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COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 20 May 2021

Housing Schemes Expenditure: Think-tank for Action on Social Change

Dr. Robert Sweeney(senior economic and policy analyst, Think-tank for Action on Social Change) called and examined.

Today we engage with the Think-tank for Action on Social Change, TASC, to examine expenditure on schemes for the provision of housing, including the rental accommodation scheme, RAS, and the housing assistance payment, HAP. This follows on from our examination of the accounts of the Department of Housing, Local Government and Heritage last November. The Department funds these schemes and this engagement will help inform our next engagement with the Department, which is scheduled for 3 June.

We are joined remotely from outside the precincts of Leinster House by Dr. Robert Sweeney, senior economic and policy analyst at TASC. I welcome him to the meeting and thank him and his colleagues for the briefing material they prepared for the committee. When we begin to engage, I ask members to mute themselves when not contributing so we do not pick up background noise or feedback. As usual, I also remind all those in attendance to ensure their mobile phones are on silent mode or switched off.

Before we start, I will explain some limitations to parliamentary privilege and the practice of the Houses as regards reference that may be made to other persons in evidence. The evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected, pursuant to both the Constitution and statute, by absolute privilege. However, today’s witness is giving his evidence remotely, from a place outside the parliamentary precincts, and as such may not benefit from the same level of immunity from legal proceedings as a witness physically present does. The witness has already been advised that he may think it appropriate to take legal advice on this matter.

Members are reminded of the provisions within 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 of the objectives of such policies. Members are also reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.

I understand Dr. Sweeney is making a presentation to the committee, so I ask him to share his presentation now so we can confirm it is visible on our screens.

Dr. Robert Sweeney

I thank the committee members for the invitation to present, and I hope they can see my shared screen now.

We can see the presentation. Before we begin, I remind Dr. Sweeney that our time is limited and I ask him to be as concise as possible. This briefing, however, will be very useful to the committee, so I ask him to present for approximately ten minutes.

Dr. Robert Sweeney

That is fine.

We do not have a list with the sequence of members who will be asking questions, so I ask them to indicate their desire to do so by using the raise hand function in the software. I now ask Dr. Sweeney to start his presentation.

Dr. Robert Sweeney

I am going to discuss briefly some of the supports available for those in need of social housing, particularly the cash payments available to people to support their accommodation needs. As the Vice Chairman said, I am going to talk about RAS and HAP. I will also talk briefly about rent supplement.

To begin with a short overview and reminder of the schemes, rent supplement is the historic cash support available for those in need of assistance with accommodation costs and who are not currently in local authority housing. This payment was originally intended as a short-term support for existing tenants in the private rental sector. Under the scheme, the local authority provides part of the payment in respect of the rental cost - most of it, in fact - and the tenant also contributes a payment. One of the issues with rent supplement was that people working 30 hours or more each week were ineligible. Therefore, it was deemed a financial disincentive to the taking up of full-time employment. An important point is that people who availed of rent supplement could remain on the social housing waiting list. Those tenants were in the private rental sector and could get supports, but they could also remain on the waiting list to get local authority housing or approved housing body, AHB, accommodation.

Rent supplement has gradually been replaced by the RAS programme.

It was intended for long-term recipients of rent supplement - those who had been in receipt of rent supplement for about 18 months or more. Under this scheme, the local authority sources and contracts the landlord for accommodation. Importantly, particularly when we contrast this with HAP, the local authority is responsible for alternative accommodation if the landlord exits. The local authority makes payment to the landlord and the tenant pays the local authority. The tenant payment through the local authority is based on the tenant's income and ability to pay. The tenant pays the local authority and the local authority pays the tenant contribution to the landlord but the local authority will typically pay most of it as well so the local authority takes up most of the slack. Rental limits apply to this as they do to rent supplement and HAP, which means that each local authority will have a limit as to how much it is willing to pay to private landlords. With RAS, the resident is removed from the social housing waiting list so his or her social housing need is deemed to be fulfilled. Importantly, unlike rent supplement, tenants are entitled to continue to work full time or take up full-time work.

RAS and rent supplement are due to be replaced by HAP, which is already replacing rent supplement. It is envisaged that HAP will also replace RAS. HAP is very similar to RAS. One crucial difference is that the tenant sources accommodation in the private rental sector. It is the tenant's responsibility to find accommodation. The contract is between the tenant and the landlord. The contract is not between the local authority and the landlord. It is similar to RAS in that the local authority makes payment to the landlord and the tenant makes his or her contribution to the local authority. The tenant is removed from the social housing waiting list, as with RAS. HAP and RAS are similar in that rent limits apply in each local authority. If the rent exceeds the rent limits, the tenant typically pays the difference to the landlord. Some discretion is allowed in terms of exceeding those rent limits. In what are called exceptional circumstances, local authorities can pay 20% more - 50% in the Dublin area - than the rent limit if the household is homeless. The tenant is allowed to work full time. The difference between HAP and RAS is that with HAP, the tenant sources the accommodation and has a contract with the private landlord whereas with RAS, it is the local authority that contracts with the landlord.

