Chapter 2 – Central Government Funding of Local Authorities.

Mr. Graham Doyle (Secretary General, Department of Housing, Local Government and Heritage) called and examined.

I remind all those in attendance to ensure that their mobile phones are on silent mode or switched off. Today we begin the first of our two-day engagement with officials from the Department of Housing, Local Government and Heritage. There is a significant amount of material to cover, which is why we have split the work over two days. The matters for examination today are, from the 2019 report of the Comptroller and Auditor General and Appropriation Accounts, Vote 34 - Housing, Planning and Local Government, the Local Government Fund, and chapter 2, central government funding of local authorities. To assist us in our examination of the matters before us today and with regard to the public health guidelines, we are joined by Mr. Graham Doyle, Secretary General of the Department, Ms Mary Hurley, assistant general secretary, and Ms Marguerite Ryan, finance officer. We are also joined remotely by Ms Maria Graham, assistant secretary, planning division, Mr. Feargal Ó Coigligh, assistant secretary, water division, Ms Lorraine O'Donoghue, principal officer, local government finance, and Ms Clare Costello from the Housing, Local Government and Heritage Vote section at the Department of Public Expenditure and Reform. They are all very welcome to the meeting. I thank them and the staff in their Departments for the briefing material that they have prepared for the committee today.

The witnesses are protected by absolute privilege in respect of the presentations that they make to the committee. This means that they have an absolute defence against any defamation for anything that they say at the meeting. Witnesses are expected, however, not to abuse that privilege and it is my duty as Chairman to ensure that this privilege is not abused. If statements by witnesses are potentially defamatory in respect of an identifiable person or entity, they will be directed to discontinue their remarks, and it is imperative that witnesses comply with such directions.

While we expect witnesses to answer questions asked by the committee clearly and frankly witnesses can and should expect to be treated fairly and with respect and consideration at all times, in accordance with the witness protocol. Members are reminded of the provisions of Standing Order 218 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government, or the merits or objectives of such policies. Members are also reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable. I also ask that the members and witnesses remove their masks when speaking to ensure that they can be heard and that when members are leaving that they take their seats in the sanitised area.

I call on the Comptroller and Auditor General’s Seamus McCarthy for his opening statement.

Mr. Seamus McCarthy

I thank the Chairman. The 2019 Appropriation Account for Vote 34 Housing, Planning and Local Government records gross expenditure of €3.96 billion. The appropriation account is presented under five programme headings. Some €2.37 billion, or almost 60% of the total, was spent on a wide range of schemes that together constitute the housing programme. A further €1.29 billion, or just under one third of the total, was spent on the water services programme, and comprises mainly payments to Irish Water. Just under €211 million was spent on the local government programme. Some €68 million was spent on the planning programme. And just under €28 million was spent on Met Éireann.

The surplus at the year-end was €40.1 million. Of this, €33.5 million related to unspent capital allocations associated with the planning programme which were carried forward to 2020. I issued a clear audit opinion on the account. However, I drew attention to the disclosures in the statement on internal financial control as to some non-compliant procurement by the Department of Housing, Local Government and Heritage during the year.

The Local Government Fund is managed separately from the Vote, by the Department. There have been a number of changes in the source of funding for the fund in recent years. It is now funded by the proceeds of the local property tax, or LPT, and a transfer from the Vote. In 2019, LPT receipts into the fund amounted to €473 million. This was down marginally from the level of receipts in 2018. The transfer to the fund from the Vote in 2019 amounted to €185 million. This was up by €60 million, or 48%, year on year. Total receipts were €658 million. The fund expenditure in 2019 amounted to €644 million. The bulk of this was accounted for by transfers to local authorities. At the end of December 2019, the fund’s reserves stood at just under €99 million. Again, I issued a clear audit opinion also as to the fund account.

Because of the complex ways that central Government funds flow to individual local authorities, chapter 2 is compiled each year to present an overview of the level and purpose of the funding provided. The chapter also outlines the oversight of local authorities’ financial performance by the Department, the Local Government Audit Service and the National Oversight and Audit Commission.

In 2019, transfers of funding from central Government sources to local authorities amounted to a total of €4.17 billion – an increase of 13% from 2018 funding. More than 90% of the central Government funding for local authorities came from three sources: Vote 34; the Local Government Fund; and Vote 31 for Transport, Tourism and Sport. Of the total of €4.17 billion central Government funding, almost €2.4 billion was provided to local authorities for housing and regeneration. A further €882 million was provided for transport investment.

I will introduce the chapters which are the focus of tomorrow's meeting in advance of that meeting tomorrow. I thank the Chairman.

I thank the Comptroller and Auditor General for his remarks. I now ask Mr. Doyle for his opening statement, please.

Mr. Graham Doyle

Chairman and members, I am pleased to be here this afternoon as Accounting Officer to assist the committee in its examination of the 2019 Appropriation Account for Vote 34; Chapter 2- Central Government Funding of Local Authorities and Local Property Tax; and the Local Government Fund Account for 2019.

I am joined by a number of colleagues from the Department and the Chairman has already introduced them. Together, we will work in discussing the expenditure and activity of the Department in 2019 with the committee.

Despite not being present in the Department for the period under examination, I have very carefully examined all of the areas of activity and expenditure. I recognise that the Department had a very substantial work programme in 2019 and delivered on a range of key policies and programmes. I will not go through every area of expenditure but will touch on the key areas briefly.

As requested by the committee, I have provided some advance briefing for the meeting and also a copy of this opening statement.

The Department’s gross expenditure in 2019, as set out in the appropriation account before the committee today, totalled some €3.9 billion. I will start by welcoming the work of the Comptroller and Auditor General, and, in particular, on the four chapters which will be examined over the course of this evening and tomorrow. I recognise and appreciate the value of this work in the context of enhancing the outward demonstration not only to this committee but to the public in general of the important work that is done in my Department and the value we put on transparency and accountability. As with previous recommendations, we will continue to evolve and mature our systems and reporting to align with best practice wherever possible.

The focus of the Department’s 2019 activity in the area of housing was led by the actions set out in the six year Rebuilding Ireland: Action Plan for Housing and Homelessness. The year, 2019, represented the fourth full year of activity under the plan and a milestone year in terms of social housing delivery. The Department’s gross voted expenditure on housing programmes, as set out in the appropriation account, totalled some €2.365 billion in 2019. A further €92.6 million was available from local property tax receipts to fund housing programmes of certain local authorities whose LPT allocation exceeded their funding baseline, bringing the overall total resourcing for the Department’s housing programmes to almost €2.5 billion in 2019.

Social housing delivery represents a large proportion of expenditure under the housing programme. Delivery is achieved through the main headings of build, acquisition, leasing, housing assistance payment, HAP, and the rental accommodation scheme, RAS. Within these headings there are multiple sub-delivery vehicles, all working in parallel to achieve the optimum outcome for Exchequer investment.

To understand why the Department relies on both capital and current structures for social housing delivery, it is important to refresh our minds on the context of the Rebuilding Ireland social housing targets. These were developed in response to the recommendations of the Oireachtas Committee on Housing and Homelessness in 2016. That committee indicated that the local authority and approved housing bodies stock available for social housing should be increased by some 50,000 homes, but also recognised that the ability of the State to meet the cost of responding to the need for social housing was hampered by the application of domestic and EU fiscal rules. In addition to this, the need for immediate, mid-term and long-term delivery had to be taken into account and the range of programmes that are now in place seek to harness the maximum delivery possible by deploying the maximum current and capital funding available.

Appendix 1, which I have circulated in the briefing paper, sets out the key targets for the period 2016 to 2021 and details the progress that had been made to the end of 2019. In overall terms, housing supports were delivered to over 28,000 households in 2019, just ahead of the target. Cumulatively, since 2016 more than 100,000 additional households had received a social housing support, and social housing waiting lists dropped by 25%.

Build activity increased year on year, with new build activity - excluding returning vacant local authority dwellings to active use under the voids programme - growing almost ten-fold between 2015 and 2019.

The quarterly Social Housing Construction Status Report showed an increase from 8,430 homes in the programme overall at various stages of development at end 2016 to some 26,015 homes at end 2019. Local authority-led new-build activity also grew significantly over the period. The number of local authority-led projects increased from 290 schemes representing 4,820 homes at end 2016 to almost 700 schemes representing almost 11,000 homes by the end of 2019, and this continues to grow. This excludes local authority turnkey schemes, which accounted for 3,860 homes in the programme at end 2019.

Wider housing supply also continued to grow in 2019 with the number of new homes becoming available for use in the full year reaching 24,394, a 14% increase on 2018.

While what I have set out reflects some of the positive indicators and increasing provision of social housing, we are keenly aware of the substantial work that remains to be done. The number of homeless households supported into more sustainable housing increased by 16% last year, however the challenge remains in making substantial and sustainable inroads into reducing the net numbers reliant on emergency accommodation and services, and we continue to absolutely prioritise working with housing authorities and NGOs. Prevention is just as critical as developing pathways for exits.

