Eoghan Murphy (Dublin Bay South, Fine Gael) | Oireachtas source

The aim of the local infrastructure housing activation fund, LIHAF, is to relieve critical infrastructural blockages to enable the accelerated delivery of housing to address the shortage of supply in urban areas.

The Exchequer funding under LIHAF goes directly to the local authority which will procure the infrastructure through normal public procurement. The State receives a dividend in the form of accelerated housing supply once the blockage to development is removed, land for the infrastructure, as well as much-needed social housing under Part V. In seeking to secure improved affordability on private housing, it was initially proposed that a capped price point would be set on a percentage of the housing. However, it was subsequently recognised that setting a cap in 2016 for housing that would be developed up to 2021 and beyond was problematic and would have adversely impacted the commercial viability of some sites, with consequential negative impacts on overall supply.

Accordingly, a more proportionate way to recognise the contribution of LIHAF that will encourage housing supply and deliver an affordability dividend has been put in place. Two options are available to local authorities in seeking to reach agreements with developers, one which sets a minimum number of houses to be offered at 10% below market cost, including under €300,000 in Dublin, and a second option where a cost reduction related to the LIHAF contribution could be spread over the housing development as a whole.

This second option means a smaller reduction in price over a greater number of houses, giving more purchasers a potential saving, but not affecting the viability of the development and more accurately reflecting the contribution of LIHAF to reducing the overall costs of providing the new homes.

No drawdown of funding can occur by local authorities until cost-reduction commitments have been agreed and signed between the local authority and the developer. It is expected that all agreements will be finalised by the end of this month.

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