Here is some information on spending. This is what is called social housing output from 2005 to 2019. The social housing current expenditure programme, SHCEP, is the leasing scheme. HAP is here, as is RAS new transfers, Part V - new build-----

The presentation is not coming up on screen. It is stuck on the first slide.

Dr. Robert Sweeney

Can members see it now?

Dr. Robert Sweeney

I will try to share it again. Can members see the screen?

Yes, but it is only the first page.

Dr. Robert Sweeney

Can members see that now?

Dr. Robert Sweeney

Here is spending on social housing output. The bottom part of the bar shows local authority completions and acquisitions. We also have completions and acquisitions by approved housing bodies, AHBs - the non-profit housing associations. We have Part V new builds. That is where the private sector builds 10% social housing as part of its developments. We have RAS new transfers and HAP. We should see that expenditure on HAP has increased a lot in recent years. There has been very significant expenditure on HAP. RAS new transfers now form a fairly small part of overall expenditure.

The next slide shows public current expenditure on housing in 2019. Here we see that HAP is 36.4% of expenditure; accommodation for homeless is 15.7%; SHCEP, which is the leasing scheme, is 13.2%; RAS is-----

Can I stop Dr. Sweeney? We are still on the table. We need to move on to the chart.

Dr. Robert Sweeney

I might stop the slide show. Can members see that now?

Dr. Robert Sweeney

Here is current expenditure on social housing for 2019. We see that HAP is the main component of this at 36.4%. Homeless accommodation is 15.7%, SHCEP is 13.2% and RAS is 12.8%. We see the figure for rent supplement along with a variety of other schemes. HAP is the most important part of current expenditure on social housing and is set to become more important in the coming years as rent supplement and RAS are gradually phased out.

In terms of how we might assess HAP, I will present what one might call positives. Spending has broadly been in line with Rebuilding Ireland projections. There is often criticism of HAP for increased budget outlays. As I will discuss shortly, it is not a very efficient way of providing social housing but nevertheless spending has been in line with the Rebuilding Ireland projections. It has been effective in providing income support for those in the private rental sector, many of whom would become homeless without HAP. The advantage of HAP is that it is comparatively easy to set up. It takes time to scale up local authority or AHB building of social housing whereas HAP is very easy to scale up.

Research by the Economic and Social Research Institute, ESRI, has shown that HAP creates a financial incentive to do paid work. One of the criticisms of rent supplement was that it created barriers to work. Whatever one's views are, one of the goals of HAP was to remove some of those barriers. On that ground, HAP has been successful, whether one agrees with that policy or not.

There are problems with HAP. Can everybody see the problems with HAP slide?

We can. For anyone watching from outside I wish to state that, with the agreement of the committee, we will publish the presentation on the committee's web page because it is appearing for those of us at the committee meeting but it does not appear to be appearing for those who are watching. We will publish the presentation afterwards.

Dr. Robert Sweeney

So there are difficulties with HAP. One of the difficulties is that with most accommodation in the rental markets, the cost of that accommodation exceeds the rental limits or the amount of rent that the local authority is willing to pay. This has fluctuated from year to year. In 2020, according to the Simon Community only 5% of rental accommodation as advertised on daft.ie was within the rent limits of HAP. That is, it was within the limit that the local authority was willing to pay, and that is 2020. This improved dramatically in the latest round as rents in Dublin, particularly, fell and I presume that is what was causing it. So, 38% of rental accommodation that was advertised fell within the rent limits of HAP. One could still be critical of that and say that almost two thirds of the accommodation that is out there is outside the rent limits of HAP.

Another problem is that the rent limits have not been revised since 2017. So the legislation is 2017 but the actual rent limit is, I think, from the second quarter of 2016. What happens is that the tenants pay their share to the local authority and the local authority pays most of it to the private landlord. Sorry, the local authority pays most of the rent and it pays that to the private landlord and also the tenant pays a contribution to the local authority. What actually happens as well is that there are these tenant top-ups whereby the tenant actually pays an extra amount to the private landlord because his or her contributions are insufficient to cover the rent. That is also a problem. That is a figure from the Department of Public Expenditure and Reform. Threshold, based on a survey, said that it might actually be higher and be closer to half of tenants now paying top-ups to private landlords.

Unsurprisingly, it is very difficult for HAP tenants to actually source accommodation. We have, obviously, a big supply shortage in housing and also the rental sector. So it is really a landlords' market and they do not really want to go to the hassle and risk of taking on a HAP tenant. HAP tenants are competing with other tenants who have more means to pay higher rents. If it is a choice between a regular tenant and a HAP tenant, the landlord is only going to choose one person and that is the non-HAP tenant.

