been successful in the serviced site submission and there was a meeting just yesterday to try to tease out the final element of that. There will be further meetings next week about trying to get funding. To reiterate what Mr. O'Connor said, there is keen focus to try to use the various tools available to try to make the initial rents as low as possible while at the same time financing the cost.
Dr. Conor O'Toole:
I thank the Senator and Deputy Ó Broin for their comments on the research. I will first deal with the structural versus cyclical issue we concluded in the research and then make a short comment on the middle income earners and how to define housing affordability challenges they may face.
Deputy Ó Broin put the issues relating to the structural versus cyclical conditions very well. We are basically saying that across the period we examined, the problem has always been there for those groups of households. Approximately 30% of households in the private rental sector would be classed as having high housing costs by international definitions. For the low income households in that group, up to 70% would have high housing costs. The inference from the evidence is that these households are in a tenure that is unsuitable to manage their housing cost. We conclude that the provision of an alternative rental model for those households provided within the context of State provision is critical to dealing with the affordability challenge for those households. That has persisted across the period. Since 2014 there has been well documented rapidly increasing private rents due to a number of factors, including excess demand for housing, the macroeconomic recovery and labour market improvements. Regardless of all these fluctuations, this pattern has persisted over time, and it is critical to highlight that.
One of the interesting aspects of the research is that we looked at not only how much people spend but whether if what is left from the income is enough to buy a normal standard of living that we would expect a household to be able to make. Households up to the 40th or 50th percentile of the income distribution - middle income households - would not have enough after their housing cost, in either the private rental or mortgage sector, to buy a standard basket of goods. That is why in the paper we called for the introduction of a definition of housing affordability that would take into account not only the cost of housing in terms of shared income being spent on a monthly basis, but also how much is left afterwards and whether that is sufficient. It is a broad definition that would be able to take these nuances into account. That is an important fact to take from our work.
Dr. Barra Roantree:
I will respond to Senator Boyhan's question about differential rent schemes. They vary hugely across local authorities, both in terms of the minimum and maximum rent they pay, whether it is capped and how fast any income is means-tested to determine people's rent contribution. Some local authorities even take into account the definition of that income, including the artist formerly known as family income supplement, now known as the working family payment. Some do not take that into account. There is large amount of variation. I highlighted in the opening statement that under HAP these schemes will be used to determine how much HAP claimants renting in the private rental market will pay. The levels of support for a national scheme will vary hugely for families with identical circumstances in different areas. It is a separate matter, in a way, from the issue of differential rents for local authority tenants in that this is very much a national scheme but the level of support varies in a way where it is hard to understand the policy intent.
We assessed the national differential rent scheme proposed in 2014 but it was not brought forward. There was a commitment in Rebuilding Ireland to review the differential rent schemes across local authorities by the second quarter of 2017.
That was yet to be finalised. The latest update on the Rebuilding Ireland target was that the review would be published at the end of last year. As far as I know, it is yet to be published so members may wish take up that issue. Fundamentally, the issue of the subsidy that people at different income levels should get is a political matter and not one on which we can provide input. Using a unified national differential rent scheme for HAP makes sense. That can be designed such that the rent that people pay rises with their income up to the point at which they start to pay the market rent for the property they are renting. It is an issue for politicians to decide what income level is appropriate to what rent.
I acknowledge that, while one could design a national differential rent scheme that is only used for HAP, there is a separate issue with transitioning people who are on existing local authority leases and paying differential rents in that it would result in some winners and some losers. As such, one may wish to stagger that over a number of years. The problem will be that it will be harder to introduce a national differential rent scheme for people renting under HAP in five years, if, as the Government hopes, 80,000 people have been moved to HAP. The number of HAP tenants is not large but, for the same reason that one gets winners and losers, the more people there are on the HAP, the harder it will be to introduce such a scheme. Hopefully, that answers the Senator's question.
I will start with a quick observation and then ask a question of each group. At the start of November, the Ó Cualann Cohousing Alliance organised a conference which was addressed by Orla Hegarty from the UCD school of architecture. In the course of her remarks, she said:
I think we need to redefine what affordable housing is. I would have a concern that defining affordable housing as a product or a niche market or a scheme is not the way to look at this; we need to talk about affordability as the underpinning strategy for all housing policy.
That comment makes a great deal of sense. Is affordability defined according to income or to cost? It strikes me that the ESRI is trying to square the circle by saying it should be defined on the basis of cost but one needs to take into account whether someone can afford a certain basket of goods after paying out the rent or mortgage. Fundamentally, it has to be based either on income or cost. If housing policy is geared towards meeting the needs of people rather the profits of a minority, it must be based on income. The best policy would be to set rent at perhaps 15% for people on the lowest incomes, increasing to perhaps 25% for others. That means in reality that the provision of affordable housing is overwhelmingly the State's direct responsibility.
My first question is for the ESRI, which provided some interesting and useful statistics in its report. The 25% of the population with the lowest income are paying 40% of their income on rents or mortgages. How does that compare with other European countries? Is there any other European country where the percentage is as high? If the average is 40%, that implies that there are some who are paying slightly less than that in rent, while others are paying more than that. Something that I am increasingly coming across, especially among young workers in precarious jobs, is people paying more than 50% of their income on rent. Are the witnesses from the ESRI in a position to provide statistical evidence on how prevalent that is?