Across all areas we will be unrelenting in our commitment to achieve the best outcome for citizens using the resources provided to us by the Exchequer. The new programme for Government seeks to place even more demanding ambition on delivery to be achieved in the years ahead and rising to meet this ambition will be the cornerstone of social housing activity for my Department.

The 2020 provision for housing amounts to nearly €2.7 billion, including local property tax receipts, the majority of which will be concentrated on supporting over 27,500 additional households across all our social housing delivery streams and those already in a support. Like many sectors, the impact of Covid-19 has been very challenging for the Department and its stakeholders, however we continue to push for maximum feasible delivery across all streams. As we move into 2021, a provision of over €3.3 billion will be available for the housing programme. This represents the largest ever investment in housing and will support implementation of the ambitions in the programme for Government with a particular focus on increasing supply through new build activity.

I will now turn to water services. The past decade has seen a significant period of reform in the approach to the delivery of water services and the promotion of wider environmental protection. As the committee is aware, responsibility for the provision of public water services transferred from local authorities to Irish Water on 1 January 2014. Irish Water is now firmly established as the national public water utility and has brought a new coherent approach to the delivery of water services investment and management.

While the Government’s voted Exchequer investment in Irish Water is substantial, with €1.2 billion in the accounts before the committee today for 2019, and €1.3 billion for 2020 and 2021, there remain significant infrastructure deficits to be dealt with and it is critical that we maintain a high level of investment in the sector in order to achieve compliance but also to support national housing and regional development objectives. In terms of our rural water programme, in 2019 some €41.1 million was provided across both capital and current funding structures. Certainty for priority investment has been put in place through a multi-annual capital programme, aimed at improving the reliability and efficiency of rural water services infrastructure.

On local government, members will be aware that the Local Government Fund, LGF, is a special central fund established in 1999 under the Local Government Act 1998. The profile of income and expenditure of the Local Government Fund has undergone significant changes in recent years. Income, which historically comprised motor tax income along with some payments from the Exchequer, is now comprised of income from the Exchequer and, since 2014, local property tax. The Government decides the expenditure from the Local Government Fund each year as part of the budgetary process. As the chapter shows, transfers of funding from central government sources to local authorities in 2019 totalled some €4.17 billion, an increase of 13% on 2018. The Local Government Fund accounted for 15% of this amount. A number of Departments, including my own Department and the Department of Transport, as well as other agencies, are involved in providing this annual funding to local authorities. The Local Government Fund account for 2019 gives details of the operation of the fund during the year. The income sources to the fund totalled €658 million, made up of local property tax receipts of €473 million and a payment of €185 million from the Exchequer, through the Department’s vote.

The main payments from the LGF in 2019 were: local property tax allocations to local authorities of €503 million; an allocation in respect of local authority pay and pensions costs of €86 million; an allocation of €47 million in respect of compensation in respect of rates previously paid on water infrastructure; and an allocation of just under €1 million to support the implementation of the Creative Ireland programme at local level.

With regard to chapter 2, which has been prepared by the Comptroller and Auditor General, the Department welcomes the work undertaken to provide such a comprehensive overview of the structures and the funding flow, and the complexity of same. The chapter also sets out the scale and levels of scrutiny and accountability that have been put in place to ensure appropriate levels of oversight, including through the Local Government Audit Service and the National Oversight and Audit Commission.

As for other programme areas, further areas of expenditure set out in the 2019 appropriation account include, in the planning area, meeting the costs of An Bord Pleanála of €18.5 million, as well as Met Éireann costs of €28 million. Since the establishment of the new Government this year, my Department has also taken on responsibility for the heritage division and while not covered in today’s examination, I look forward to updating members in due course on the wide range of activities supported by expenditure in that area.

Before I conclude, I will make some short remarks regarding my Department’s activity in 2020. While not the subject of today’s meeting, and I look forward to meeting members in due course to discuss expenditure, it has been an exceptionally challenging year for all sectors. I am immensely proud of the responsive and proactive manner in which the Civil Service has acted in response to this pandemic and for the collegiate and practical collaboration with political colleagues during a never-before-seen set of circumstances, starting with the election in February. I came to this Department a very short time ago, in the midst of the pandemic, and saw at first hand the scale of activity and responsiveness. The Department, its agencies and our partners for delivery, including the NGO and approved housing body sectors, have given of themselves tirelessly to achieve the best for those we serve and I formally acknowledge that here today. In particular our local authorities, with whom members will all have played their own part, have demonstrated the true value of public service through the Community Call and other critical supports deployed at local level. At all times, the Department has continued to advocate for local government at a national level and will continue to do so, in recognition of the absolutely critical nature of the local authorities.

The matters I have referred to illustrate well the broad range of programmes and activities for which the Department had responsibility in 2019. I and my colleagues will be happy to respond to questions or issues that emerge in the course of the committee’s work today.

I thank Mr. Doyle.

I welcome our witnesses, those before us and those joining us remotely. I thank them for taking the time to be with us today. Everyone is grateful for their extraordinary work over the past months in supporting our local authorities to deploy vital services, as Mr. Doyle said in his opening remarks. They came to the fore with the Community Call during the height of the pandemic and we are very grateful for the Department's support in those instances.

As time is limited, I will start with a focus on housing and the 2019 accounts before us today. Will Mr. Doyle tell me exactly how many houses were delivered in 2019 by the local authorities and the approved housing body for social housing purposes? How much was spent in build, acquisition and leasing?

Mr. Graham Doyle

Yes, certainly. I thank the Deputy for his comments also.

In 2019 just over 10,000 social homes were delivered through build, acquisition and leasing schemes. That was pretty much exactly in line with the target of 10,000 for that year. Of these, 6,074 were homes built through the different programmes implemented by local authorities and the approved housing bodies. That was an increase of about 20% on the build activity of the previous year. Including the housing assistance payment, HAP, and rental accommodation scheme, RAS, activity that is just over 28,000 social homes provided for families and individuals in 2019, against a target of almost 27,400. That was 3% over target. This was on the back of a record level of public investment of €2.4 billion in 2019 to support the delivery of housing programmes. Almost €1.5 billion was on build, acquisition and lease, which breaks down as €836 million for build, €496 million for acquisition and €150 million for lease. The 6,074 built social housing units that are referred to break down as 2,271 local authority new build units; 2,174 approved housing body new build units; and 1,326 Part V units. We limit how we report voids but adding some 300 units on voids brings us to the 6,074 units built.

What was the build pipeline at the end of 2019? Was there an intention to ramp up the figure of 6,000 units that has just been related?

Mr. Graham Doyle

Yes, absolutely. In terms of the pipeline at the end of that year coming into this year, we were looking at approximately 14,500 in terms of what would have been in the mix for coming forward at the end of that year.

Has the impact of Covid-19 affected the delivery of the programme to 2020? The Secretary General, in his earlier statement, outlined that the majority of housing will be concentrated on supporting over 27,500 additional households across all our social housing delivery streams. Does that include new builds, acquisitions and leasing?

Mr. Graham Doyle

Yes. We are increasing the level of direct build and that will continue forward into next year. For example, next year we are looking at a direct build programme of 9,500. We are seeking to increase that and to change the mix in terms of delivery across the programme, which is challenging. There is no question but that as we ramp that up, we are going to have to play a very careful role around local authority delivery and through the other streams as well.

In terms of the concerns about construction activity in this year that have been mentioned, there is no denying that time was lost around that. We work closely with the local authorities. I think the housing delivery co-ordination office is playing a really strong role at this point in time in working with each local authority and the other stakeholders to try to maximise delivery this year and into next year. Just trying to minimise the impact of that delay, and looking at the construction status report for quarter 2, it showed us that delivery was below target, obviously, at that stage. There were almost 1,500 built, acquired or leased homes at that point of the year. They cycle of delivery, which has surprised me in terms of coming to the Department and I would have really expected delivery across a year, but it does actually get back-ended, just the cycle tends to get back-ended, into the latter part of the year. That profile for completion in quarter 4, heavily weighted towards quarter 4, is there. We are hopeful that we will get much of what we sought to deliver this year and the numbers are relatively encouraging. We will not quite make where we had hoped to be.

What is the completion timeline for the 26 projects funded by the major capital programme? What percentage has been completed to date?

Mr. Graham Doyle

I am not sure I have to hand, unless one of my colleagues has, the percentage to date. We have seen various numbers put forward by various groupings. As we discuss this with the local authorities and try to crunch the numbers for the end of the year, we are hoping to see delivery in the 70% or 80% range and, if we are lucky, it might push a little bit above that.