There is a lack of stability as well. The tenancy can be terminated for a variety of reasons and then it is up to the tenant to find somewhere else. That is in contrast because if one is in social housing there is much greater stability. Even with RAS there is greater stability because it is the local authority which has responsibility for finding accommodation for the tenant. As I am sure we will discuss, it is more expensive. Whether one uses HAP, RAS or rent supplement, it is a lot more expensive for the State over the long term, especially to pay the rent of these tenants rather than to build social housing. As I mentioned, the advantage of HAP and similar schemes is that it is able to facilitate their needs in a quick manner. It takes time to build up one's housing stock but, as is widely recognised, it is expensive.

My last point is that the slide looks at trends in public housing expenditure and the mix between capital expenditure and current expenditure. What we saw in the depths of the financial crisis, in 2012, 2013 and 2014 and a year here and there, was that there was not a massive increase in current spending but a massive increase in the share of public housing expenditure that was accounted for by current expenditure. In 2013, for instance, current expenditure was over double capital expenditure. That has improved in recent years. In 2019, current expenditure accounted for, I guess, about 40% of total housing expenditure so capital expenditure was actually greater, basically. That is different from what we had in 2005 and 2006 where current expenditure was less than half of capital expenditure. Obviously it is much more efficient, from a public finance perspective, if one invests in social housing, which is what capital expenditure is, rather than pay all of these transfers which, essentially, go into the pockets of private landlords.

So there are good things and bad things. What I would like to see, and I think what most people want to see, is for the share of public housing expenditure, accounted for by capital expenditure, to continue to rise in the coming years.

I thank Dr. Sweeney for his very helpful presentation, which will stimulate discussion. I open the debate to the members of the committee. Each member will have six minutes. I ask that members virtually raise their hands to indicate when they wish to contribute and I will take members in the order that they indicate. As our time is limited I will keep them to their time and will allow them to come back in for a second round of questions if time allows.

I thank Dr. Sweeney for his presentation.

Dr. Sweeney made a point about 2012 and 2013. Obviously the big problem around that period was access to funding but at the same time there was a huge demand to deal with the housing issue. There was not a huge amount of choice at that stage. If one had put funding into capital one then would not have had Ministry funding to support people who required housing. We have seen an increase in the amount of current expenditure. Has Dr. Sweeney a figure for the number of households who availed of the scheme in that period?

Dr. Robert Sweeney

I have those figures in front of me here somewhere. If we look at the figures for HAP, for example, in the second quarter of 2019 there were 48,261 tenancies in the HAP scheme. This has increased greatly since the scheme's inception. HAP was only introduced, on a phased basis, in 2014, when there were 6,200 tenancies. However, the figures have grown significantly in each subsequent year, and almost 50,000 households were availing of HAP in 2019. I do not have the figures in front of me regarding how many people are availing of RAS but we would have to think that it is a smaller number. I say that because the pie chart I displayed earlier and which is also in my submission demonstrated that HAP is now the main support. If we combine RAS and rent supplement together, the total comes to approximately the same as what is now spent on HAP.

The graph contained in Dr. Sweeney's presentation has a figure of 17,025 given for HAP. What is that? Turning to social housing output from 2005 to 2019, a figure is given for local authority completions and acquisitions of 4,479, while the figure given for completions and acquisitions by approved housing bodies is 3,041. Yet, the HAP figure is listed as 17,025. Is that-----

Dr. Robert Sweeney

That figure is for the number of households that have availed of HAP.

Therefore, the total number of people availing of HAP in 2019 was 17,025.

Dr. Robert Sweeney

Basically, those figures relate to how many people have availed of HAP in each of those years. However, the number of people currently availing of HAP will be less than the sum of all those figures on the graph because some people will subsequently leave the HAP scheme for a variety of reasons.

This figure, then, is the total number of people availing of HAP for the entire country, which is 17,025 households.

Dr. Robert Sweeney

No, that was the total number for that year who availed of HAP. If we look at the total number of households availing of HAP in 2019, that figure was 48,261. However, if we look at the total number of HAP payments which have been set up, that figure is about 63,000, but some of the people who go onto HAP then leave the scheme for a variety of reasons. They might find employment, for example, or they might go back to education. Therefore, the latest figures I have for the number of active tenancies in HAP is 48,261. The chart I displayed during my presentation displayed the number of new HAP tenancies created each year.

Would it not be appropriate for us to have the figures for those availing of HAP each year, rather than simply a figure for new applicants? I state that because what is being presented distorts the figures. On the one hand, the total number of local authority and approved housing body completions are included, but on the other hand, we do not see total numbers of those availing of the HAP scheme. I wonder if it is possible to get those total figures for the numbers of people availing of HAP each year rather than just the number of new applications?

Dr. Robert Sweeney

Yes, it will be possible to get those net figures, and I can send them to the committee afterwards.

That is fine.

Dr. Robert Sweeney

I do not have them in front of me now.

Regarding the approved housing body and local authority completions and acquisitions, has a comparison been done of the average cost per unit? Are the approved housing bodies getting better value for money or are the local authorities? Has a detailed comparison been done in that regard?