My second question is to the representatives of the Housing Agency. They mentioned the new affordable purchase scheme. We are waiting and wondering if they have any more detailed or concrete information about when we will see the colour of the Minister's money. Are the witnesses in a position to enlighten us about how the Minister will square this circle? We were told at budget time that this would the scheme would provide a 40% reduction in the purchase price for some buyers. With €310 million set aside for 6,000 affordable homes, the average discount would be slightly more than €50,000. A reduction in the market value of a home of €50,000 would not come near to a 40% discount. Even if there is a manoeuvre here or there to try to increase the discount, it is still not clear to me how that 40% reduction will be achieved on the basis of the funding that has been allocated for the scheme. If the witnesses are in a position to give any more information on that, it would be helpful. I know that may not be the case but I invite them comment on that.
My final question is more of a local question for the representatives of the Ó Cualann Cohousing Alliance. Their submission to the committee states:
In the case of Boherboy in Cork for example, we would need to add another €13,000 per unit to cover the cost of the site, and an average of €5,000 per unit to cover development levies.
There is considerable interest in the Boherboy scheme in Cork city and county and in the idea of being able to afford to buy a house in the scheme. There is perhaps a need for more public information about how it will operate. Will the witnesses provide greater details on the scheme?
My first question is for the ESRI and relates to accessibility and affordability. Does the ESRI consider accessibility to housing in its research? I ask because there is always a cost of getting to work, school and community facilities.
I will ask Mr. Hugh Brennan a similar question on accessibility. The suggestion that the State make 20% of IDA Ireland land available for housing is interesting. Given that many IDA Ireland sites are located well outside the cities, how would Ó Cualann Cohousing Alliance square the circle in terms of accessibility? The witnesses spoke about building communities and described Ó Cualann Cohousing as a social developer, which is a positive term. How does it build communities, beyond supplying housing? As Ó Cualann moves outside Dublin, how does it propose to build communities in areas such as Cork, Waterford and Galway?
Dr. Conor O'Toole:
I will address Deputy Barry's comments. On trying to define how many households would have housing affordability challenges, there has been a move internationally towards using a specific figure such as 30% of income. What we found when we looked at other international models, specifically the Australian case which uses both an income limit and housing cost definition, was that these are much more accurate in defining those households' views. We also see other metrics of economic strain, such as being in mortgage arrears, finding it difficult to make ends meet, or other characteristics of distress such as poverty.
Our point in this research is to say that, while the housing cost, which is used more broadly in general, needs to be taken into account, so must the income. For many households, even lowering the housing cost-to-income ratio to very low levels leaves them with insufficient incomes to buy what we would count as a normal basket of goods and services. For them, there needs to be a dovetailing of housing policy and social welfare policy, as they need income supports as opposed to direct housing interventions. That dovetailing is important. We cannot approach this problem with separate housing and income support policies. They need to be integrated.
One of the nuances we have found in our research is that, if a particular target is set, for example, 30% of income or an income limit of €35,000, it will cause difficulties because people will fall on either side of the threshold in question. They will have similar challenges, but there will be discontinuities just because they fall on one side of the threshold. When trying to define housing affordability challenges, we may need a graduated model that allows the housing cost and income metrics to vary across the income scale. It is a complex problem that has many moving parts, but legislators need to take all these issues into account.
The question on the European comparison was a good one. We have not been able to do a comparison. One reason for that is that the Irish Survey on Income and Living Conditions, SILC, is the only one of its kind in Europe that asks what housing costs. While surveys are available in other European countries, that particular indicator is not. We would have liked to have benchmarked Ireland against our European peers, but we have been unable to. Such an exercise would be useful.
As to the proportion of households that pay 50% plus on rents, I do not have the specific numbers. With the data we have, it is possible to examine that issue. In this paper, we are saying that the fact that we would classify 70% of low-income households, particularly the bottom 25% in terms of income distribution, as having high housing costs using the international metrics suggests that the average masks a considerable amount of challenge for pockets of society. If the average is two fifths, one can be sure that a large proportion of those households are well above it. There are pockets of vulnerability in particular groups.
Regarding Senator O'Sullivan's points on accessibility, we have purely considered the housing cost issue. This does not take into account the ancillary services or other utility costs that come with running a household, for example, transport to work or place of business and home insurance. In terms of the estimate of how much it costs a household to maintain a home, these are in a sense lower bands and are based purely on how much households spend on their mortgage or rental payments.
Mr. John O'Connor:
Deputy Barry stated that affordability should underpin the approach to housing, be that in the form of home ownership or rental. I agree. It needs to be across the board, as the cost of rental accommodation and purchasing housing must be reasonable. Getting into too many schemes can be dangerous. Without highlighting what is done in other countries, the focus is often on having rental accommodation that is at a reasonable price, and the market is not even chased.
In terms of household income and affordability, we use a rough guide of one third. For lower income households, though, where someone is earning under €20,000, 15% of personal income is a significant burden. For households earning between €20,000 and €30,000, 25% is a significant burden. Long term, we want the amount to decrease as a percentage of someone's income so that it does not stay at a high level. There is much more I could say on this point, but it is dependent on short-term as well as long-term income.
Regarding the new affordable purchase scheme, I understand that the Department intends to give it full effect in the next number of weeks. The legislation underpinning it was commenced last year in Part 5 of the Housing (Miscellaneous Provisions) Act 2009. Regulations still need to be introduced, which I understand will be done shortly. Funding is already going to housing through the local infrastructure housing activation fund, LIHAF, and an amount of housing provided in private developments should be sold as affordable housing. As such, there is already funding for the delivery of an amount of affordable housing. What needs to get going now is the delivery of affordable housing for purchase on local authority and other sites. Keeping the price down at an affordable level is about using lands at, for example, no cost and investing infrastructural funding. Rather than thinking about the market price, the focus should be on keeping the cost of providing the house as low as possible and making it affordable to households. The scheme is due to commence fully shortly.