Ms Mary Hurley

The Deputy talked about the number of schemes completed. Over the course of the past four years, 1,132 schemes have been completed, so in respect of the projects one would see listed in the appropriation account, there is a range of projects and they move through the various stage of the pipeline. Things can fall over various years. One of the interesting things that the Deputy has raised is about the build. If one looks at the expenditure on build over the last number of years, in 2016, when we started to develop the pipeline, the spend on build was in the order of €170 million and, in 2019, we spent €835 million on build. That shows the growth of the pipeline.

One of the things, in terms of delivery also, has been the blend of delivery. One of the things that we have tried to do, in terms of delivery and it is reflected in the expenditure, is to maximise the amount of homes that we actually deliver through the various different schemes whether it be build, acquisition or leasing. The Deputy will see very clearly in the trajectory the build peaks are really growing and we are seeing significant numbers of homes in the pipeline. At the end of quarter 2 of 2020, more than 29,810 homes were moving through various stages of the pipeline either completed, moving on site or in the pre-development stage. So, very clearly, we are seeing the spend on build increasing as we move through the years.

There are vacant and derelict buildings in my own constituency and I presume it is the same in most towns and villages. The repair, retrofitting and leasing scheme has provided a useful mechanism to address vacant buildings and revitalise some towns. The expenditure in the accounts for last year was €47 million. I ask the witnesses to provide an update on how many homes were delivered and their location. What is the average cost to retrofit a house?

Mr. Graham Doyle

Just in terms of repair and leasing, there are two schemes that we see as sister schemes. There is the buy and renew scheme, and the repair and leasing scheme. The cumulative delivery under the buy and renew scheme, which started out very slowly in 2016 and which I think local authorities tend to prefer, has over the past four years reached over 570 on that side. On the repair and leasing scheme, it has been a little bit slower with 165 under that scheme. There has been a lot of activity in various local authorities. You can see that some of them brace these schemes more than others.

What was the target for the repair and leasing scheme?

Mr. Graham Doyle

I do not think I have that here to hand, Deputy. There was certainly an expectation that there would be a much greater uptake on that. I think what was probably discovered, as the local authorities went through the process of looking at these, was that time had moved on a little bit. I think some of these properties had begun to be used in different ways. I think there was probably less properties out there. There were plenty of properties out there that were in states of repair that would work for this scheme but maybe not in locations or maybe not fully suitable to social housing. We are very anxious to address and attack the vacancy issue. So we are still persisting with these schemes and trying to promote them again, working closely with the local authorities. Some have had a lot more success than others around this for a variety of reasons. Louth has been very good. Cork has been very good. Waterford has been very good.

The people in rural Ireland would see the schemes as a game changer for most towns and villages with a lot of opportunity to revitalise areas. I am interested to hear what the projections are for 2020 and 2021 in this regard.

Mr. Graham Doyle

Yes, we will see if we can get you some projections and send them on.

Ms Mary Hurley

Under our voids and energy efficiency scheme, we retrofit and bring back vacant social housing stock into use. I think the Deputy sought a figure so 5,133 properties were upgraded for €47 million at an average cost of €9,200 for each unit.

My last point is on the mica remediation scheme, which is a huge issue in counties Mayo and Donegal. Previously, with the pyrite scheme, homeowners went through hell and witnessed their homes falling down around them.

How many homes have been improved in Mayo to date under the new defective concrete blocks grant scheme?

Ms Mary Hurley

That scheme has been rolled out and lots of work has been done to address that issue, which is a significant concern in Donegal and Mayo. To date, there have been 49 applications in Donegal and 39 in Mayo. Some 13 projects have been approved in Donegal and ten have been approved in Mayo. The other applications are moving through the system. Guidance has been provided to the local authorities in question. A liaison point has been set up, recognising that this has been a very traumatic experience for households. Funding is available. The National Standards Authority of Ireland, NSAI, has developed a standard to support households and determine what can be done to address the issues in their homes.

Do the witnesses have an initial figure for the average cost per household?

Ms Mary Hurley

In Mayo the affected homes generally have to be rebuilt because of the impact the mica has had on structures. There are five options. The response can depend on the applicant. Some 90% of the activity is funded by the State. Support is also available for households seeking to remediate buildings.

Mr. Graham Doyle

The response varies according to those options. The maximum approved cost for demolition of the entire house is €275,000, with a maximum payable grant of €247,000. Those figures vary across the various categories of response. Remediation of homes affected by mica is much more expensive because the damage tends to be very significant, while the average figure for homes affected by pyrite is about €65,000.

There will be more time for questions tomorrow, but in the meantime I would like as short an answer as possible while still addressing the issue. I know it is an impossible task. It is probably not surprising that in considering Vote 34 I was drawn to the money spent on the O'Devaney Gardens development in 2018 and 2019. The figures were €1.7 million for 2018 and €3.79 million for 2019. Does that relate specifically to the social housing built outside the housing land initiative, HLI, or does it include HLI-related spending?

Ms Mary Hurley

That spending was related to social housing. That will be the first element of the site to be developed and will support the delivery of the wider site. There will be phased delivery of social housing. The expenditure will support the design and development. There will also be phased payments on the site.

As such, some elements relate to the larger project.

Ms Mary Hurley

Yes.

In July 2019, a new council was elected. It has a different approach to housing and seeks to build more public housing on public land. In November 2019, the council voted to approve the HLI deal and made a parallel agreement with Bartra Capital Property to purchase 30% of the stock for cost-rental accommodation. I know the new Government is committed to a cost-rental approach. At this early stage, is the Department supportive of the programme which the council seems to be progressing? The council has appointed two approved housing bodies, AHBs, to consider the details. Is the Department supportive of that?

Mr. Graham Doyle

Certainly.

I really appreciate the Department's support, which was key to securing agreement on that site.

That bears comparison with what happened just a week ago at the Oscar Traynor Road site. A full year passed between the decision on O'Devaney Gardens in November 2019 and the vote on the Oscar Traynor Road site in November 2020. It was known that the proposal for O'Devaney Gardens was barely voted through by the council. Was the Department concerned that the time and effort it had put into the Oscar Traynor Road scheme would result in the failure we saw? It is very disappointing all around, but why did both sides not manage in a full year to arrive at a proposal that was at least as good as O'Devaney Gardens? In the event, we got a proposal that was worse than O'Devaney Gardens. How was that project managed during that year? Did the absence of an affordable housing scheme, which was a key element in the uncertainty around this, and the continuing absence of an affordable rental scheme play a major part? I accept that there was no Government for a large part of that year. What did the Department do in the intervening period to prevent the failure which we ultimately saw?

Mr. Graham Doyle

It would certainly be helpful for us to re-examine our approach to affordable housing schemes and cost-rental over the coming months. Dublin City Council drew on a lot of the Department's existing schemes to construct that arrangement. From what I could tell, one of the biggest issues was the mix of means of delivery. The council takes a particular view, as it is absolutely entitled to. The Deputy has asked if we are disappointed. The scheme involved about 850 units, and our drive is to house people. We will have to learn lessons from this.

An earlier speaker described a mix of incomes. The main reason for the failure of this project was uncertainty around the prospect of 50% private ownership. These units could easily become private rental housing through the housing assistance payment, HAP, or a real estate Investment trust, REIT. Providing models of funding which allow certainty around the outcome will be the secret to securing more agreement from local authorities and will enable the Department to deliver these houses. I do not believe it is an unreasonable left-wing approach. Most of the reservations arise from uncertainty around what we will get from these deals and the lack of transparency with which infrastructure and unit costs are conflated. If the Department focuses on those points it will help to ensure further spending on further projects like O'Devaney Gardens.

I welcome the witnesses. I will try to keep my comments focused and I would appreciate short replies as five minutes is a very short time. I would like to concentrate on local government funding. In his opening comments, the Comptroller and Auditor General referred to the complex ways in which central government funds flow to individual local authorities. That is a great understatement and a very balanced comment. It is acknowledged in the chapter that the local property tax was a replacement of the motor tax fund. Revenue is collected by the Revenue Commissioners and it is up to the Department to distribute it. I will concentrate on the key issue of baselines. I do this every time the Department appears before the committee. There was to be an interdepartmental review of local property tax, with baselines to be specifically examined. Where is that review?

Mr. Graham Doyle

As the Deputy says, it is a complex area. We have brought our expert, Ms Lorraine O'Donoghue, who is in the other room. Perhaps she can comment on some of this.

Ms Lorraine O'Donoghue

The Deputy mentioned the baseline review. That was carried out in parallel with the Department of Finance-led review of local property tax.

The group that carried out the baseline review - I was the Cathaoirleach - submitted their proposals to the Minister when the work was essentially finished. Those proposals have not yet been signed off but they have been resubmitted recently to the current political team in the Department. We await further news on local property tax changes before that baseline change can be decided upon and put in place, assuming that it would be acceptable to the Minister. As I said a moment ago, it is under review.

A number of options were looked at. The principle that underpinned the baseline review initially was that in the event of local property tax changes and additional properties coming into the LPT net, additional funding would be available for the local government system. It was about considering the best allocation of those additional funds. There were commitments in the programme for Government about moving to 100% equalisation. We will have to review that in parallel and consider how to implement all of those things at the same time.