Dr. Robert Sweeney

Yes, a comparison has been done on the cost of those completions and acquisitions. I think, again, it was the Department of Public Expenditure and Reform which looked at the cost of schemes in different areas of the country, such as Dublin versus Mayo, etc. The Department then broke those figures down according to the type of accommodation involved and found that the best value for money, in the Dublin area anyway, which is where the need for social housing is most acute, is derived from local authority construction. Local authority acquisitions would generally be the next best way in respect of value for money. The third best way, then, would be local authority long-term leasing. Also, according to the Department of Public Expenditure and Reform, the AHB lease scheme is a more expensive way of doing it. However, the Department did not do a breakdown regarding how much it costs when the AHBs build housing themselves.

Deputy Burke's time is up. I ask Dr. Sweeney to provide the source along with the information he is going to forward to the committee so that Deputy Burke will have it to hand immediately. I must move on because our time is limited.

I thank the Chair.

I call Deputy Verona Murphy.

I was distracted for a minute and I may have missed some of the topics Deputy Burke asked about. Looking at the graph in Dr. Sweeney's submission concerning 2005 to 2019, what explains there being such a dip in the figures from 2012?

Dr. Robert Sweeney

As we were just discussing, in 2012 there is a dip in total expenditure when we include current and capital expenditure. Obviously, that was in the depths of the financial crisis when the Irish State was coming under a great deal of pressure in international financial markets. There was a general reduction in public expenditure during the years of austerity.

I imagine one of the reasons there was a large dip in the capital expenditure in particular was that we had extensive overbuilding of housing in the 2000s. In 2020, for example, we built about 20,000 houses and in 2019 the figure was approximately 21,000 houses. However, in 2006 we built 90,000 houses. Those are the total numbers of houses built, by the way, including public and private construction. During the housing bubble years, therefore, we had massive overbuilding of housing. That meant there was an overhang, or excess supply, of housing.

I would imagine that was a contributory factor to why capital expenditure was scaled back during the crisis years, in addition to the general pressures on public finances.

In hindsight, we definitely scaled back our public expenditure too much, not least because if you wait for the economy to recover, it will be more expensive to build houses in a booming economy than when house prices are cheap and costs have fallen. There was an oversupply of housing and there were general constraints on public finances and, notwithstanding those things, we did reduce our capital expenditure too much, as we have subsequently found out.

Is it fair to say that, considering forecasts for the coming years, funding must be almost double what it is now, given that our supply is so sparse?

Dr. Robert Sweeney

That would be fair. It is for the Government to forecast because it is pulling the policy strings, but we need an increase. The Economic and Social Research Institute, ESRI, for instance, is calling for a doubling of capital expenditure for public housing output and I certainly support that because we have such supply constraints in our housing market at the moment.

Does Dr. Sweeney have any input to funding models? He will tell me he does not set policy but it would seem very clear from what he has presented so far that all of the expenditure under these schemes is yielding nothing in return, including the fact we do not have homes to house people. What I mean is that a vast amount of money is being spent with no return. Would we not be better with a policy that would see homes built in some shape or form? Social housing is now an asset to the Government, as opposed to something that just funds private landlords.

Dr. Robert Sweeney

That is absolutely true. The advantage of the housing assistance payment, HAP, and the other schemes was that it was very quick to set up whereas it takes time to scale up local authority building. It is not good value for money to rely on what are essentially transfers to private landlords. Reliance on these schemes is not an efficient use of public funds and it would be better to build new units, as analysis by the Department of Public Expenditure and Reform has shown. That was also shown by an analysis by the architect, Mel Reynolds. In 2017, he compared how much it costs to build social housing directly with relying on HAP. He calculated, based on 2017 figures, that the State monthly payments, when he took everything in, were approximately €400 greater under HAP than direct build. We are absolutely better off building new units than relying on the transfer system.

I thank our witness for joining us today and for his presentation. I certainly feel the HAP programme for struggling tenants, where the State subsidises rising rents through direct payments to the private rental market, is not value for money. Since its introduction, we have seen the scheme bloom. Dr. Sweeney earlier mentioned that more than 50,000 people avail of the scheme and that is evidence of its blooming.

I was surprised no reference was made in Dr. Sweeney's presentation to the thresholds that are applied to applicants for social housing under the housing assistance regulation. There is a maximum threshold in Mayo and I am sure that threshold is much higher in the Dublin region. I think the threshold for couples is €26,000. That means a whole cohort of people who are earning €30,000 do not qualify for social housing and cannot get access to a mortgage. In other words, these applicants are too wealthy to avail of housing assistance and too poor to get a mortgage from their banks. Am I correct in saying income limits are set by the Department and not by the council? What concerns does TASC have with regard to the many people who do not qualify because of these income thresholds? I would like to get Dr. Sweeney's thoughts on that.