Mr. John Moore:
The only information we have on the Boherboy scheme is that the cost of the site will be €2 million, levies will have to be paid and there is €4.2 million of a grant for services to the site. We will only find out how that will work if we are selected for stage 2. Currently, only expressions of interest have been received. One could look at it and say that the service site fund of €4.2 million is being used to pay €2 million for the site, leaving us with approximately €2.2 million to service the site, which may not be enough for 147 houses. We will not know unless we get selected for stage 2.
Mr. Hugh Brennan:
In terms of accessibility, Poppintree is probably one of the best areas in the country for a residential development because it is so close to everything. It is ten minutes from the airport and 20 minutes by bike into town. I have done the latter, although it is 25 minutes coming back out because it is uphill. It is close to Beaumont Hospital, DCU and the M50. It is ideal. That is what we seek when considering sites. We do not want to be pushed out to the extremities where people have transport costs and so on.
Senator O'Sullivan spoke about building communities. We bring people together in advance before the houses are ever constructed. They form a group, have several meetings and decide on their common charter.
When they were preparing the common charter in Poppintree they said they wanted to live in a development where they got to know their neighbours before they moved in; where they all looked out for each other; the mortgages did not cripple them; their energy bills were low; the houses were built to the best international standards and they felt safe and secure. We say that is not too much to ask for any community. That is our guideline for moving to the next development in Cranogue and we will go through the same process. We hope to have a similar one of 20 units in Ardmore in Waterford, five of which will be social housing with Túath. If we get the ones in Cork we will follow the same process.
We need to be a bit more rigorous in considering the subsequent sale of houses in private developments under the local infrastructure housing activation fund, LIHAF. There is one in Swords where the Government and local authority have put in €4.9 million in LIHAF funding but as advertised a two-bedroom affordable house there will cost €295,000. That is not affordable for a two-bedroom house, a person would have to be earning between €45,000 and €50,000 to buy it. I think the advertisement also said they would be €2,500 less than the market value. That is not affordable. If the Government is putting a lot of money into making housing available, which I agree with, it should be more rigorous in dealing with the developer on the ultimate sale price.
Dr. Conor O'Toole:
We looked at a couple of models. There are three main international models, one asks is the housing cost higher than 30% of net monthly income; the second says the person must be in the bottom 40% of the income distribution as well as having a high housing cost; and the third proposes taking one of the first two models and seeing how much people have left after they have paid for their housing. The conclusion we have drawn in our paper is that we want to get somewhere between the 30% and 40% models, for the low income households to pay a maximum of 30% of their income and allow that stagger up a bit because there are higher and middle income households which do not have sufficient resources available after paying for their housing. In general our definition is approximately a maximum of 30% of income for the bottom 40% of the income distribution. Maybe it should be lower as other commentators have said for very low income households but then come up to middle income earners to take their housing costs into account.
I thank the witnesses for their contributions. They were extremely informative and helpful. I welcome the fact that they all in their different ways confirm what everybody knows, that the private market is not capable of delivering affordable housing for great numbers of people.
Although the ESRI gave us a lot of useful information I do not know if it said how much of our housing needs to be social or affordable, given that unaffordability is persistent. It is not cyclical and it is not just the outcome of a crash. It is a consistent feature. To solve this problem how much of the housing output needs to be social and affordable? Does the ESRI think the proportion needs to increase? In my view unaffordability is getting worse, as well as being persistent. That seems to be an international pattern. In London, New York, Paris and most of Europe unaffordability is becoming more of a problem for more people. To put it in simple anecdotal terms, in the past people on average, or slightly above average, earnings, could entertain the prospect of getting a mortgage to buy a house on the private market but today there are many on the same level of income who can never hope to do that, not just now but never in the future. That has radical policy implications. I would like the ESRI witnesses to comment on that.
I may be asking the ESRI to stray into the political sphere and if the witnesses cannot do that, they cannot, but let us pretend it is not politicians who use a mantra that absolutely infuriates me that we just need supply and if we just get supply everything will be okay. That is a load of crap. What does the ESRI think? It is important to say what we think about that. I do not think that if the private market ratchets up supply at any point it will provide affordable housing for a very significant cohort of society. It did not do that when there was massive supply in the private sector prior to 2008 and I do not think it will in the future. The answer to that question has very important policy implications. At the point that the private sector might produce a supply that could actually lead to a drop in prices it would stop supplying. That is what I think, but what do the witnesses think?
On the question of how to deliver the social and affordable housing we need, the big frustration for ordinary people is that the analysis is great, the plans are great but where is it? I would like somebody to say what is the delay in our getting it. What timeframe does Ó Cualann have and how does that compare to what is happening everywhere else? How long does it take from the moment it gets a piece of land from the State to delivering social and affordable housing? The witnesses can probably answer that question but we cannot get an answer to it from significant State sectors. In my case, locally, Shanganah is one of the big sites, and we are pulling our hair out. We have been talking about it for five years and now the talk is of delivery in 2022. What is going on that it is taking so long? The witnesses from Ó Cualann may have thoughts on that but they can certainly say how long it takes them.
