Friday, 4 June 2021
Affordable Housing Bill 2021: Committee Stage (Resumed)
Alice-Mary Higgins (Independent)
I am glad that the Minister of State accepted amendment No. 58. I refrained from engaging on that amendment, which touched on one part of cost rental. In his answer, the Minister of State spoke to the other concern about cost rental. It is a fundamental concern, unfortunately, about how this Bill approaches cost rental in terms of the role of what are referred to as non-Exchequer backed sources. It deals with the role of speculative finance. It is still there. I find it very concerning that not only are speculative financiers included in the Bill but the scheme is adapted to suit their needs. The Minister of State has said that one of the reasons we need to set a limited number of years on the scheme and so forth is that it is one of the requirements of the non-Exchequer backed sources, including pension funds. I am all for the universal pension and pension funds but let us not be sentimental about pension funds. These are giant investment funds. They may well relate back to pensions but, to be clear, this is not a pensioner buying the house.
We are trying to address a real concern with this set of amendments and they could make a fundamental difference. We are trying retain the positive moves on cost rental in the legislation that people, including me, support and which we all want to see. A cost rental scheme can be a way for us to get housing to people, housing they can afford to rent in a secure way in the long term. It would change the landscape in Ireland. Funds are on the other side of the equation. I still think about the article in the Business Postwhich referred to leasing. The article stated that when there is a 25-year lease and one gets a return on that leasing from a local authority, the estate in question is no longer made up of properties, it is a fund. That was the description. A house becomes a fund. By including limited equity returns, the Bill is turning cost rental developments into funds with limited returns. There is no bank in Ireland that will offer 3% or 4% return per annum, or whatever, but are these developments going to do that? Profit is being built into the scheme and we do not need to do that.
The Minister of State said we need to do this in respect of the debt burden. I would point him to everybody who has talked on that issue, including the IMF, the EU Commission and, most recently, the Economic and Social Research Institute, ESRI. The ESRI has been clear in pointing out that the State can access financing and that it should double the financing it is accessing. This is a concern. We do not need to factor in a profit. We can access financing because the State has the luxury of longer periods of time within which to repay. That is addressed in Senator Moynihan's amendment No. 66, which I support. We should have 100-year thinking. The idea that we think more in the long term was, in more religious times, called "cathedral thinking". The long-term vision of this cost rental scheme should be that we build houses which people would rent and in which property they would live the full length of their lives. Thereafter, the approved housing bodies, those who have partnered or the State will have housing stock, which it can then decide to make available for affordable purchase or continue as cost rental. That housing becomes a long-term public asset.
The danger of it becoming a private equity scheme, whether over 30 years or 40 years, with a private equity return, is that the scheme becomes a slightly better version of leasing. The scheme would provide a dividend for the shareholders every year for 40 years.There are very few places you can get a guaranteed return over a long period of time. After that guaranteed portion of whatever the agreed limited equity might be over a 40-year period, the housing stock may go to the private investor, so he or she gets to walk away with the asset at the end. That is a concern.
I have a number of later amendments which address the fact that, certainly in situations where this cost rental housing is being built on public land, there should be no question of us taking public land, making an agreement with a private investment fund for it to build a certain number of houses, for it to get its cost rental return with its profit margin guaranteed per year, and for it then keeping the housing stock. I have amendments which address that part of the equation, which is a real concern. I am hopeful the Government will take those on board when we know financing at a better rate is available to the State.
I do not see why we are adapting this scheme, adjusting the time rates and adding in a profit margin, as if we need to entice private investment funds to be part of this mix when we do not need to do that and it only adds to the cost. The crucial point, as referred to in amendment No. 62, is it adds to the cost of the rent for the persons involved because it is part of the factoring in of the cost which needs to be reflected in the rent.
Let us not put profit into this. We do not need to do so on a fiscal or financial basis. There may be private actors who want to, out of some good, charitable or positive motivation, join in and say they are happy to invest and have their returns, but we do not need this to be a profit scheme. We do not need this to be about investment funds. We need this to be led by approved housing bodies, co-operatives and local authorities. I worry not only about the participation but also that the terms of the scheme are being adapted to favour the needs of one type of participant.
I hope the Minister of State will address these issues. This is fundamental. This is the difference in whether this is a cost rental scheme and vision or an extended version of the leasing return and the 30-year fund. That is why the original 30-year fund looks very similar to the return years you would expect if you put money into a fund instead of looking at the lifetime outcome for the State.