Dr. Robert Sweeney

I mentioned in my presentation that the thresholds, the rent limits, have not been changed. As to who sets them, I understand it is the Government but I am not clear on whether that is the Government in conjunction with local authorities. As I said, the thresholds have not been changed since the most recent round that was introduced in 2017, based on the second quarter of 2016. Rents have obviously increased a lot since then. I referenced the fact that many households are now topping up their HAP to private landlords. For instance, Threshold did a survey in conjunction with the Society of St. Vincent de Paul in 2019 and found that 48% of HAP tenants are paying top-ups to their landlords. Under the HAP scheme, local authorities allow tenants to pay top-ups to their private landlords but, in general, that is not supposed to be in excess of 30% of their net income, so their total housing expense should not be more than 30% of their net income. The Threshold survey found 20% of people who are paying top-ups were paying more than 30% of their income. There appears to be an issue there in terms of the thresholds not keeping pace with rising rent expenses.

Figures from the Department of Public Expenditure and Reform showed only 28% of tenants are paying top-ups. Let us say that between 28% and 48% of tenants are paying top-ups. I agree with the Deputy that there are affordability issues for people on the HAP scheme despite the fact there has been an increase in funding for HAP in recent years. The funding is in line with the projections made by Rebuilding Ireland but I take the Deputy's point that it is not sufficient for many households.

I come from a rural constituency and the real issue is we have seen a considerable shift of people from urban centres to rural areas because they have access to remote working.

That certainly accelerated during the pandemic, meaning they are competing with people on lower incomes and who want to access the rental market. The rents themselves now have been driven up. It is now hard to get access to good housing. It is a difficult situation seen in more towns and villages.

The solution is to build up supply in our housing stock to get people into more secure tenure within the social housing network. The State subsidising tenants and paying private landlords is not the way forward. It is not sustainable in the long term. I thank Dr. Sweeney for his presentation.

There is a long-standing commitment to look at the eligibility criteria used for income grounds and qualification to housing waiting lists. The Department of Housing, Local Government and Heritage issues the limits for HAP. The local authorities do not have discretion except with the risk of homelessness. Rent assistance is with Department of Social Protection.

Deputy MacSharry asked me to pass on his apologies to the committee today. I thank Dr. Sweeney for his presentation. Much research has gone into it and it is welcome. How many existing tenancies remain under the rent supplement scheme? From my experience RAS was better than the rent supplement scheme. HAP was also better than RAS. There are flaws and there is an over-reliance on each of those schemes. With rent supplement, I was aware of some tenancies falling into arrears for various reasons at the time. Does Dr. Sweeney have a breakdown of the number of tenancies that fell into arrears which were in receipt of rent supplement?

Dr. Robert Sweeney

The short answer is "No". I do not have the figures for the number of people on rent supplement or the number of those in arrears on rent supplement. I can have a look to find those and bring them to the committee.

Regarding the merits of each, there are good and bad points. For instance, there were criticisms of rent supplement in terms of the ability of people to take up full-time work. That is not so much the case with RAS and HAP because you are allowed to take up full-time work on those schemes. There is not that barrier that if you work 30 hours or more, you cannot take up full-time work.

One of the advantages of RAS over HAP is that the local authority has greater responsibility to source housing for the tenant, including when the tenancy is terminated by the landlord. With HAP, it is the responsibility of the tenant to find that accommodation himself or herself. One of the stated advantages of HAP is that the quality of the accommodation will be higher. As we have a long social housing waiting list, it is not straightforward for a local authority to find accommodation for someone through RAS.

Does Dr. Sweeney have figures from his research for the number of landlords who have exited RAS since its inception and to the point when it will be phased out?

Dr. Robert Sweeney

I do not have those numbers. It is envisaged that RAS will be phased out as HAP is scaled up. Many HAP residents have gone from rent supplement to HAP. I understand not many have gone from RAS to HAP.

I compliment Dr. Sweeney again on his presentation. For the committee, the figures are quite startling and the money spent is enormous. Does he have a figure for the number of people who availed of each of the schemes broken down by local authority across the country? Does he have a breakdown of the cost of running those schemes versus the cost of construction during a similar period?

Dr. Robert Sweeney

I do not have the breakdown by local authority in front of me. I mentioned that the architect Mel Reynolds has done a breakdown of the cost of HAP versus direct local authority build. According to his calculations, it costs the State €450 more per month to support tenancies through HAP compared with direct build. Those are 2017 figures.

The Department of Public Expenditure and Reform has done some numbers as well comparing the various schemes. According to its figures, local authority construction is the cheapest way to deliver houses in the Dublin area compared with RAS and HAP. Generally, HAP is more expensive than RAS. That changes when you go outside of Dublin. There is less of a difference between the expense-----

I apologise for cutting across but my time is limited. I presume that is because of that top-up that so many people have to avail of in the Dublin region, given the price of properties. Does Dr. Sweeney have any data on the numbers availing of the top-up to avail of rent support in the Dublin region or in other major population centres?

