Dáil debates

Thursday, 8 July 2010

Waste Management

Social and Affordable Housing

9:00 pm

Photo of Ciarán LynchCiarán Lynch (Cork South Central, Labour)
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Question 2: To ask the Minister for the Environment; Heritage and Local Government the number of houses leased from private landlords under Social Housing Leasing Initiative to date in 2010; average monthly cost and full-year these leases; properties which are be refurbished returned landlord at end lease period with no option buy property or sell it sitting tenant; reason was not made mandatory establishing SHLI view fact that this is considered norm agreements; achieved expected 20% rent reduction as compared market costs; if he will make a statement on matter. [30895/10]

Photo of Michael FinneranMichael Finneran (Minister of State with special responsibility for Housing and Local Services, Department of Environment, Heritage and Local Government; Roscommon-South Leitrim, Fianna Fail)
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To the end of June 2010, my Department had approved over 2,330 units for use under the social housing leasing initiative. Of these, some 1,830 have been issued with funding approval, of which 175 are private lease units to be provided by either a local authority or an approved housing body, AHB. Of the private lease units approved under the initiative, 47 have lease agreements signed and commenced in 2010. The average monthly cost of these units is €612 per unit and the full year cost is €7,342 per unit.

The discount levels achieved in these agreements has varied; 40 units have achieved 20% below market value, two have achieved 18% below market and a further five have achieved 16% below market value. The variation in the levels of discount achieved arises because in some circumstances the property owner has retained responsibility for maintenance and management. In addition, a wider discount range may also apply in cases where the owner has retained responsibility for service charges.

With regard to the inclusion of an option to buy clause within the lease agreements, of the 47 units leased from private landlords this year 30 have an option to purchase clause included in the lease agreement. The provision of an option to purchase clause is a matter most appropriately dealt with by the authority or approved body on the basis of individual negotiations. It is considered that restricting the negotiating flexibility of authorities or approved bodies could lead to increased leasing costs and may in certain circumstances reduce otherwise available supply. To assist authorities in circumstances where it is appropriate to include an option to purchase my Department has provided template option to purchase clauses, as part of a suite of framework legal documents, which can be inserted into agreements as required.

Photo of Ciarán LynchCiarán Lynch (Cork South Central, Labour)
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I thought we would be doing this after "Oireachtas Report", not before it.

Photo of John GormleyJohn Gormley (Minister, Department of Environment, Heritage and Local Government; Dublin South East, Green Party)
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We can still make it.

Photo of Ciarán LynchCiarán Lynch (Cork South Central, Labour)
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It is interesting that when the Minister announced this programme in the Chamber two years ago, he said he would spend €20 million per annum and with that would acquire 2,000 properties in the private sector. The figures the Minister has given this evening are well off those targets. At that time he was also adamant that there would be no option to buy as part of the package. Why has he been unable to fulfil the target of 2,000? Leaving aside the fact that I consider this to be bad social housing policy, these were his targets and he does not appear to have reached them. Could he also explain the change in his position with regard to the option of a purchase being facilitated? Can he explain how that purchase is put aside? Is it the situation that pertains with most long-term leases, where there is what is called a peppercorn purchase, which is a very small sum of money at the end of the lease, or is it a more proportional sum?

Photo of Michael FinneranMichael Finneran (Minister of State with special responsibility for Housing and Local Services, Department of Environment, Heritage and Local Government; Roscommon-South Leitrim, Fianna Fail)
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The Deputy raised two questions, the first regarding the number of units leased from private landlords. The target I set for this year and last year was 2,000 units each year. We achieved our target. There were 1,993 units for 2009 and I am confident that we will reach our target this year. The reason for the private units being at that level is that local authorities obviously decided, and rightly so, that they would offload many of their unsold affordable units into the leasing area for the very good reason that they were costing them a great deal of money and were not being sold. It made sense to me and to them that they would deal with that area of their responsibility first. Indeed, in 2010 the swing is going the other way towards the private side.

With regard to the right to purchase, the Deputy asked that we insert a mandatory right to purchase. I do not agree with that. The property owner as part of the negotiation process may decide to put a value on account of the house not having such a clause. I am of the opinion that the charge for having this option being made available should be left as a negotiating opportunity by either the approved bodies or the local authority with the developer. An alternative to the inclusion of an option purchase clause could perhaps be the right to have a first refusal. I am not prepared to have a mandatory purchase but if a developer wants to have such a clause, we have set out a template for him or her to enter such an agreement with the local authority or the approved body.

Photo of Ciarán LynchCiarán Lynch (Cork South Central, Labour)
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As I have stated in the House previously, there is no long term security of tenure for a social housing applicant in this programme and neither is there an exit policy. The Minister of State is on record in this regard in reply to a parliamentary question. Even though he is shepherding local authorities into this approach by saying it is the only show in town, he is not giving them any direction as to how they will get out of the difficulty he is creating for them in ten to 20 years' time when these leases expire.

My final supplementary remark is that the Minister of State is being somewhat disingenuous when he states he has met the target of 2,000 last year as approximately three quarters of those were affordable homes and social housing. What he has done is to convert social housing and affordable programmes into a leasing programme and he did not meet his target in the private sector, which was 2,000.

Is the option to purchase only available on those social and affordable homes or is there an option to purchase on the private properties being leased? The sum of money which is an income for the local authority is based on the rent differential where a tenant pays a rent equivalent to a standard social housing house would run to several hundred euro a month. Will the Minister of State confirm that this money is ring-fenced specifically for the maintenance of these properties leased from developers and cannot be spent by the local authority other than to reinstate these properties at the end of the lease?

Photo of Michael FinneranMichael Finneran (Minister of State with special responsibility for Housing and Local Services, Department of Environment, Heritage and Local Government; Roscommon-South Leitrim, Fianna Fail)
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Deputy Lynch asked about the options at the end of a lease period of ten or 20 years. There are a number of options for the local authorities to meet their social housing needs and these include renewing the lease, the purchase of the unit if the option to purchase clause has been included in the lease agreement, or if the owner is willing, or there is the other option of taking the house into the social housing stock, providing the householder has alternatives suitable to the needs of supporting households to purchase another dwelling under the incremental purchase scheme. The Deputy will be aware I introduced the incremental purchase scheme and I signed the ministerial order only last week and it is available now for people to buy houses from the social housing stock.

I have included the option of purchase with regard to private houses. Under the affordable scheme there is an option to buy and after five years they will revert back and it may be a different market. I am leaving the door open for people who wish to purchase a home for themselves, both in the private leasing and in the affordable sector.