Deputy Barry has talked about affordability but to me part of the answer to the question about delay is that we are not answering the question about cost versus affordability. If affordability is the issue and the State wants to deliver affordable housing it can afford to finance things in the long term and eventually cover the cost but the private market cannot because it needs to make profit in a relatively short period of time. Does Ó Cualann think it is fair to say let us stop the messing around, agree that affordability is the issue, we need to deliver housing that is affordable and to decide what is affordable and just do it? I agree with the 15% to 25% and maybe 30% in the higher income bracket. That would simplify matters to get a move on. How the State finances it or assists others like Ó Cualann to finance it can be worked out afterwards?
I know that some people just want to buy their houses and we should make affordable housing available for those people but I begin to get a bit confused by the social versus cost-rental talk.
I am for anything that helps to solve the problem, but I also get a little annoyed and frustrated. Bringing it down to brass tacks, I am dealing with three people who have been knocked off the housing list because they do overtime. They have to do it to pay the rent. They do not want to do it or work Saturdays, but they have to. It is disgraceful that they are being knocked off the list. Why is there an income threshold for social housing? Do the delegates think there should be a threshold? Anybody who wants to rent social housing from the State should be able to put his or her name on the social housing list. That would actually achieve a social mix. Instead, one cohort is put into social housing which is really the bottom of the ladder, while another slightly above it will be in cost rental housing. It is creating a social differentiation which would not be created if everyone who wanted to do so could go on the social housing list with payments based on income. Beyond that, there may be a cohort who want to buy but cannot afford to do so in the private market. Therefore, we need an affordable scheme that is genuinely affordable. The State is going to have to do this because the private market will not do so.
I have been listening to all of the presentations in my office. I was at the conference yesterday and found it very interesting. It is clear that, by and large, the supply of social and affordable housing is the big issue and that the private market is not going to deliver it. I am disappointed that nobody has argued that the State should be operating a company and doing what we did back in the 1960s and 1970s when the State was running a company and making it available to the different bodies to build social and affordable housing. There could be an element of building privately also. I cannot see us getting out of this circle unless we get into a recession and things collapse. We are not going to be able to get rid of our major problems with homelessness and housing provision. That was the general sense that was coming across at the conference.
We are spending between €700 million and €800 million between the HAP scheme, the RAS and the rent supplement scheme. The local authorities are sending letters telling people that they have to move onto the HAP from rent supplement. That is increasing the number of homeless people because nobody can get the HAP or their landlords to agree to accept it. I am finding that it has now nearly come to a standstill. We have transferred as many as we can from rent supplement. We are facing a very serious problem which we need to watch. Several people have been to my office in the past few weeks for this reason. We are told that the figre is going to be over €1 billion by 2020. It is scandalous that this money is being spent in this way when we are not investing in social and affordable housing.
I was born in Finglas and came from a council estate. I have always been upset by the general opinion that we have to have social, affordable and private housing and that if we do not, there is something wrong. There are constant remarks about social housing as though people who are looking for it come from a different background from everyone else. I was always very upset by that line and have never bought it and never will. Even at the conference it was quite clear that we were very successful in building social housing. We have models dating back many years. What is wrong with looking back at those models and utilising them? Our biggest problem in building many of the estates, whether in Finglas, Ballymun, Tallaght or wherever else, was that we did not put in place the infrastructure needed such as creches, shopping malls and transport. In most cases it all came afterwards. I am a great admirer of Brendan Kenny, but I disagree with him in that he is adamant that we will not be putting in place large-scale developments containing a lot of social housing. We have not got many left in Dublin City Council, but in Fingal there are large tracts of land on which we could build a massive amount of social and affordable housing. The biggest amount of such land in the country is probably available in Fingal.
I am a great admirer of Ó Cualann Cohousing Alliance, but I think there is doubt in the mind of Dublin City Council that it can deliver on a large scale. I have had this argument with it. There are 38 units coming up in Ballymun and the quality of the housing Ó Cualann Cohousing Alliance has delivered is outstanding. However, Mr. Brennan said something that surprised me. He suggested Ó Cualann Cohousing Alliance was being confined to Ballymun. I got that impression from what he said and would be very disappointed if that was be the case. I know that it is moving into Cork and elsewhere. There are plenty of places across Dublin that could be utilised. Is it down to the shortage of workers and skilled people? I keep hearing that we need to entice people back from Australia and other places because of the shortage of workers. We lost so many in recent years. Is it one of the biggest stumbling blocks? That is really what is coming across to me. Recently, Dublin City Council spent €35 million in buying 90 units with between one and four bedrooms. The four-bedroom units ost €500,000 each. The builder is laughing. Ó Cualann Cohousing Alliance can build houses at less than half that price. Surely we can do better; that is not value for money. I know that we are in a crisis, but it is mind-boggling that we have spent so much in this way.
Dr. Barra Roantree:
My area of research is tax, welfare and pension systems. I will leave the easy questions Deputy Boyd Barrett asked to my colleague, Dr. O'Toole. The Deputy mentioned the income thresholds to qualify for social housing. They are set just at the cliff-edge in order that if somebody passes them, he or she will no longer qualify. That is the perverse effect of setting thresholds at the cliff edge, of which there are many in the tax and welfare systems. In a way, the HAP scheme was an attempt to try to get away from this in the sense that it was getting rid of the cliff-edge threshold of 30 hours a week that applied to the rent supplement scheme. It is recognised that setting thresholds at the cliff edge has a disincentivising effect.