Dr. Robert Sweeney

There are two types of top-ups. One involves the tenant paying directly to the private landlord. The other type is where the local authority pays. It exceeds the thresholds. There are two ways of exceeding those thresholds. Generally, they only have discretion in a certain number of cases to exceed those thresholds by 20%. In some cases, where the family has been homeless and in the Dublin area, those thresholds can be exceeded by 50%.

I have the relevant figure on the proportion of HAP tenancies that are exceeded by 20%, and it is 28.3%. The proportion of HAP tenancies that avail of the 50% uplift is 10%, essentially. In total, almost 40% of local authority tenancies are availing of those uplifts.

I know I was asking Dr. Sweeney for additional information. It would be greatly appreciated if he could furnish the committee with any other information he might have. I thank him for appearing before us today.

The next contributor is Deputy Munster. I am calling the contributors in the order they are showing on my screen. Deputy Devlin made the point that members are not being called in the order in which they indicated, but I am calling them in the order in which they appear on my screen. That is by way of explanation.

That might help to explain it. Dr. Sweeney spoke about the number of current HAP tenancies. I have departmental figures relating to May 2020. The total HAP tenancies in May 2020 was 59,821. That is quite significant. I presume it has increased since then. The figures were broken down by individual local authority area. For Dr. Sweeney's own knowledge, the figure had increased to almost 60,000 tenants.

Looking at the number of additional households that are supported by HAP each year and the associated cost, there seems to be a decreasing yield on moneys spent. There was an increase in the spend of €42 million in 2016 for, I believe, 12,000 new places. It amounted to an average cost of around €3,482 per person, per year. The additional €78 million that is provided for this year will work out at around €5,200 per person for 15,000 people. That amounts to a doubling in the subsidy, when nationally we have seen rent increase by over 25% since 2017 alone. In my own constituency in Louth, for example, in quarter 1 of 2017 the average rent for a three-bedroom house was €977 per month, with the cost over the same period this year being around €1,230. That is an increase of nearly 26%. Is it the case that Dr. Sweeney sees this money as being an increased spend aimed at resolving the issues in the housing market or does he believe these subsidies to private landlords are having a role in driving up rental prices?

Dr. Robert Sweeney

I am not sure they have a role in driving up rental prices. Ultimately, the increase in rental prices has been driven by an underlying lack of supply in the market. Obviously, by availing of HAP, the amount of money that low-income households are able to spend increases, so there might be some small factor there in terms of driving up prices. Essentially, the Government is creating a demand for rental accommodation that low-income households would not be able to create on their own. However, the underlying factor is there are not enough houses being built. It could be argued there is an opportunity cost in respect of the amount of money the Government is spending on supports. If that money was spent on building houses, it would alleviate some of the rental price pressures. Of course, we need the temporary measures such as HAP until we scale up the building of public housing.

In terms of the reduced yields, rents have risen significantly in recent years, but the proportion of rent the HAP tenant pays to the local authority is based on his or her ability to pay. For instance, in 2016, the tenant paid about 28% of the total payment. That figure fell slightly in 2019 to around 26%. There has been some attempt to maintain the fact the tenant payment is based on his or her income and the local authority is taking up most of the slack in respect of the rising rents. Still, the tenants are paying more over time, but the local authorities do appear to be taking up most of that slack.

The HAP contract concluded between the local authority and the tenant sets out the HAP payment per month for the accommodation or the property and the HAP contribution for the tenant. Nowhere in the contract is the cost of the rent taken into account. That was a bone of contention for me when HAP was introduced back in 2014. It is as if we do not need to know the reality. Dr. Sweeney mentioned the percentage of HAP tenants paying top-ups. I believe he stated it was around 28%. I can guarantee that it is much higher than that. Even outside of Dublin, in places like counties Louth and Meath, the top-up that tenants have to pay can be as much as 40%. It leaves them put to the pin of their collars.

In respect of the HAP contract, does Dr. Sweeney believe the rental cost of the property is being excluded from the contract deliberately? The contract gives the impression it is setting out the cost of the rent for the property, even though local authorities and, indeed, the Government know fine well it does not set out the cost of the rent. Happy days if it was. What does Dr. Sweeney think about the fact the contracts exclude the reality of pricing?

Dr. Robert Sweeney

In relation to the amount of people availing of top-ups, I have stated the figure ranges from 28% to 48%. The figures are supplied by Threshold. It did a survey in 2019, according to which the figure was 48%. It may well have increased since that period.

I do not really have a view on why the cost of the rent is not included in the HAP contract. Obviously, if people are paying an increasing amount of top-ups, that would raise questions about the contracts and their sufficiency.

And value for money?

Dr. Robert Sweeney

Yes.