I know many arguments are made to the effect that some parts of the country are different from others in terms of the rates base and so on. In fact, if we consider the gross expenditure and carry out a comparison between all local authorities, the counties with growing populations are always at the bottom of the list in terms of the amount of spend per head. There is a direct impact on the baselines. Essentially, the primary work done on the baselines was done under the needs and resources model in 1999 and 2000. We are still using the 1996 census of population. No increase in population has been counted in terms of the needs of certain local authorities. Is that the kind of thing we can expect to see the reports addressing?

Ms Lorraine O'Donoghue

As I said a moment ago, we have resubmitted the proposals to the Minister in recent days. I would not like to anticipate any decision that the Minister might make but suffice it to say that several of those issues were actively considered as part of the baseline review. These included issues such as population change, current population, geographic features, size of the country, etc. A range of issues were looked at and will be looked at again. One of the key issues that underpinned some of our thinking on the review group was that the data available and used to review baselines would be fully transparent and publicly available.

Deputy Murphy referred to the baselines. The needs-and-resources model was developed around 2000 and ran until 2008. It involved 600 layers of data being analysed every year. It was quite an inefficient process in terms of allocating local government funding. However, the current baselines in operation were essentially set at 2014 levels. No additional general-purpose funding through local property tax has been brought into that system since then, although they were adjusted marginally in 2017. It is fair to say that some of the issues Deputy Murphy has raised are relevant. Individual local authorities have changed somewhat. All of that has been factored into the proposals that are with the Minister at the moment.

I welcome Mr. Doyle and everyone. I wish Mr. Doyle the best in his new role. I am sure he will have no problem getting across the brief, having come from the mixed brief he had. It is even more mixed since he left it. I welcome Ms Hurley and Ms Ryan as well. The Chairman can stop me if he feels he needs to, because I will be somewhat current. During the Covid-19 period have any rules applied to the Department or any agencies under its remit that permit paying staff full salary for working part-time?

Mr. Graham Doyle

There is guidance relating to the issues around Covid-19 with regard to staff and the Civil Service. It issued from the human resources side of the Department of Public Expenditure and Reform. The guidance has evolved over the course of the initial lockdown period and up to now. Much of it is based on safety of staff and providing a service to the public. It is based on the public service trying to show leadership around working from home, where that is possible. Where work necessarily has to be carried out on-site, the idea is to try to do that in a safe way.

I am unsure whether there is a specific line on the point raised but all this lends itself to organisations doing what they can to try to comply with the overall guidance being given by Government. The idea is to try to bring about a safe working environment and show some leadership in the context of what all organisations across the State are trying to do at the moment.

Of course safety is of paramount importance. What about the issue of people being paid a full salary for less work, should a person be unable to work remotely? For example, what if the person is outside a broadband area or is simply unable to attend work in a safe space? What I am trying to get at is whether things have evolved to the extent that we are paying a full salary where, for example, people are working part-time.

Mr. Graham Doyle

It is probably not an issue. I think I know the circumstance Deputy MacSharry is referring to, because I know he has been pursuing it elsewhere. The approach we take within our Department is to have people work remotely where they can work remotely.

I support that of course.

Mr. Graham Doyle

If they cannot, we have them in their offices. If we had circumstances where many people on a team needed to be in the office, we would have to try to find ways to spread them out or to stagger the times. Various approaches have been taken in organisations across the public service.

The Department of Public Expenditure and Reform says that if people work less they should be paid less pro rata. Obviously, we have to look after people so there are financial supports through the pandemic unemployment payment and so on. Will Mr. Doyle check this? I do not expect him to know the answer today.

I believe the Property Registration Authority is under the remit of the Department. In answers to me from the authority and from another source providing me with information I have learned there are approximately 202 working hard remotely. That is working well. The remaining 345 are split into team A and team B. The alternate teams work two days one week and three days the following week and vice versa, but all are paid full salary.

I am aware of the directions from the Department of Public Expenditure and Reform. I understand the sort of evolution to try to help people on the one hand and keep the whole operation afloat on the other. I gather in this case it has not evolved to the extent that it is an official line. I appreciate that Mr. Doyle may not have the answer today because it is not the subject matter of today's meeting, but I wanted to use our time efficiently. Since Mr. Doyle is here I said we would take advantage of it. Can Mr. Doyle come back to us to confirm whether people are getting full salary for part-time work as a result of Covid-19? It is not the fault of the workers. It is our fault as a State if we are presiding over such a situation. I do not believe it is right, if that is the case. I will park that point with Mr. Doyle.

I have one final question on the vacant site levy. I know this is an issue for the Department of Finance in the main. Again, with Covid-19 this year there are issues where someone may have bought a site and closed the sale in November 2019. The person may have proceeded through the planning and so on this year. He may not be there yet, as is often the case for a larger-scale development. However, from 1 January 2021 the person will be levied. In many instances, the cost would be tens of thousands of euro. Is there any scope or can there be any scope with this? I know local authorities do not have discretion on this. Is the Department of Housing, Local Government and Heritage in discussion with the Department of Finance on any sort of accommodation for people who have been affected by lockdown in terms of the progress they would normally have made?

Mr. Graham Doyle

I think under some other programmes allowances have been made along the lines Deputy MacSharry has suggested. I am unsure specifically on this point. I wonder whether my colleague, Ms Maria Graham, in the other room happens to have some detail on that. If not, we will come back to Deputy MacSharry with an answer. That is no problem.

I thank Mr. Doyle.

Given the time, I ask that Ms Graham to give a brief answer and, if not, perhaps she can come back with a written reply.

Ms Maria Graham

In the original lockdown, we brought in emergency provisions under the planning Act that gave an eight-week extension, so any provisions cover that gap when construction was not active. We can follow up with more details for the Deputy and the committee, if that suits, given the time.

I thank Ms Graham. I call Deputy Munster.

The opening statement suggests delivery is achieved through a number of headings, which are build, acquisition and leasing. According to the Department's briefing paper, it looks as if more than 60% of the output for 2019 was via HAP. Is that correct?

Mr. Graham Doyle

HAP, as a housing solution, is certainly a significant proportion. I am not sure if 60% is the exact figure.

Ms Marguerite Ryan

There were 17,000 HAP tenancies delivered in 2019.

It is approximately 60% of the output.

Ms Marguerite Ryan

It is separate to the build, acquisition and leasing. The targets were met on both sides.

A little over 20% was made up of new builds.

Ms Marguerite Ryan

It was 6,000 out of 27,000.

A little over 20%. Would those new builds include turnkeys?

Ms Marguerite Ryan

Yes.

Local authorities appear to be choosing turnkey more than direct build or direct delivery, even though it is more expensive to do that. The reason for that, they say, is the nightmare of bureaucracy. If they go to start a small project, it takes 18 months before they start to build the house, even in the midst of a housing crisis. Many local authorities have made reference to the fact the tendering process and the procurement process could run in parallel and that would shorten the time for the physical delivery of houses. Why has the Department not looked at that, given the pressure it is under to deliver homes in a crisis?

Mr. Graham Doyle

The red tape point, to put a label on it, has frequently been made over the years. While I am new to the Department, I am very aware there has been a focus on trying to reduce that.

Is there a reason the Department has not done that? I am sorry to interrupt. I am under pressure for time.

Mr. Graham Doyle

To be fair, it has. There is a need for scrutiny, and this committee would want us to ensure we are getting value for money. We have taken down those timeframes significantly.

The Department is not running the tendering and the procurement processes in parallel, which would speed it up significantly.

Mr. Graham Doyle

On that particular point-----

Ms Mary Hurley

On the process for projects over €6 million, that can be a three-stage process or a two-stage process. We work with local authorities to run those processes together. The timeframe for that is generally 59 weeks. We have seen in Wicklow, for example, projects going from inception to being on site in 43 weeks, so we do try to work the four stages together.

Was that a new process?

Ms Mary Hurley

There is a four-stage process. What is new is there is a one-stage process now------

How many have taken up that one-stage process?

Ms Mary Hurley

There is a one-stage process that has been raised from €2 million to €6 million, but in terms of the €2 million threshold, there are 20 projects - 50 units - and they are currently going through that process. That has now been increased to €6 million and we are working with local authorities to bring them on stream. There is one transitioning at the moment through that process.

Just one so far.

Ms Mary Hurley

One since September, but there is a range of 20.

There is one going through. Am I corrects that, last year, 70% of the social housing units delivered were turnkey properties?

Ms Marguerite Ryan

I would need to check the statistics.

The Department can revert to me on that and it can perhaps revert to me on whether it has plans to run those two processes in parallel. It would certainly help and it is quite astonishing it has not been done.