Dr. Barra Roantree:
Not in applying in the first instance, no.
There is also an inconsistency in that once a person qualifies for social housing, gets onto the list and finds a place under the HAP scheme, his or her income can increase beyond the threshold. However, there will be a cost implication which feeds into other Deputies' points.
Those thresholds reduce eligibility and therefore keep down the costs. It is for policymakers to decide whether the need, in the short term at least, to subsidise people's rents warrants getting rid of those kinds of cliff edges. There is a fundamental trade-off between getting rid of the cliff edges for the good reasons outlined and the cost implications in the short run, while other policies come into play.
Dr. O'Toole will answer the other questions.
Dr. Conor O'Toole:
I thank Dr. Roantree for the difficult questions. I will begin by making some general reflections on Deputy Boyd Barrett's comments. The research we conducted did not look at what share of annual output should be in particular groups. We asked, given the data, what share of households would be classified as having high housing costs and across the definitions, it is between 20% and 30% of households. That is not the same as saying that we need 20% or 30% of annual output to be at that level because it might need to be higher, if there are deficits or otherwise. Certainly in the long term, that is the magnitude of the share of households that one would need to be covering in these proportions to be dealing with the affordability issues.
On the issue of the "more supply" mantra, it is very clear from all of the research that there is excess demand for housing in Ireland. Housing supply has been less than what one would have expected on the basis of fundamental demographic household formation for many years. It is correct to say that if a lot of new supply comes in at prices that are unaffordable for households to purchase, then that will not alleviate the pressure on those households that are facing these challenges. It does matter where, across the housing price distribution, these new units come on line. That is certainly important. That is how I would sum up the findings of our research.
One of the findings of our research is that there is a requirement for a longer-term commitment to public housing to provide a large share of units more generally. That should not just be when times are good but should also happen when times are bad. In that way, one would be able to smooth the economic cycle through State provision of housing. When one looks at subsidies like HAP, which accounts for a very high share of social housing output in the current model, it is our assessment that delivery mechanisms for build, hold and acquisition are another long-term way to deliver those units. Redressing the balance in the long term towards those types of aspects is important, as well as trying to develop alternative rental models like cost rental. These can all be part of the solution in terms of moving the rental model towards one which provides affordable housing more broadly for households and which is sustainable in the long term. Our research showed clearly that low-income households in the mortgage market were the ones who saw a really big increase in the cost of their mortgages relative to their income during the crisis. These households took on very large mortgages that were unaffordable in the boom phase, with poor underwriting conditions and they were hit with very large income shocks during the crisis. One of the inferences from that is that we need a very strong macro-prudential framework to ensure that these households get the correct credit terms at origination. That is a critical component of the rules. As a consequence, these households, if they do not get a private mortgage need to be housed somewhere else and that is where the alternative rental models fit into the scheme, in terms of protecting these households from the fluctuations in the market which are not sustainable for their circumstances.
Mr. Hugh Brennan:
In response to Deputy Boyd Barrett's point about the percentages, I will stick my colours to the mast. One can say that as close as makes no difference to 30% are either social tenants, HAP or RAS scheme participants or in AHB housing. The next 40% are in that cohort that are earning between €42,000 up to €79,000. We got those data from the Nevin Economic Research Institute and the CSO and they relate to 2016. We suspect that those percentages have grown and that the band itself has grown. We suspect that people earning up to €85,000, especially in Deputy Boyd Barrett's constituency, cannot afford to rent or buy. We also know that only 7% of house sales in 2015 went to that cohort, meaning that 93% went to those earning above that threshold.
I can give the Deputy the exact timeframe for Ballymun. We were notified that we had the site in November 2015. We started building in October 2016 and we have just finished building. The project was traditional brick and block construction of 49 houses. Construction was slower than we would have liked but that was because of finance, phasing and so on. We were brand new to the process but for the next scheme we are probably going to go for rapid build. It takes about a year from getting the site to go through the section 183 process, planning, conveyancing and so on. We hope that our next build will only take 12 months for 30 of the houses and a little longer for the remainder.
I agree with the Deputy's point about income thresholds which also ties into the point made by Deputy Ellis. We will always argue for integrated housing. I do not believe that people should be segregated on the basis of income. Some people say that we are putting down people in social housing by making that argument but we are not doing that. We are arguing for the broader group to whom the Deputy refers. Why not house all of these groups together? We are all effectively social creatures who need to live in houses and we can spread that out. I do not think we are ever going to see it however, unless I am made a Minister for housing, which is very unlikely.
Mr. Hugh Brennan:
Yes, exactly and they all get on well together. When the Minister came out, he was going to stay for 15 minutes but ended up staying for two hours. All of the kids were playing around him and it was a lovely day.
We were hearing all of the time that we did not have the capacity but now we do have the capacity. We are getting a lot of philanthropic funding which is enabling us to build up our capacity so that we can scale up. Our capacity at the moment is such that if we had the land, we could start building 940 houses this year. We are only one small co-operative. Think of what the rest of the AHB sector could do if we got our act together.
We have argued in the past that not one square inch of public land should be sold to a private developer for at least the next ten years, until I do not care about it any more. In the meantime, the land should go to the social development side. We have the capacity to deliver but I do not think it is going to happen. The Government is saying that it must sell to the private sector in order to get money to buy more land but that is nonsense. The Government must take a broader view on the value it is getting from its land. As I said already, for every house that is sold, €50,000 goes to the Exchequer. We must think of the benefit to local areas of all of that extra money. It is capitalism but as we have joked previously, with our model even capitalism works.