People often talk about how their parents purchased their house in their 20s. Now there are people who are in their 30s and even their 40s who are unable to secure home ownership. The average term of a mortgage loan is 20 to 25 years. There are people who are now in their 40s and retirement age is 65, or it could be 67 if the Government gets its way. Are we effectively working towards a deadline in respect of the housing that is available? For example, will an entire generation be locked out of home ownership for good if they are not presented with a realistic opportunity to buy in the next decade? Will that be the next crisis that we will face?

Dr. Robert Sweeney

There do seem to be problems down the road. The average age of a first-time buyer has increased over time. I believe it is currently 34, compared with 29 in the 2000s. There is an increasing number of people in their 40s and 50s who are renting, perhaps, because they could never afford to purchase a property or because of a relationship breakdown and so on. This will be a problem in the years to come if we do not begin to address our housing problems today.

Renting is not necessarily bad, if we have a functional rental system. Currently, rents in the Dublin area in particular are not affordable or stable and tenants are open to eviction where a landlord proposes to sell a property or to move some of his or her family into it. I am not necessarily opposed to having a high proportion of our population renting if we have a good rental system, which is affordable and meets high standards and provides security.

The Deputy's time has expired. Time permitting, I will allow her back in.

I thank the witness for his presentation. I want to focus on cost rental and where the opportunities lie in that regard. Cost rental is a measure in which the State, up to now, has not engaged, but it is a feature of various models throughout Europe? Where do the opportunities lie for the State?

Dr. Robert Sweeney

Under the cost rental model it is envisaged that the rent will essentially cover the costs of building and maintaining the property. The National Economic and Social Council, NESC, has been advocating for a cost rental model for a number of years. In terms of roll-out, the local authority or approved housing body would build the house and the tenant would pay rent which is sufficient to cover the cost. In the case of approved housing bodies in particular, some would have to borrow to build the housing and the rent would have to be sufficient to cover that cost. To be honest, I have not done a huge amount of work on the cost rental model, but it seems a way to proceed going forward. The system we have now for social housing is very much oriented towards low-income households. I would like to see a situation where it is not just the poorest of the poor who can avail of public housing. A cost rental model would be a way of doing that. The rent paid would be based on a person's income.

I agree with Dr. Sweeney's final remarks, particularly in regard to those people for whom affordability is an ongoing challenge and for those who are in professions and on a fixed income. For example, a primary school teacher will stay within a particular pay bracket and need certainty around housing, in particular duration of tenancy. This is a big part of the affordable housing Bill that is currently on the table and a large part of the Land Development Agency model. In my own area in Shankill, planning permission granted for 600 homes provides that a chunk of those houses will be used for the cost rental model. In terms of where the opportunity lies, I would be interested in taking up with Dr. Sweeney another time if it is around providing certainty to people in regard to rent, which is the cost of build plus the cost of management, but not profit. That differential enables the State to build more and to retain the asset in perpetuity and thus there will be available stock over time. The other advantage is the ability to provide long leases, be that five or ten-year leases, which will provide certainty to people that they will not be subject to eviction or rent increases and also access to homes for those over the social housing threshold, people on fixed incomes and at pension stage, who have made changes to their lives. I appreciate this is not a matter which Dr. Sweeney expected to be raised today, but I just wanted to get his perspective on it. There is so much more to the affordable housing Bill.

Dr. Robert Sweeney

I agree with everything the Deputy said, in particular that that should be a policy going forward. I understand there have been a number of pilots in that area. I would like to see it scaled up.

Deputy Hourigan has asked that her apologies be noted. I would like to pose a number of questions. If any member would like to come back in, he or she should raise a hand and I will call him or her in the order indicated on my screen.

I recall very well the debate in the House on the introduction of the housing assistance payment, HAP, when it was stated that unless it was accompanied by a significant house building programme it would absorb large amounts of money in perpetuity. We are seeing that now.

In the chart provided by Dr. Sweeney, he sets out percentages. Does he have the figures in terms of the finances, as opposed to the percentages, on HAP? I am seeking the actual spend on homelessness and the other key areas.

Dr. Robert Sweeney

In 2019, we spent a little over €1 billion on current expenditure. The spend on HAP is approximately 36% of that amount. I do not have the figures in front of me, but the spend on HAP is approximately €400 million.

When we are told that the spend is €3.5 billion, HAP is a component of that spend. Am I correct that the more the HAP spend grows, the less we have to spend on direct build?

Dr. Robert Sweeney

Yes. As I mentioned, we needed a measure like HAP to address the emergency need while we built more houses. The spend on HAP takes from the investment in social housing. It will be an ongoing expense over the next five to ten years that will add to the Exchequer expenditure, but over the longer term there will be savings from it. As I mentioned, it is not an efficient way of addressing housing need. Interest rates are very low so now is a great time to build.

The local authority completions and acquisitions are relatively similar for 2015, 2016, 2017, 2018 and 2019. We do not yet have the figures for 2020 which, owing to the pandemic, are likely to be lower. I understand total output was approximately 21,000, a component of which was local authority build. We can get those figures. The figures for 2015 to 2019 are low when one considers the growth in demand or the requirement in terms of the other schemes. Dr. Sweeney spoke about completions and acquisitions. Increasingly, I am seeing acquisitions of whole estates as turnkey. Did Dr. Sweeney investigate the cost of direct build versus acquisitions?