The other aspect I wanted to touch on was the housing maintenance budgets. Local authority income from rental is less than half of the response maintenance, and that is not taking into account the structural maintenance. I will give the example of the local authority in County Louth, where there have been more than 4,000 maintenance requests for this year to date, with more than 425 coming in during October. There are properties where windows have to be nailed shut, and doors one could put a finger through. Local authority management have said they are starved of funding. That is just one local authority but there is clearly an issue that local authorities are starved of funding. I imagine that if the Residential Tenancies Board was to go in and inspect local authority properties, they would not pass any inspection and they would be considered substandard in many cases, to say the least.

It is an area that has been flagged up by local authorities but it seems to fall on deaf ears. Are there plans to increase the funding? In addition, AHBs get more funding than local authorities for maintenance of their housing stock. Why is that?

Mr. Graham Doyle

What I think the Deputy is talking about is the preference for having a planned approach to maintenance. There has been a lot of work over the years, when a house becomes vacant or becomes a void, to bring the property up to a new pre-letting standard. What we are actively looking to do at the moment is transition from focusing on voids to the extent that was probably done in the past to a planned maintenance model. That particular change is being worked through at the moment. It is a valid point, which is why we are pursuing that.

I am not talking about doing up a property to re-let; I am talking about existing stock.

Mr. Graham Doyle

That is what I am talking about. It is a question of moving from doing up a property to re-let to actually having a planned maintenance programme, where we are proactively dealing with the housing stock and maintaining that housing stock over a period of time, rather than going at it in fits and starts. That is a project that is being worked on at the moment.

How long does Mr. Doyle believe that will take?

Mr. Graham Doyle

In terms of our approach, I would have to check with the team that is working on it. Coming up with a new approach is probably not going to take long.

It will need additional funding because, otherwise, while it might look good on paper, if there is no funding to come with it-----

Mr. Graham Doyle

We will either have to re-purpose funding or seek more funding.

I welcome the witnesses, in particular Mr. Doyle, who I know from a previous life.

Mr. Graham Doyle

We are calling each other “Mr. Doyle” and “Deputy Murphy” now.

I welcome all the witnesses and thank them for the significant effort they put into this detail. My question is in regard to HAP and RAS. What are the performance targets in regard to how much we are spending on those? Is there a significant difference in how long people have been on them when they get their house? How are targets being set in that regard? It is very hard to discern how the Department is even setting targets because everything seems to be bunched together. Is there a more streamlined way we could look at this?

Mr. Graham Doyle

In terms of HAP tenancies, it is a way to meet a housing need and, given the challenges the State and the economy have had in the overall build space in recent years as we try to ramp up that build, there has been a reliance - at least a partial or significant reliance - on current expenditure measures to try to put a roof over people's heads.

HAP has played an important role in that. As we deliver more and more social housing, we would like to see the numbers on HAP reduce over a period of time.

Is it a successful scheme? Should we continue with it? The figures, between the accommodation for homelessness and HAP, are significantly increasing whereas the housing stock seems to be going the other way. I am asking about the targets.

Mr. Graham Doyle

We set targets around this. The way the Department has looked at this previously is how much build can conceivably be delivered reasonably in terms of ramping up over a period of time and meeting the projected housing need through the various blends. If we can get the build output, which the State has ramped up the over recent years and is certainly going to continue to do that, we will start to reduce the reliance on that. It is about setting targets based on cutting your cloth around the mix that can be delivered because, ultimately, we have got to put roofs over people's heads.

I appreciate that but does the Department feel the scheme is working? I see a significant issue in this regard with planning applications, for example, where developers apply for planning on the basis of dwellings per hectare and the next thing An Bord Pleanála overturns that and insists on 35 dwellings per hectare, and the development does not go ahead. The scheme is falling down because we will continue with the HAP tenancies. The houses are required. How is the Department meeting targets? In one county, there are 13 planning permissions granted but, because of the dwellings per hectare stipulations, they are not going ahead. Out of 13, there are two, which means that we are not solving the housing issue.

Mr. Graham Doyle

I might be misunderstanding the Deputy.

How does the Department set its targets? If there are 13 planning applications, only two of which will go ahead, how can the Department set targets?

Mr. Graham Doyle

Ms Ryan has been heavily involved in that piece and I will let her respond to the Deputy on it.

Ms Marguerite Ryan

Quickly, as I know the Deputy's time is short, at the outset of Rebuilding Ireland, we knew more than 92,000 people were waiting on the social housing waiting lists and we had to deal with them in a blend of ways. Five thousand were determined to be the appropriate number of additional stock through build, acquisition and leasing and the remaining 87,000 through HAP and RAS. Over the past number of years, there have been a high number of HAP set-ups. The Deputy is correct in that regard. However, it is worth noting that almost 6,000 people up to the end of quarter 2 this year had exited from HAP into a long-term social home.

How many new applications were there?

Ms Marguerite Ryan

We are probably on track to meet the target of about 15,000 HAP tenancies this year.

If 6,000 exited, how many are entering?

Ms Marguerite Ryan

Does the Deputy mean just for that year? There will be 15,000 new entries this year.

Effectively, we have 6,000 off that scheme and we are adding an extra 9,000.

Ms Marguerite Ryan

No. We have got 6,000 off the scheme in total to transfers to other forms of social housing but, overall, since the scheme started, 22,000 people have left the scheme for various reasons, such as back to work, back to education, have found other jobs and moved location. Of that 22,000, the number who have got their long-term social home is 6,000.

There is a really good report, published last week by the Central Statistics Office, that analyses data probably more than we could because it compares it to those of Revenue and the Department of Social Protection. It shows how being in HAP has improved the financial situation for a number of tenants.

Certainly, but it still does not tell me how the Department sets its targets.

Ms Marguerite Ryan

The targets were set under Rebuilding Ireland. Under the Government-agreed programme, it is split out over the years to meet the demand arising in each area.

Are they reviewed year-on-year?

Ms Marguerite Ryan

Budgets for HAP are secured year-on-year through the budgetary process in October.

I welcome our guests. I want to return to a point that had been raised by Deputy Munster with regard to the single-stage approval process. With much fanfare, the limit was increased from €2 million to €6 million. It has been indicated that there is only one project, which is in the early stages of that process. How many houses is that project expected to deliver?

Ms Mary Hurley

The limit, from €2 million to €6 million, would leave a maximum of 30 units. One of the things we have been trying to do in relation to that increased limit is to work with local authorities to bring forward applications, and there is a number of applications coming through the system.

In terms of the one-stage process, we know that there are 35 projects on site involving schemes that are under the €2 million ceiling. We know there are 20 applications in respect of €2 million.

Did the 35 projects avail of this single-stage application process?

Ms Mary Hurley

At the rate of €2 million. Where the ceiling was €2 million, that has been raised to €6 million. What we have been doing in the Department is working with local authorities to bring forward applications. This new cap has only been introduced.

Side-by-side with that, it is probably worth noting, just in terms of the approval process and in terms of speeding projects up, that in tandem to those approval processes we have put in place frameworks. A volumetric framework has been put in place to support the deliver of the volumetric housing on a regional basis. Each region will have one of them. We have put in place internal layouts that will help local authorities design their house. We have put in place a really useful document, an employer's requirement, which essentially sets out the quality around fixtures and fittings. In terms of approvals, the approvals are one piece but the other pieces are the supports that we provide to local authorities in trying to speed up matters

Deputy Munster spoke about the red tape. We are conscious in the Department to cut any red tape. That is why, in terms of the four-stage process, which is still there for projects over €6 million, we run a lot of those processes in tandem so that it is possible to come in with a joint stage 1 and stage 2. We are all committed to accelerating delivery.

I am a new Member of the Dáil but I was previously a member of a local authority. I was chairman of a housing strategic policy committee, SPC. I have heard this language from the Department since I cannot recall when and the problem is the outputs. Ms Hurley is talking about the different pieces. The piece the people are interested in is where are the houses. The output is getting worse as we are going on.

We are talking about all of these projects and about streamlining. We have a €6 million limit now that will allow local authorities apparently to enter and engage in a streamlined process that should be much quicker. That is the expectation. However, only one local authority is actively engaging with the Department.

Ms Mary Hurley

No. There is one application moving through the process. All local authorities are engaged on that single-stage process and guidance issued to support them doing it. Applications are being prepared across the 31 local authorities.

How many applications are being prepared?

Ms Mary Hurley

I do not have that figure to hand at the moment. That is in process.

It would be useful to get a sense of that.

Ms Mary Hurley

We can certainly get that for the Deputy.

Mr. Graham Doyle

That changed in September, as the Deputy will be aware.

I understand that these things, unfortunately, do not happen quickly but we are in the middle of a crisis so they need to happen quickly.

I refer to HAP and the fact that 60% of outputs in 2019 were related to HAP payments. What was the budget for HAP in 2019?

Mr. Graham Doyle

One of my colleagues will get that.

Could the Department also give me the expected outturn for this year, and even for the next couple of years?