Mr. John Moore:
I agree with Deputy Boyd Barrett's comments on the private sector and supply. I was in the private building sector for many years and that sector will never sort out the supply issue. As the Deputy has argued, if there is no money to be made, the private developers will stop and that is how it has always been. I have yet to see a builder sell a house at a loss. When they are looking at land, the first thing they ask is how much they will get for a house on it. They do not look at the value of the land or their costs. They ask what they will get at the end and work back from there. They put a value on the land then and say that they cannot sell for less than €300,000 or €400,000. I fully agree with the Deputy on that point.
Mr. John O'Connor:
Deputy Boyd Barrett asked what percentage of housing should be public. At the moment it is somewhere in the order of 10%.
We definitely need to moving towards having 25% of the 40% in public housing. In the Netherlands, Denmark and Austria, for example, which I mentioned have reasonably successful housing systems, public housing or not-for-profit housing accounts for approximately 50% of their overall housing. We undoubtedly need to be moving up to a higher percentage than we are at present and that needs to be one of our objectives for the future.
In terms of housing, we were asked whether supply is the issue. We definitely need more housing supplied but it is a question of what type of housing and for whom. One must not over-rely on the private market to supply that. It needs the private market but also the supply of affordable rental housing for a wide cohort of people.
In terms of getting the supply going, the issue we must address is building on scale. On the public housing side, we are trying to deliver small sites and that will not give us the delivery we need. We need to deliver on a much bigger scale on those publicly controlled sites and maybe not get too hung up on stating that we must have houses for sale, we must have this and we must have that. We need to provide effectively a lot of rental housing on those sites.
One point I would ask the committee to consider is the balance between home ownership and rental housing. There needs to be both. There needs to be home ownership and there needs to be rental housing. Often policies and initiatives are focused on home ownership and we do not get the balance right. There needs to be rental housing. We need to provide rental housing that is both affordable and for which one has long-term security of tenure. That is one critical aspect.
The other point about rental housing - we have seen it in the private sector - is that one can get pension funds or investors to fund rental accommodation because they know a whole development can be funded and delivered. When one gets into housing for sale, one is waiting for somebody to buy it. The same can be applied to the State-owned or local authority-owned land. Let us build rental housing for a wide cohort of households at scale.
On that issue of income thresholds, over time we need to address that issue, in that anyone should be able to avail of public housing. I am not saying we can just replicate those other countries. We must see how they do it and how can it be applied here. We are probably the only country that has income thresholds on eligibility for social housing and it is something that needs to be looked at. Various changes need to be made to effect that.
Deputy Ellis asked who delivers it and whether there are local authority companies elsewhere. In terms of how it is delivered elsewhere, it is local authority companies. They call them municipal companies in other countries because they are municipal authorities. There is also the not-for-profit sector of housing associations. It tends to be a combination of the two. Some countries favour one over the other. Sweden might have many municipal housing companies delivering that, whereas the likes of the Netherlands has many housing associations.
On HAP, the balance has to be got right. HAP has its place in terms of meeting housing needs but we need to get the balance right. We still need to be delivering enough public housing in the State. I will list some of the advantages of HAP. It meets people's immediate need. If somebody is on the housing list and he or she needs to get rental accommodation and is eligible for social housing, that person can now avail of HAP. I take the point that it is difficult in certain areas to find rental accommodation. HAP encourages people to take up employment and there are not the restrictions that have been mentioned, as in rent supplement, in taking up full-time employment. An important advantage of HAP, even over traditional social housing, is that if one gets a job in a different county, one can move and stay on HAP. One advantage of HAP over other measures is that ability to move for certain households. If a person is in Dublin and gets a job in Meath, he or she can move to Meath and get a HAP property in Meath. It has only been teased out in the past year to make that more effective. It also allows for some households which are not being allocated social housing to avail of rental housing. Therefore, there are advantages.
There is a balance. We need more publicly owned property - be it local authorities or the housing associations providing and owning more rental housing. There is no question about that. It is a matter of trying to get the balance right.
On the delivery, there are constraints. There are the funding constraints. We talk about having capital funding, having current expenditure funding and within the European Union, there are controls on the balance sheet treatment of this. We must fund and deliver housing within those constraints of the capital available, the current expenditure available but also the balance sheet treatment of that. It can be done. In some cases, we might need to change how we use the funding because sometimes we merely continue on with our old ways of doing it. There is the availability of low-cost finance, particularly with the State and long-term proposals.
I will finish with Deputy Ellis's point. There are large tracts of land and the State or local authorities need to develop the ones that are in their control, and do it on scale to meet the housing needs.
I thank the witnesses for the presentations today. We could spend another day here merely discussing this subject alone.
On the first mention of affordability, what automatically comes to mind is whether it is affordable to buy a home. We must remember that affordable housing is equally about the rental market and that whole sector, which we have a tendency to forget about.
I have a certain sympathy with the view that the cliff-edge nature of qualifying for housing supports is not the right way to go about tackling this crisis on a long-term basis. Even describing social housing, we should have housing supports on a sliding scale and available to everyone. Affordability could mean something different to me today than what it would mean in five years' time. Circumstances determine what is affordable. It is an area into which we probably need to dig deeper and be a little more radical in our approach.
I will concentrate on a few more practical factors in relation to affordability and issues that are preventing affordability. We can build three-bedroom and four-bedroom houses for €200,000 but we are selling them for €540,000. Is it down to profit? Is it down to greed? Is it down to land? What factor in respect of affordability do land costs represent?