Dr. Robert Sweeney

No. I have not done that.

That is okay. I can do that myself. In terms of the capital spend, rents are increasing right across the country by incredible amounts. In Maynooth last week we saw that some of the houses that were acquired by a developer are likely to be somewhere in the region of €1,900 to €2,000 a month. That is an incredible amount of money and very unaffordable for most. That puts people on HAP outside of the option of renting them because once there is a limit on HAP people are not be permitted to rent what might be available beyond a certain figure. Is it not the case that it becomes more cost efficient in that scenario to build?

Dr. Robert Sweeney

Absolutely. The Government's or at least the Department's economic evaluation service has done some analysis on the cost to the State of building versus supporting tenancies through HAP or RAS. It differs from jurisdiction to jurisdiction - from local authority to local authority - but as I mentioned once or twice already, in the Dublin area where the affordability pressure is most acute, the savings are the biggest there in terms of the local authority building versus RAS or HAP. As I indicated, interest rates are very low so there has never been a better time to scale up our building of public housing.

The rent for a tenancy must be notified to the Residential Tenancies Board, RTB, so we know what the rents are in an area but given the top-ups, are we getting a very distorted picture? I am aware of some of the top-up amounts. We have all seen them. They have been a feature for some time. When the rent supplement limits were lowered after the crash to try to keep rents down, top-ups started to be a feature and they have been a feature since then. Do we really get an accurate picture of rent?

We probably all see scenarios where there is a queue for a rental property. If HAP is involved, the local authority must approve it and inspect a premises. There is not automatic approval, so there is a time delay for someone getting HAP and it means that a landlord will take a person with cash in hand, who is possibly offering two months deposit and rent for one or even two months in advance. It is becoming much more difficult for people on HAP to get accommodation and not just because of the limit. Are rents distorted by top-ups? Are we really seeing the full picture?

Dr. Robert Sweeney

There seems to be some uncertainty as to how much households are paying in top-ups. I mentioned already that the Department's figures are 28% but a survey by Threshold suggested that 48% of HAP tenancies are topping up and that many of them are topping up such that their total housing expense is in excess of 30% of their net income, which it should not be.

In terms of the distortionary effects, basically, landlords will accept or demand a top-up because they are able to do so. Essentially, it is a landlords' market. It is because of the lack of supply of rental accommodation relative to the demand that landlords are able to extract high levels of top-ups. It is more that there is insufficient supply relative to demand that is causing the distortion and the ability of landlords to demand top-ups. They would not demand them if they were not able to get higher rents or equivalent rents elsewhere. If a landlord was not able to get as good a tenant from his or her perspective in terms of the amount of rent paid, then he or she would not demand a top-up. I would see the distortion of top-ups, if one wants to call it that, as being more due to an underlying lack of supply rather than the top-ups themselves being the cause of the supply problem.

The €1 billion in current spending is constant, so if we have a €3.5 billion budget for housing it is really €2.5 billion. Is it the case that it is a growing number as rents are going up?

Dr. Robert Sweeney

Yes, current expenditure is growing and that appears to be driven by the increase in the number of people availing of housing supports. Rising rents are a factor as well. As capital expenditure is increased, hopefully we would see current expenditure decline, but it really depends on how much capital expenditure is scaled up and if it is done at the scale that is needed.

I do not see any other indications from members that they wish to speak, so I remind them to put up their hand if they want to ask further questions.

Dr. Sweeney mentioned the substantial difference in long leases. There have been lease agreements right through from 2009. We can see the numbers he has provided us with on the top line of the first chart. However, there is a substantial difference now in local authorities long leasing. Dr. Sweeney mentioned something about them being more expensive. Could he elaborate on that?

Dr. Robert Sweeney

Yes. The Government's economic evaluation service examined the cost of providing accommodation. The cheapest way in the Dublin area is local authority construction, whether that is two-bedroom or three-bedroom. Long-term leases are significantly more expensive. In terms of a hierarchy in the Dublin area, the most efficient way is local authority construction, then local authority acquisition and then long-term leasing, which is significantly more expensive than that. HAP is typically more expensive still than the leasing scheme.

Even if we do not have an asset at the end.

Dr. Robert Sweeney

Yes. According to the figures of the economic evaluation service.

I do not see any other Member wishing to contribute. I thank Dr. Sweeney for joining us today, for providing us with that information and taking questions. That will be helpful in advance of our meeting with the Department of Housing, Local Government and Heritage.

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

I thank Dr. Sweeney for his contribution today. The committee will meet again at 9.30 a.m. on Tuesday, 25 May.

The witness withdrew.
The committee adjourned at 11 a.m. until 9.30 a.m. on Tuesday, 25 May 2021.
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