Ms Mary Hurley

The budget for HAP in 2019 was €382 million and that provided supports to many households across the country.

Ms Marguerite Ryan

The budget for 2020 is €479 million. We expect it to come in in or around that and to deliver 15,750 additional supports this year.

And next year?

Ms Marguerite Ryan

We expect 15,000 additional tenancies next year. It is slightly lower.

Slightly less than €479 million next year?

Ms Marguerite Ryan

No, slightly fewer tenancies in 2021 than in 2020.

HAP, essentially, as we need to be clear because some people might not understand, is subsidising private landlords to sort the problem that was created because of a disastrous housing policy.

Mr. Graham Doyle

It is trying to bridge a gap between what an individual can afford and what is there.

It is because there is no social housing available and rent prices are too high to be afforded.

Mr. Graham Doyle

There is something in the order of 80,000 households under the housing assistance payment, HAP, scheme. It is a question of how much social housing one can provide over a period to exit people from that and bring down that number.

When I was a local councillor in the early 2000s, a house in the housing estate in which I grew up came on the market. Usually, in these cases, the local authority would quickly purchase the house. It was good value and a house built by the council. The Department refused to allow the council to buy it, however. It was bought for €42,000.

Since then, the owner of that house has been subsidised through rent supplement and HAP. The State has paid in value multiples of what it would have cost to build that house on day one. That was as a direct result of an ideological driven position that has been adopted by the Department. Has ideology been put aside? Are we ready to go back to basics, namely local authorities building and purchasing homes which in turn will alleviate the pressures on rents and return them to a reasonable level? Are we at that point that we can address the fundamental core problem that lies at the heart of the reason we are in the middle of a housing crisis today?

Mr. Graham Doyle

There are 79,000 people on the HAP programme. To use that money to deliver houses, one is not going to deliver that many overnight. This is an issue which will change over time. Our objective is to bring down HAP over time as delivery comes through for exactly some of the reasons stated by the Deputy.

We are spending more money on this scheme than we are on providing houses.

Mr. Graham Doyle

We are not. One could not possibly deliver the same number of houses over people's heads for that money.

Not in year one but over time.

Mr. Graham Doyle

Over time.

There is an issue with a local authority house purchased under the tenant purchase scheme, then sold and bought by a private landlord and rented. I raised this issue when I was a councillor. The house is built by the local authority with taxpayer money. A tenant lives in it for 30 to 40 years and then buys it out under a tenant purchase scheme. The house might subsequently be bought by an individual who turned out to be a small-time - in some cases, big-time - landlord. The tenant renting the house would get rent supplement or HAP. The taxpayer was effectively subsiding the rent for a house which the taxpayer built. There is a 20-year rule which can be applied. The county council of which I was a member did not apply it. It is an issue which needs to be nailed down.

There are several ways the Department does long-term leasing which includes Part V housing. About a third of these are lease-to-buy, meaning the local authority would own the unit after 25 years. Then there is lease-to-lease which is the greater number, two thirds. The local authority leases these units under a long-term lease but never gets to own them. After 25 years, it has to start all over again.

Dún Laoghaire-Rathdown County Council, for example, pays €2,300 a month per apartment under this scheme. The cost of that over 30 years would come to €828,000 for an apartment. A cost-to-build unit on public land would come to one quarter of that. This does not make sense. Where is the logic in that approach? Dublin City Council will enter into a deal on former RTÉ lands in Donnybrook which will come to €521,000 for a two-bed apartment and €472,000 for a one-bed. That lease is astronomical.

Can anything be done by the Department to ensure value for money? I would argue more should be going into social and affordable housing but we are not getting value of out such a scheme.

Ms Marguerite Ryan

Mr. Doyle and Ms Hurley referred to the blend of activity required and the role leasing plays in that. There is a strategic objective to harness off balance sheet investment in order to deliver the maximum number of units. That is why we blend capital and current.

The enhanced lease is a specific model within that space. It is not always easy to compare the unitary cost of a lease like that with other delivery mechanisms. We have to look at the availability of alternatives in that area, particularly in a local authority where land is constrained and its own construction programme is operating in parallel but also at a cost.

The lease costs have other elements to them which are not immediately visible and not comparable with the construction, notably management, maintenance and the long-term management of the tenant within the unit. There are outliers relating to more expensive units but there are other schemes progressing at more normal prices in the market. It is a market-rent driven scheme. The leases paid for are not above market rent and a discount is secured on the market rent as part of the contract. It is just about the proportion and the slice of the overall delivery through leasing.

I will have to come back to the Chairman on the lease-to-buy and the lease-to-lease schemes. In most cases, they are 20-year to 25-year leases. Some can be shorter. The reason-----

At the end of the 25 years-----

Ms Marguerite Ryan

Sorry Chairman, but in order to keep off balance sheet, if the State were to own the asset at the end, it would change the balance sheet situation. It is quite complex and I do not have the specifics around it. We can get a detail for the Chairman on that. It is a specific part of the structure of-----

The majority of leases do not come into the ownership of the local authority.

Ms Marguerite Ryan

They do not.

That is to keep them off balance sheet. The problem is that it is a lot of money going down a big hole. Up to €2,300 a month to rent an apartment is an astronomical spend, even in Dún Laoghaire-Rathdown. In terms of social housing delivery, I am in favour of the integration of social housing with private. I have argued for it over the years. When I was chair of my local authority SPC, strategic policy committee, I pushed it hard.

Up to 70% of new builds for local authorities and approved housing bodies were turnkeys. There is an argument that this takes away from private housing stock in that if an approved housing body buys units in a development, it leaves fewer for first-time buyers trying to get a starter home.

The cost of these homes appears astronomical. Figures supplied by the Department show that the cost to build such a unit in Fingal is estimated to be €209,000 while a turnkey unit costs €412,000. In Dublin city, the cost to build an apartment is €181,000 while the cost of a turnkey apartment was €382,000 in 2019. It is more a case of breaking even in rural areas in that turnkey accommodation can be bought for roughly the same amount as it would cost to build. By any standard, these turnkey developments represent an excessive cost. To return to the issue of leasing under Part V, in many cases developers have the option to lease 10% of units rather than allowing the local authority to buy between 10% and 20% of them at a discounted rate, as was the case under the old system. That is where many of the leases are getting caught. I presume those units in Dún Laoghaire were acquired under Part V.

Ms Marguerite Ryan

Yes.

There is the problem. With regard to the issue of turnkey acquisitions, is the Department examining the excessive costs in this area? In some areas, particularly urban areas, the cost of such acquisitions can be twice that of building accommodation.

Mr. Graham Doyle

As the Chairman has said, the situation is different in different locations. The averages may potentially distort the picture, particularly as a result of some outliers. We have looked at the issue. We are trying to compare apples with apples. Some of the numbers that are quoted with regard to average costs for local authorities to deliver accommodation, such as €200,000 or €210,000, quite often relate to a three-bedroom semi-detached or terraced house. Some of the very large numbers quoted relate to apartment delivery, which is fundamentally more expensive. We are trying to deliver a mix of units into the housing system. There are plenty of people looking for one-bedroom or two-bedroom apartments in addition to families who may be looking for a more traditional three-bedroom home. Quite often, the numbers quoted relate to some of the outliers.

A Department of Public Expenditure and Reform report highlighted the fact that building or buying accommodation is better than the myriad of long-term schemes we have with regard to value for money over time. According to this report, better value would be achieved through building and buying accommodation, even over the medium term.

Mr. Graham Doyle

We are trying to do that. As we move towards the numbers for next year and beyond, the Chairman will see that we are trying to shift the mix a little bit further in that direction. I have looked at turnkey accommodation over the few months I have been in this role and it was certainly an issue as we looked towards the Estimates for next year. There are, however, many situations where turnkey accommodation makes absolute sense. One of the biggest criticisms the Chairman mentioned is that we can potentially be competing with first-time buyers, which is something we do not want to do. A significant amount of the turnkey accommodation that has been delivered has been located on sites where properties would otherwise simply not have been built. It does, therefore, add additional supply into the system. The particular type of accommodation needed in a particular locality can also be an issue. Turnkey accommodation definitely has a role. The one thing on which I would caution-----

I am not arguing against it. I have seen good value achieved through turnkey acquisition.

Mr. Graham Doyle

The Chairman is right. It particularly has a role-----

In some cases and in some areas, however, the cost can seem excessive. That is the point I am making. There is a slice of the overall Government budget allocated for housing and we have to try to get as much out of it as we can. That is the point I am making.