Development contribution schemes and levies have been mentioned here. I often wonder is it time to review development contribution schemes because the LIHAF scheme, which we now have in place, in one way provides the critical infrastructure that development levies were supposed to provide at local authority level. Is there an offset happening from one or the other?
Should central government be left to look after critical infrastructure? Water infrastructure has been removed from local authorities and no longer forms part of their levy. Do the delegates have any information on that issue? Deputy Ellis has mentioned labour which is a significant issue that adds to the lack of affordability down the line.
Mr. Brennan made a few interesting points. I welcome Ó Cualann Cohousing Alliance's fantastic model and wish Mr. Brennan luck with the IDA Ireland site in Greystones. As we are all aware, he has outlined that the foreign direct investment companies investing in Ireland are beginning to buy properties, some of them potentially on a large scale. What are the long-term consequences? Do we have a full understanding of them? As a model, we do not need to look too far back in our history, when companies provided accommodation for their employees. Even in my small village of Glendalough, the Mining Company of Ireland built 20 houses for its employees. The owners of the Kynoch factory in Arklow - it built weapons for use in wars - built nearly 150 houses, all of which listed and perfectly usable today. Therefore, the idea of companies becoming involved in the delivery of housing happened in the past. Should we look to the foreign companies that invest in Ireland and ask them whether they can contribute to easing the housing crisis in a more official way than they do? It probably would help in some way to increase affordability for their employees, if nothing else, as was the case many years ago, when it was about providing an affordable place for employees in which to work.
Mr. Brennan spoke about the scale of Ó Cualann Cohousing Alliance's model. What scale does he wish to achieve? Assuming everything is in place, what scale does he expect to achieve?
By way of a brief follow-up point, I wish to draw out the main implications of the points made by Mr. O'Connor and by Dr. Roantree and Dr. O'Toole from the ESRI. I agree fully that we need to move to a public housing stock of between 20% and 30% to meet the structural demand within the social and affordable housing need. Nevertheless, if the State has a commitment under the national development plan, NDP, to add between 25,000 and 30,000 new units to the overall housing stock annually, we are faced with a far greater proportion being non-market housing, that, is public housing, than envisaged under Rebuilding Ireland or in the general targets in the NDP post-2021.
Mr. O'Connor might be better able to answer my question better than the ESRI. What percentage of the figure of between 25,000 and 30,000 units should be public housing? By a rough calculation, it will probably be approximately 50%, or between 14,000 and 15,000 annually, in the public housing system to try to absorb that need, even over the course of a decade. Is there a need for the Housing Agency, the ESRI and the National Economic and Social Council to try to work out in an empirically robust way the percentages of new households in the system every year that are falling into the categories we are discussing? It is all very well saying it is 30% of existing renters, but that does not tell us about the percentage who are entering the rental market. One of the most important things we could learn from the discussion is how many units we will need over a decade and what percentage it is of the NDP target. I do not mean to put words into Dr. Roantree's or Dr. O'Toole's mouth, but is it correct that they both believe the Rebuilding Ireland and NDP targets do not come close to meeting the level of need the ESRI's research and Mr. Moore's experience predict?
There was one question to which I did not get an answer. Is the delay in the delivery of an affordable housing scheme related to the cost affordability dilemma? Should we, therefore, focus on affordability to solve that problem?
Will Mr. Brennan comment on the projected on Mullinastill Road? Why was it rejected?
Mr. Hugh Brennan:
To respond to Deputy Casey's questions, the factors are land; development levies; the cost of construction, which we take as set because it is not something with which we can interfere and it is not a huge factor; and the labour issue, which is not very signficant because we can use volumetric or rapid build construction. We have found that the larger contractors come to us and when we ask them what their capacity is, they say they have the capacity to work with us and build. I am not sure the labour issue is as signifcant as it is thought to be.
The main factor is the developer's margin because we never really know what it is, as Mr. Moore highlighted. If it is done from a cost perspective, however, and one considers what one gets in return for the land, what the subsidies are and the construction cost, costs can be kept down. The variable subsidy was mentioned. We also talk about it. If one is earning €42,000, one will need a full subsidy to buy one of our houses, which means that the land will need to be acquired at a figure of €100,000, the development levies will need to be waived and one will need to work with a not-for-profit organisation. If one is earning €80,000, however, one still cannot rent or buy, but one does not need a greater subsidy, which is why I like the variable subsidy idea. It can, for example, also be used for affordable rental purposes. We do it, but it can also be done in the case of private rental where two people live side by side and one receives a slightly different subsidy from the other. Ultimately, therefore, they pay different rates.
On the consequences for companies, many companies are interested. Another one at Grange Castle approached us recently. It is expanding considerably and will have 1,500 employees, but it does not know where its employees will live. It is asking us what it can do to help to resolve the situation. We recommend that companies set up a local employees' housing co-operative, which we also recommend in Bray, and then work out what the company can contribute to it. In Bray companies are examining helping people who are struggling with deposits and helping them under a rent-to-buy model which we are also happy to run.
The point about previous co-operative models was fair. We had a good co-operative structure in place in Ireland years ago. Bord na Móna was another example and committee members also provided examples. There is no reason it cannot be repeated. It is done around Europe - in Vienna, Sweden and Denmark - and there are models available. We are not reinventing the wheel and do not have to.
