Meeting social and cost rental housing targets will become “increasingly challenging” due to viability issues stemming from disruption in the construction and financing of homes, an Oireachtas committee will be told on Tuesday.
The joint housing committee is to hear from large Approved Housing Bodies, non-government organisations that have a key role in building social and affordable homes, on the implementation of the coalition’s Housing for All plan.
The committee will be told of the need for rapid reform of the financing model underpinning the sector, as well as structural reforms needed to ensure it delivers the numbers of homes mandated under the plan.
Clúid Housing will outline that delivery is becoming “more challenging” against the backdrop of higher interest rates, limited access to affordable land, the need to provide homes to Ukrainians fleeing the war there, and inflation.
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“Given the current viability challenges in construction and financing,” it will tell the committee, “meeting the overall social and cost rental housing targets will become increasingly challenging”.
All the groups will criticise the level of debt they have to get into to build out projects, with the entirety of their activities being funded by borrowing, and will call for more direct involvement on an equity basis from the exchequer.
Circle Voluntary Housing Association will tell the committee that there are “too many AHBs”, with 400 registered and 250 “active”, but only 17 delivering new homes - six of which are delivering more than 90 per cent of AHB homes and over half of all social housing.
“There is a need to reduce the number of AHBs to a more reasonable number to ensure good governance and regulation,” the group will say.
It will tell the committee that Ireland is the only European country that insists that all social and affordable homes be provided by 100 per cent debt funding, arguing “this is not sustainable” and there needs to be a “move away from debt and into equity provided by the state”. It recommends the reform of two funding schemes, the Capital Assistance Scheme (CAS) and the Cost Rental Equity Loan (CREL).
The cost of borrowing, it will say, is a “major barrier to delivery of low cost, affordable homes”.
“With the recent increases in cost and the difficulties of 100 per cent debt finance, the latter two schemes are no longer delivering the previous level of output,” the committee will be told. The schemes are being reviewed, with Circle warning that reforms are needed “otherwise the level of housing delivery is likely to be limited over the coming years”.
Circle will call for the removal of VAT on social and affordable homes and a cap on the level of profits of builders delivering the homes, also arguing that “the planning system itself is a barrier, it requires reform and simplification to facilitate our growing and future population needs”.
Clúid will also call for Government support in helping reclassify the debts of the AHB as separate to general government borrowing. The “on balance sheet” nature of the funding, meaning it is considered part of the state’s borrowing, followed a decision by Eurostate in 2018 and has prompted a “range of concerns regarding future funding opportunities and competition for available Government funding which will impact on social and affordable housing supply”.
Respond Housing Association will echo these concerns, especially on the suitability of the debt funding schemes which “significantly increase the debt profile” of AHBs. It will say that under the current model it is “particularly difficult” to achieve viability of schemes in non-uran or ruralbareas “and consequently, it is not currently possible for us to develop social and cost rental homes in these areas utilising these funding models”.
It will call for a new cash flow mechanism for AHBs and the removal of development levies on social and cost rental homes.
Tuath Housing will call for a “long term, ethical pension fund investment” into social and cost rental to be considered.
“In depth modelling has proven that this financial framework can be cheaper for the State to deliver permanent social housing than other methods of leasing and/or debt funding routes. Now is the time for this potential solution to be properly explored,” it will tell the committee.