I also want to come in on this very point. All I see in my constituency are long leases. Properties are leased for 25 years at 90% of market rent with reviews at four-year intervals. That is in cases where the maintenance is done. When the maintenance is not covered, 80% of market rent is paid. At the end of that period, the property is still owned by the developer. I cannot see where the housing stock is going to come from in future. All I see are the housing assistance payment, HAP, and long leases. I could point the witnesses to six such developments being acquired under long leases, some of which are replacing units that were expected to be purchased under Part V. Other whole estates are completed and it is expected that they are going to go on the market. People tell me that they were waiting in the hope that they could stay in the area in which they grew up, where these are the only developments under way, only to find that, all of a sudden, these units are to be put out under long leases of 25 years. I cannot see how value for money could possibly be achieved in that way. We can use all sorts of language about things being off-balance sheet, blended mixes and so on but, at the end of the day, we need to build houses and add to our housing stock and this is not the way to do that.

To be perfectly honest, all I can see in the figures I receive through parliamentary questions is that the percentage of housing delivered in this way is growing. I hear that developers are encouraged to suggest this option to the local authority. That encouragement must be coming from the Department if that is the case. Perhaps the mix in my area is different from that in others because I do not believe the local authority in my constituency owns any land which is designated for housing, but how can this be considered good value for money? HAP is another issue. Since 2014, I have been giving out about HAP and about how it is not a short-term measure and was the only measure available for a long time. We have spent an absolute fortune on these measures which deliver no permanent assets and, in the case of HAP, do not deliver any certainty either.

Mr. Graham Doyle

The system is moving towards building more accommodation. This has happened. If one compares the numbers built in 2016 with the numbers built in 2019, the year we are looking at today, or with the numbers that would have been delivered this year, one will see that more of these permanent solutions are certainly being brought into the system. This will continue and, over time, we will see the number of HAP tenancies reduce. In fact, it has reduced this year. I have some statistics in respect of the Deputy's constituency, which I can certainly send on to her.

I ask Mr. Doyle to please do so.

Mr. Graham Doyle

I have some detailed numbers, which I will not go into here, but it can be seen that the social housing need in 2016 was to the order of 5,500. That has come down. I have the June 2019 number before me and, at that time, it had reduced to just under 3,400. There is a good amount of built housing in the pipeline. I am very happy to send these statistics on if the Deputy would find that helpful.

With regard to value for money in the long term, we pay 90% of current market rent, reviewed every four years, in cases where outside maintenance is carried out by the developer, who owns the unit at the end of the period. I calculated that if rent is paid on 2,600 long leases over 25 years, the State will pay €865 million and own nothing.

Mr. Graham Doyle

With regard to the mix of managed properties and what government has tried to deliver over recent years, there are many ways in which to deliver a roof over people's heads. There are ways which would be preferred and-----

It is a question of value for money.

The figure I have used there is the Department's own figure, which is an average of €13,222 as the cost for each long lease every year. How is value for money put into that if one considers it over the lifetime of the house?

Mr. Graham Doyle

There are certainly arguments we can make back and forth around value for money but fundamentally, there is a number of tools in the box in how we deliver housing and how we deliver a roof over people's heads. In recent years, there were constraints in the ability to build. The State has been trying to ramp up that capacity over the last number of years and has some success. While it is not enough yet and there is still a long way to go in that, with the constraints around Exchequer finance it has been a question of trying to balance value for money but also of using many of the tools in the box to ultimately deliver the roof over people's heads. That is what governs a lot of this, while at the same time trying our best to move over time to deliver solutions that do deliver value for money.

On delivery of housing that delivers value for money, how many units were granted planning permission in 2019?

Mr. Graham Doyle

Lots. There are loads of planning permissions out there.

Can we get that figure and how many were appealed to An Bord Pleanála?

Mr. Graham Doyle

I would imagine that is probably a lot of them also. There are plenty of planning permissions out there but whether they have gone though successful appeal or not is a question of the market's appetite to deliver.

It is not the market's appetite to deliver. I am back to An Bord Pleanála's insistence in some instances of usurping the local development plan and insisting on 35 dwellings per hectare, and in rural areas particularly, which means a mix of apartments and a mix of houses. Essentially, one cannot build the apartment for less than one can sell it for. Those developments, therefore, do not go ahead. To my mind, to the developers' minds and to the minds of the people who are looking for housing this is not solving our housing problem. It is creating it. We may have lots of applications and lots of planning granted but the significant issue is that they are not viable at 35 dwellings per hectare in areas where apartments are just not suitable. Rural and small towns in Ireland do not have the infrastructure. It is a bit chicken and egg. We need to put the infrastructure in to allow people to travel by train to these areas, or some other form of transport in order that they are not just the ghettos of the future. This is why they are not being built. That is the difficulty I have. We need to see where An Bord Pleanála is coming up with this. It is not in the guidelines, it is not anywhere. I have raised this in the Dáil. An Bord Pleanála is doing it persistently and it is preventing housing stock from increasing because the development of housing stock is not going ahead. The grant for planning may be there but it is not viable on the basis of 35 dwellings per hectare. This is a significant issue, and counter to what Deputy Catherine Murphy is saying, in that we are going to continue with HAP if we are not going to be able to increase the housing stock.

Mr. Graham Doyle

I suppose that I would struggle to comment on An Bord Pleanála, for obvious reasons.

I appreciate that but does Mr. Doyle appreciate that these are not unlinked? If we join these dots there is a significant issue.

Mr. Graham Doyle

The are, obviously, viability issues out there with regard to the costs of delivery and the volume of units or apartment blocks versus, for example, a three bedroom semi-detached house. The Government is seeking ways to try to address that. For example, it is looking at issues such as the affordability scheme that we are working our way through. The committee will see more of that in the coming couple of months.

I think Mr. Doyle is just missing the point. The issue here for the Government is to address the fact that An Bord Pleanála is actually doing something illegal. It is insisting-----

I must caution the Deputy for commenting on a body outside of the Houses.

We have already discussed this in the Dáil Chamber. It was agreed by the former Minister to write to An Bord Pleanála to ask it to desist from insisting.

I have to ask the Deputy to desist from describing something as "illegal" outside-----

If it puts in a minimum density that is not in the guidelines, it is an illegal function. There is no minimum density within the guidelines, and yet An Bord Pleanála is insisting that this is what a developer must build, namely, 35 dwellings per hectare. The former Minister did not write that letter. We now have a new Minister who has not got around to it either. I believe that it is the Department's function to look at this. It is a significant issue that does not help the Department in increasing housing.

Mr. Graham Doyle

Perhaps my colleague Ms Maria Graham would like to come in on that. Ms Graham leads the planning function.

Ms Maria Graham

On the Deputy's questions, the Office of the Planning Regulator is now producing a lot of statistics on progress through the planning system. More generally, more than 29,000 planning decisions were made in 2019, of which almost 26,000 were granted and approximately 2,000 went to An Bord Pleanála. In the cases with An Bord Pleanála, 24% of the decisions were confirmed, 25% were reversed, and 50% were varied. There is a huge amount getting through the system. I believe approximately 40,000 homes were consented in last year.

As Mr. Doyle has outlined, An Bord Pleanála is the independent planning appeals board. It makes its judgments based on the policies in vogue and guidance given by the Minister.

There is no problem in that regard. The point I am making is that if 40,000 permissions were granted we did not build 40,000. They did not go ahead. The significant issue is to ask the question "Why and what is the problem?" That is all. I ask that Ms Graham might forward to the committee the report she has quoted from.

I will ask for that.

I want one point of clarification. In his response to Deputy Catherine Murphy, Mr. Doyle mentioned the local housing need as assessed by his Department in the Deputy's constituency. Does that include people who are in receipt of HAP?

Mr. Graham Doyle

It does.

There is a figure of some 3,000 people with housing need.

Mr. Graham Doyle

Yes, those are on-----

Does that include all HAP recipients also?

Ms Marguerite Ryan

When a person takes a HAP tenancy, he or she comes off the waiting list. If he or she wants to go into what is called "long-term social housing" owned by a local authority or an approved housing body, then the person can go on the transfer list, which is maintained at local authority level.

Does that 3,000 figure include those people?

Ms Marguerite Ryan

No.

It does not include them? So, it only incudes people who have not even got HAP?

Ms Marguerite Ryan

It is the net need.

Okay. That is crazy. That figure is not the housing need in that county. Most people who are in receipt of HAP are actually still looking for housing. That is not a long-term housing solution for those people. It should not be-----

Ms Marguerite Ryan

The legislation from the Oireachtas says-----

The legislation might say whatever it says but that does not-----

Mr. Graham Doyle

The legislation-----

The legislation does not reflect the housing need in any county because we are talking about thousands of people who are in precarious accommodation, whatever way one looks at it, and it is not a long-term solution to their housing needs. To even suggest that it is a solution is spurious. The Chairman spoke of-----

Mr. Graham Doyle

The legislation does say that it meets the housing need.

The legislation is an ass, if Mr. Doyle does not mind me saying so.

Mr. Graham Doyle

I have to work to the legislation.

