Friday, 4 June 2021
Affordable Housing Bill 2021: Committee Stage (Resumed)
I will address Senators' comments in reverse; it is the way I am wired, so please forgive me. On Senator Moynihan's comments, we have explained that the provision is driven by a modest return. That is prescribed and is quite clear.
On Senator Higgins' comments about upward-only rents, I would be loath to allow that comment to leave the Chamber because it might be alarmist and imply we are heading back into an upward-only rent type of situation. That is not the case, or I certainly do not think so. The rent shall be manageable, certainly. The nub of this - what we are referring to in this debate - is something related to differential rents. I agree with Senator Cummins that it is going to be quite difficult to get lift-off with cost rental, let alone scale it up, if we deviate from the tried, tested and proven model we have spoken about this afternoon. It is really important we take that on board.
Senator Boyhan is correct around mixed-income communities. What we are trying to achieve and what we will see as cost rental evolves is greater diversity and social cohesion in creating communities. We talk a lot about units but really what we are trying to create are sustainable communities. That is what this will try to achieve.
Regarding landlords and developers, it is correct to say many landlords, developers and builders in this country are small-scale. They are trying to run family businesses, get a return on their investment, employ local people and use local suppliers. We should recognise that too.
I will specifically address amendments Nos. 69 and 70 tabled by Senator Moynihan, together with amendment No. 71 tabled by Senators Boyhan, Keogan and Norris. I can certainly understand the Senators’ intentions in proposing these amendments, which aim to limit rents to a certain proportion of an income – in the case of amendments Nos. 69 and 70, the median national income, and in the case of amendment No. 71, the income of the tenant in question. However, the provisions suggested in the amendments cannot form part of a financial model in which rents cover costs. That the rents charged cover the costs of provision of the homes is the core principle of cost rental, for which there seems to be a remarkable degree of support across the political spectrum. To put it simply, detaching rents from actual costs and linking them instead to income metrics is not cost rental. Income-linked rents introduce a fundamental uncertainty about whether rents will cover the costs incurred in providing the homes, as has been the case with the differential rents for social housing. Cost-rental providers require a significant degree of certainty that rents will cover costs, which gives them confidence to invest resources and take on significant debt to finance projects.
It is the self-financing element of cost rental which will allow the model to be scaled up to deliver homes for a significant number of households and the Government’s early projects are intended to provide proof-of-concept for cost rental’s financial foundations. The State can play a role in supporting cost-rental projects, not only through investment and lending, but also through non-recoverable subsidies. In that case, rents will cover costs net of initial subsidies like access to land, discounted financing or infrastructure grants. In State-supported cost-rental projects, the relationship of cost-covering rents to incomes will be an important metric in assessing the success of State intervention and the cost-rental model more generally. However, rent-to-income ratios cannot determine the actual rents which tenants pay, which must instead be set to cover the overall delivery costs of the homes.
It is for these reasons that I must oppose these Opposition amendments.