I thank the committee for the opportunity to make a presentation today. We forwarded our submission to the committee a week ago, so I will try to summarise the key points and messages we wish to communicate in the context of the wider brief that was requested by the committee of Circle Voluntary Housing Association and the other approved bodies.
Circle VHA is an approved housing association with certified status from the Housing Finance Agency, HFA. We are looking at this issue from our perspective as an approved housing provider. The housing policy statement in 2011 was very important and significant in terms of how it communicated the paradigm of housing and the inequality between the different housing tenures. It was also significant in stating that approved housing bodies should have a lead role in the provision of social housing. We welcome it in that context. It was a forthright recognition of our role and of what we aspire to be in terms of delivering social housing for those who cannot afford it.
Since that policy statement was issued in 2011 the housing market has continued to evolve. It is very volatile. The structure and tenure of housing type have changed in the last ten years since the boom and from our perspective there should be a national policy and plan for housing, embracing all tenures and recognising the variation within urban areas, between urban areas and between rural and urban areas. It is a complex, changing market, but our policies have not adjusted to those changes. There is currently an under-supply of housing in urban areas and an over-supply of housing in non-urban areas. That is a real challenge for everybody.
We must also work in the context of reduced capital budgets. All approved housing bodies have been affected by that. The Department has tried to switch us from a 100% capital grant regime to a loan finance regime, where we get an average 20% CALF - capital advance leasing facility - grant from the Government and must secure 80% private finance. That is an extreme challenge for the sector. It is not that the Circle VHA is against that policy in principle, but the context in which we are expected to apply it in a very short period of time. In other European countries such as Holland and the United Kingdom it has taken 15 to 20 years for that policy to evolve with the ratio of capital grant and private finance. It is therefore very hard for us to address housing need. That is a key fundamental message.
The Department of the Environment, Community and Local Government had the Housing Agency undertake a review of the CALF, the capital loan finance policy which gives us a loan grant, at 2%, to procure. It is repayable after the private loan finance is repaid via a revenue-based system of payment and availability. The agency conducted an internal review of it and tried to change from a net present value, NPV, ratio to an internal rate of return, IRR. It has a 3.6% return on capital.
We think the change to our ability to borrow private finance will not help us. It will make our chances of being able to acquire new units of accommodation or design and build unachievable. In our view the measure will affect our capacity to deliver new social housing units.
Another matter that is important currently, particularly in Dublin areas, is the lack of supply in housing in urban areas and increased rents in the private rented sector. This situation is having an adverse impact on families and single people presenting as homeless because rents have become unaffordable. Also, the Department of Social protection has a cap on the amount of rent contribution that people on low incomes can receive. Its rent policy and prices must be reviewed and we should adopt the German model which provides a return on housing of between 6% and 8%. The current inflation and bubble in property prices in Dublin and the private rented sector is also having a damaging consequence on housing need.
I have outlined our substantial points. We have given a response to the legislation planned by the Government, the housing miscellaneous provisions Bill. In broad principle, we welcome the broad proposals with regard to repossession procedures. We think the proposals are in line with the Supreme Court judgment in the case of Donegan v. Dublin City Council and the European Court of Human Rights.
The Department of the Environment, Community and Local Government wants the sector to come under the remit of the Private Residential Tenancies Board, which would be a big change for us. We are not greatly in favour of the legislation that was enacted by the Oireachtas this year and will come into force in the next 12 months. Having said that, we have adopted a pragmatic view. The PRTB is finding it difficult to deal with the problems presenting in landlord-tenant disputes. How will it have the capacity to address difficulties that emerge with the addition of 26,000 tenancies?
Another issue of note is the tenant purchase matter. It has been a policy of Governments over the past 40 years and longer that tenant purchase applies in local authority housing. Our view is that the sale of local authority housing diminishes the supply of available housing stock. Also, it is often applied to purchasers who are on low incomes, but they end up getting into difficulty when they cannot repay the loan. There is a real challenge regarding the matter.
There is a serious difficulty with the affordable homes scheme. For the past ten years a lot of people thought they could afford to buy units via the scheme but they have not been able to make loan repayments.
We welcome the housing assistance payment scheme in terms of its creation and the transfer of the rent allowance scheme from the Department of Social Protection to the Department of the Environment, Community and Local Government. Politicians have said that the scheme will enable a new provision of between €500 million and €600 million for housing each year. I believe it will change the paradigm of housing because local authorities will take responsibility. However, the scheme will maintain people in homes, so we do not oppose it in principle. The scheme should give local authorities a more strategic role, but the key issue is whether they have the capacity to deliver and inspect the quality of housing, because they have been poor on that to date.
I wish to say one more thing about the housing assistance scheme. There are 98,000 people on the national housing list, as assessed by the Department, and many of them are in private rented accommodation. If the rent allowance is paid by local authorities, arguably it will reduce the number of people on the waiting list, which is welcome. The scheme is meant to help people get over the poverty trap in which they are working but not receiving rent allowance, but there may be a negative consequence for approved housing bodies. Those who remain on the housing list will often be people who are unemployed. That may be a challenge for my sector and the local authority sector.