The Chairman referred to social mix in areas, be they geographical or otherwise. I remember a time when local authority housing estates had a great mix. There was the single parent, the person who was unemployed, and in some cases the local small business owner such as a builder or whatever. We do not get that any more. Those people cannot even apply because of the income threshold limits. I am currently dealing with a couple who have five children. They are in the exact same circumstances as me with regard to the family make-up. Does Mr. Doyle know what the income threshold is above which they cannot apply for social housing in County Monaghan?

Mr. Graham Doyle

Could the Deputy tell me?

It is €30,000. For that family to be able to get a mortgage of any description, their income collectively between the two parents would need to be in and around €120,000 or €130,000.

Between €30,000 and the higher figure mentioned, what solution would Mr. Doyle’s Department see for a family in that situation?

Mr. Graham Doyle

I would be happy if one of my colleagues took that question. As I said in my introduction, I am very new in this role and I am interested in looking at some of those issues. Perhaps Ms Hurley may have some experience in this matter.

Ms Mary Hurley

I presume the Deputy is referring to the income bands for eligibility for social housing. There are three bands. Deputy Carthy’s constituency of Cavan-Monaghan falls into band 3. That band is based on an assessment conducted by the Housing Agency. The income eligibility bands are being reviewed at the moment and issues have been raised by both Deputy Carthy and the Deputies in his constituency as to the bands in that constituency.

If I may, I will give a sense of what I am talking about. We will take a married couple, where the husband is one of the hardest workers one could ever meet and who bursts himself and is out day and night trying to look after his family. His wife is a carer for one of the children and is at home. They are crippled by rent. Every single year their rent goes up. I have lost count of the number of places they have had to move to. They have been to every single financial institution imaginable trying to see if there is some mechanism by which they can own their own home. It is a no-go and yet, the Department of Housing, Local Government and Heritage says they are not in need of housing because they earn in the region of €40,000. They would be ideal local authority residents. One must remember that there is often an insinuation that people who are in local authority houses somehow get a free house. They pay rent in line with and relative to their income and it is far from a free house. At the moment the only people who are getting free houses are the developers and the speculators who are drawing down this year €479 million in HAP payments. This system is absolutely rotten and needs to be changed.

The Deputy’s time is up now and I call Deputy Devlin.

I thank the Cathaoirleach and our witnesses for the presentation and Mr. Doyle, in particular, for his opening remarks. I welcome him to the Department and to the Committee of Public Accounts. Today is a great introduction for him.

I will start by sincerely thanking all of the staff of local authorities and, in particular, direct labour for their great assistance during this pandemic. Mr. Doyle’s opening remarks alluded to it but from the Community Call all the way through to the library services and the outreach services, local authorities were to the fore and acted in an exemplary manner. I pass on my appreciation and that of my party to everyone concerned.

The opening remarks of the Comptroller and Auditor General referred to the €3.9 billion expenditure of our witnesses' Department. Am I correct in saying €2.5 billion of this was spent on housing? My initial questions are on housing, and I have a number of them. I think I heard Ms Hurley mention that in 2019 there were 20,809 homes in pre-development stage, or it may have been Ms Ryan who said that earlier on. As to those nearly 21,000 homes at pre-development stage, under what kind of schemes are those homes being developed under? Can I get a snapshot of those, please?

Ms Marguerite Ryan

I do not know if the Deputy is familiar with the construction status report that is published on a quarterly basis but there are two tables, appendixes 1 and 2, in the foreword to that, which break down all of the projects, not only by category of development - that is approved housing body, AHB or whatever - but also by the status of development.

As to the current pipeline, which is at 29,810 units, 2,945 are at stage 1, 1,981 are at stage 2, 998 are at stage 3, 3,160 are at stage 4, and 8,529 are on site.

I refer to the make up of those units. I am sorry Ms Ryan for interrupting but I am limited in time. Can she forward a copy of that report to the committee? It would be much appreciated. As to the make up of those units, are they direct builds, Part 8s, or capital assistance scheme, CAS, types?

Ms Marguerite Ryan

They are a blend. About 14,000 of them are local authority-led, excluding turnkeys. There are 4,998 local authority turnkeys. The rest are being delivered across various programmes by approved housing bodies.

Of the 14,000 units, which is nearly half coming through local authority building, which is an important point to make-----

Ms Marguerite Ryan

I will double check my figures that that is the case.

That is fine, I understand.

The housing adaption funding is essential. I represent Dún Laoghaire which has an older population. A large proportion of our tenants require adaptions to the housing. I am conscious of the time so can Ms Ryan come back to me on the funding that is proposed for 2021 for local authorities under that heading?

CAS, historically, has been slow in advancing projects but what is the bulk of funding that is going to CAS for 2021?

Mr. Graham Doyle

Ms Ryan may possibly have that figure here. We have concentrated a little bit on this in recent times and have worked with many of the local authorities and with some of the agencies dealing with people in those circumstances. We have tried to simplify the application and to make it easier for people to access the types of solutions under those funding streams. It is definitely something that has worked well and is very important for-----

I ask that the Department might come back to me on that.

Mr. Graham Doyle

We will be very happy to give the Deputy those details.

It was said that the Local Government Fund was €473 million for 2019, according to the accounts. That is down on the 2018 figure. Perhaps Mr. Doyle might provide us with an explanation on that figure because we might have expected a bounce on that.

This not necessarily question for the Department, but the local authorities must have notified the Revenue Commissioners by 30 September annually of the decision of the local authority members. That is out of sync or kilter with their own budgets and is something that needs to be addressed.

It was said that An Bord Pleanála collected €18.5 million. Was that in fees or was that an overall figure?

As to local authority fines that are issued, whether for littering, rent arrears, parking or whatever, do they go to the central Exchequer, into the Department, or do these stay with the local authorities? Can the Department come back to me with these replies, please?

Mr. Graham Doyle

There are plenty of questions there and we will come back with replies for the Deputy. On the last question, the fines stay with the local authorities and there are obviously issues within the current year due to Covid-19 and we are addressing that through the rates waiver and some flexibilities around that. We will come back to the Deputy all of those matters.

I thank Mr. Doyle and appreciate that.

Before we finish up, on the question of public-private partnerships, PPPs, and the information the Department has supplied to us, to date, there are two bundles of PPPs entered into for a total cost and commitment of €631 million. Are those PPPs for a 25-year period? Over what period of time does the €631 million accumulate and how much is the annual payment and the number of units involved in that €631 million?

Ms Marguerite Ryan

I am sorry, Chairman, but I cannot put my hand on that information just directly.

Mr. Graham Doyle

If we cannot put our hand on that information here directly we will come back to the Chairman with it.

Could the witnesses come back to us with that information tomorrow, please?

Mr. Graham Doyle

Absolutely, yes. I will send the documentation in.

The payment and availability scheme is available to approved housing bodies. Is it available to private developers?

Ms Marguerite Ryan

No, it is not at the moment.

Some 80% to 85% of the market rent is paid by the local authority.

Yes, it depends on whether it is a house or an apartment. I will check on that for the committee.

Does the approved housing body also get a differential rent?

Ms Marguerite Ryan

Yes, that goes to the management of the amenities.

This puts the local authority which is trying to operate alongside these units on the same estate in a very difficult situation. I am not arguing against the approved housing bodies, many of which are doing very good work, but they are in a financially healthier situation where they have 80% or 85% of the market rent, plus the differential rent scheme that the council would receive from a tenant within an ordinary local authority house, which could be up to €150 or €100 a week.

They have 80% of the market rent on top of that, which is substantial. Regarding the 80% or 85%, when I dealt with it, I think it was 85% for housing.

Ms Marguerite Ryan

To clarify on the rent paid to the approved housing body, AHB, the AHB used that income to pay the debt they had secured in the private markets so it is not the case that they are in profit of the 80% market rent.

I understand that. They have to service the finance and the property.

Ms Marguerite Ryan

Yes, and they also have to have sinking funds for management and maintenance. Their money is ring-fenced.

In apartments.

Ms Marguerite Ryan

Yes.

I understand that.

Mr. Graham Doyle

Perhaps we will come back to the committee with a note on that.

Yes. It is not available to private developers.

Mr. Graham Doyle

Yes.

I thank the witnesses. We have had many discussions, especially around housing. Everybody, including the witnesses, is trying to figure out how to get more out of that slice of the cake that goes over to the Department for housing. There is huge pressure on it.

I would be remiss of me not to thank the Department staff and the local authorities for their work during the pandemic. It is important to know that it is appreciated. They provided a great service throughout that period. I thank the witnesses for joining us and for the information they have provided. We have covered a lot of stuff. I also thank the Comptroller and Auditor General for attending and, as always, assisting us with our work.

Is it agreed to request the clerk to seek any follow-up information and carry out any agreed actions arising out of todays meeting and is it also agreed that we note and publish the opening statements from the Secretary General briefing provided for us today? Agreed.

The witnesses withdrew.
The committee adjourned at 6.31 p.m. until 11.30 a.m. on Thursday, 26 November 2020.