I do not know where the delay is in Shanganagh. We are told that there are infrastructural problems with drainage, but it has been agreed that the land should be passed over to us. If infrastructural issues have to be ironed out, they will be. It depends on the number of houses that are to be built whether it makes financial sense to bring a sewer from 200 yds or a half a mile away. If we acquire a site, it seems to take approximately one year to process all of the paperwork before we can start building. We can start to build quickly. As I keep saying, we have the capacity to do so.
On the project on Mullinastill Road, the council told us that the protocol was in place and that it would prefer to use it. Therefore, it will decide if it wants to release a house as affordable or social housing and it will put it out to a number of local authorities, which is fine. We noticed that the site was zoned and services were going to within 200 m of it. The council has stated it likes the model and will revert to us.
It sees us as a niche operator. As Deputy Ellis said, if a few small houses are to be built here or there, that is probably the type of contract we would get. It referred to land value. The site on Mullinastill Road is near Rathmichael and it is valuable land. I would continue to argue that the State or the local authorities have to stop viewing land as a commodity, rather they should look upon it as a resource. If we view it as a commodity, we would always look for the best price while if we view it as a resource, we would ask how can it best we used, whether for the purposes of providing housing, hospitals, schools, or public parks.
Mr. John O'Connor:
In terms of the introduction of an affordable purchase arrangement or a cost rental, it is time to put funding in place to make sure that the affordable housing being delivered is affordable. It is important to get that right. Some funding is being put in place through the local infrastructure housing activation fund. LIHAF. It is a question of how such provision is funded and what land is available from local authorities, the public sector, to provide that if affordable housing is delivered it is affordable. As I said, I expect that will be in place within a few weeks.
Deputy Casey made a point about home ownership and the rental sector. Both elements need to be considered whereby it would not be a focus on one over the other. On the employment aspect, in terms of companies getting more involved in the delivery of housing, that would be useful. Many companies would be interested in that if there were ways that they could partake in terms of the funding of housing. The Government may have to find a way to structure that to make funding available from them.
If one builds an office block, and we could point to any office block that has been built near these Houses, each person working in an office block would take up 10 sq. m, and that is the way they are designed. When it comes to housing, 40 sq. m per person is required. For every office block, one would need four apartment blocks to house the number of people working in an office block. That is the scale involved. With respect to providing employment, we can appreciate the scale of housing we need to provide.
On Deputy Ó Broin's point, we need to build up a significant amount of housing. In terms of a combination of social housing and cost rental, I agree that in the long term those two should be combined together. There is a recognition of the need for more affordable rental accommodation. There is an understanding of that and a commitment from the political system to do that.
Regarding the national planning framework, it is a long-term plan with overall targets. Its big focus from the point of view of housing is on compact growth and that is critical. We need to focus on whether we are getting adequate concentration of housing, adequate densities of population, to make things work. With the realisation of the need to provide more rental accommodation, in terms of the percentage of what is being delivered, we need to deliver more of that lower cost rental accommodation and within State control. When the State has control of lands, the focus must be on how that is used. If somebody else is building private housing, we should let that developer do that, but we should let the State use a bigger percentage of its lands to meet that other need.
Dr. Conor O'Toole:
I would echo one of the points Dr. O'Connor made. While our particular research did not consider the composition of the output between the various different components, it is clear that over time a heightened share of that will have to be affordable and social housing in whatever dimension that is constituted. Building up to that higher share in terms of the new output will have to take place over time. We have not done any specific work on examining what share of new households formed every year will fall into the categories, although we are always building up our research infrastructure and, hopefully, with some of the new models we hope to put in place in the next year or so, we will be able to look at demographic transitions and housing tenure. We hope to consider that on a medium-term basis.
Dr. Barra Roantree:
To briefly respond to Deputy Casey's point regarding if we were to look at moving away from income limits on social housing qualifications and consider that in terms of the HAP scheme and what that would do. That would move us much closer towards, say, the model of housing benefits in the UK where there is not an initial income limit to qualify for it and it goes much further up the income distribution element in that people can still be claiming something, but that has consequences. Many more households would be eligible, it would cost more and obviously we would want to consider how going from covering approximately one quarter of the private rental market in 2016 to beyond that would affect rents in general. That might be the type of issue that may need to be looked at in the short term at least if they are these issues of housing affordability. However, if we do that, we would have to make sure we would not forget to address the caps on rent limits.
As I mentioned in my opening statement, the rent limits have not been adjusted since March 2017 and since then rents have grown nationally by about 13%. That is one of the reasons, to come back to Deputy Ellis’s earlier point, fewer households are able to find houses available under the HAP scheme. Even with the flexibility that is built in, 20% of a fixed number is still a fix in that respect. That needs to be reviewed more regularly annually in the way social welfare payments are reviewed. It also comes back to the need to address differential rent schemes. At least in terms of the HAP scheme, if we have more households on that scheme and, currently, even if a household moves on to it and its income increases to €60,000 or €70,000, it would not end up paying the market rent; that would apply to the vast majority of local authority households. That means the Government might not be directing the subsidy in the way it intended to do. By reviewing again these differential rent schemes, at least for the HAP scheme, it can put in place a system where it would get closer to that housing benefit model where more people are eligible but the subsidy declines with income, up to a point at which they start paying market rent. Again, that does not seem to be on the cards at the moment.
I thank Mr. Roantree for that comment. I thank all our witnesses for attending. This is the start of our committee reporting on this topic and their evidence was fascinating. We may invite them to attend again but I thank them for their attendance. I thank the members also.