Cost Rental Housing Model: Discussion

During this session we will consider the cost rental housing model. On behalf of the committee I welcome Dr. Tom Healy and Mr. Paul Goldrick-Kelly from the Nevin Economic Research Institute; Dr. Larry O'Connell and Mr. Noel Cahill from the National Economic and Social Council; and Ms Eilish Comerford, Dr. John Bissett and Ms Rita Fagan from Saint Michael's Estate regeneration team.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence they give to the committee. However, if they are directed by the committee to cease giving evidence in relation to a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable.

Members are 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 now invite Dr. Tom Healy to make his opening statement.

Dr. Tom Healy

Gabhaim buíochas as an gcuireadh seo chun labhairt leis an gcoiste. I thank the committee for this opportunity to speak briefly, along with my colleague Mr. Paul Goldrick-Kelly from the Nevin Economic Research Institute, NERI.

I will begin by acknowledging that the term and concept of cost rental has become very popular, widely used and, it seems, widely supported by all sides in the debate about housing. This is why it is very important that we are clear what it is that we are talking about. Our understanding of cost rental housing, which is elaborated in our own research, is that it is an arrangement whereby anyone can avail of secure, quality, rented accommodation in a way that covers the full cost of such accommodation but avoids inclusion of a profit margin in the overall cost of renting.

I will explain briefly what it does not mean.

First, it does not mean that every individual couple or family necessarily pays the same rent everywhere for the same type of accommodation. Second, cost rental is not the same as social housing which typically refers to public housing for those who cannot afford housing otherwise. The third misunderstanding is that cost rental is some sort of new idea that is, on its own, the answer to the housing crisis. The fourth misunderstanding is that in some way a cost rental arrangement is a way of getting around EUROSTAT and Central Statistics Office, CSO, rules and interpretations of Government debt and expenditure. If that were the main reason for cost rental, it would be a bad idea.

Let me deal with the first point that cost rental is an arrangement as we understand it in use in a number of European countries. We would be glad to expand on that when we take questions later. It involves covering the full cost of site acquisition, design, building and long-term maintenance. In our proposal we envisage that cost rental would be undertaken by a single national commercial, public enterprise body. It would exclude the principle of a profit margin which can vary from 10% to 15%, if not more, of the final sale price of a house depending on location and circumstances. A single national agency operating such a scheme would have the benefit of pooling scarce resources and expertise. We know there is such a scarcity, as the activity in the construction industry is picking up. It would also give people access to affordable rents, pitched sufficiently high to cover the total cost and sufficiently low as to be affordable and below going market rates, especially, but not exclusively, in the greater Dublin area.

Cost rental is a departure, which makes it a bit difficult for people to understand. We think naturally about local authority-led initiatives in social housing. Local authorities have a statutory obligation to provide social housing - I would prefer the term "public housing" - and that needs to be continued and maintained. What we are proposing could complement the efforts of the local authorities to expand and accelerate greatly the output of affordable housing, for example, through leasing arrangements with a new public enterprise body tasked with long-term, secure, high-quality rented accommodation.

There is a demand for accommodation from many different quarters and groups, including families and individuals, those who may be temporarily working in Ireland, and those who may be thinking about coming to Ireland but not quite sure where to get affordable accommodation. Unlike in Germany, Austria, the Netherlands and many other European countries, we are not used to the idea of a long-term quality rental sector. There is a cultural shift that will take time and require careful design and preparation.

Such a model would have the benefit in the long term of stabilising the Irish housing market. It would take time, but it would help to regularise the supply of housing during periods of bust, which is very typical in the construction industry internationally but especially in Ireland. Having stable funding and a public agency tasked with provision would enable us to regulate the supply of housing better in the long term. It also has the potential to calm the markets and put some downward pressure on rents where there is considerable excess demand, especially in some urban areas.

It would give choice to people. Not everyone wants to buy a home and many people can never afford to buy a home. There are many people in their 40s and 50s looking to retirement and are nervous about the affordability of accommodation if for one reason or another they are not on what we call the property ladder.

My final point relates to being on the books or off the books. It has almost become an art form for us ask EUROSTAT and the CSO how we could design something so that we could get it off the books. That is not the right question. The right approach is to establish the sensible thing economically and socially, and then see if it is possible to do this in a way that is off the books, in other words, not counted as general Government expenditure and debt. There are ways and models for doing this in other European countries which we are happy to expand on. Irrespective of whether it is on the books or of the books, an initial injection of equity and capital is undoubtedly required from the Exchequer. This obviously requires some lead-in time. The degree of urgency for housing is such that we need to scale up and accelerate the process quite considerably. We would be happy to take any questions or develop these points further as members wish.

Dr. Larry O'Connell

I thank the Chairman and members of the committee for inviting the National Economic and Social Council, NESC, to speak on the cost rental housing model. NESC is a Government body which advises the Taoiseach on strategic policy issues. The members are appointed by the Taoiseach and represent business and employers, trade unions, agricultural and farming organisations, community and voluntary organisations, environmental organisations, as well as heads of Departments and independent experts. Its composition means it plays an important and unique role in bringing different perspectives from civil society together with Government. Noel Cahill and I are members of the secretariat and are attending in that capacity.

The committee has asked us to provide an overview of the council’s position on cost rental. We will draw on two published reports and have brought copies of each. The council has argued for a range of measures to help engineer affordability in housing. Its most recent report identified that land in public ownership is the most critical resource available to the State and recommended its use for permanently affordable housing. It argues that cost rental would represent one good way of using public land. In that report the council argues that the State could retain ownership of the land and make it available subject to rents being permanently affordable.

International experience suggests that cost rental is the most effective and fiscally sustainable way of achieving permanent affordability in housing. It is also the best way to achieve integrated mixed income housing, in contrast to the residual housing of low-income families. This is explained in our 2014 report on social housing.

The basic idea of cost rental is that a housing provider raises the finance to provide accommodation and charges rents to cover current and capital costs. In those systems internationally, those who cannot afford to pay the cost-covering rent generally receive a housing support. Rents in a cost rental situation will generally be lower than market rents. Typically there is some form of subsidy by way of provision of low-cost finance, loan guarantees or preferential access to land.

The lower rent is partly but not solely due to the subsidisation provided. Rents are not based on the maximum that the market will bear, but are sufficient to cover costs net of the subsidy. Over time the rents in cost rental accommodation may increase, but critically any increase will lag the increase in market rents. This has some similarity to paying a mortgage. Cost renting may involve pooling the historical costs of individual dwellings across a large housing stock.

Cost rental uses modest supply side supports to underpin affordability. It also makes rent permanently affordable by ensuring that the equity that builds up over time as loans are repaid is used in the service of further affordable housing.

Austria is a leading international example of how cost rental housing is a critical component of an effective, affordable and stable housing system. It provides extensive but modest supply side subsidies for housing, mainly in the form of low cost finance. New social housing is mainly provided by limited profit housing associations that operate on a cost rental basis. They receive low interest Government loans which represent around one third of the total cost of housing. In Vienna they also benefit from access to land at a moderate cost. As a result, they charge rents to cover their costs and they are well below the market level.

In principle, all social housing in Ireland could be based on a cost rental model. It is a long-term possibility. In the short term a cost rental model could be initiated as an addition to the current model. It could be aimed at intermediate households that are struggling in the rental market but that are either ineligible for social housing or unlikely to be allocated it. Such housing could also be availed of by lower income tenants using the HAP scheme. Cost rental housing should be provided by a housing entity that has a mission to permanently provide affordable and socially integrated housing, rather than extract the full market value of its assets, or by an entity that has a legal duty to so. It could also be provided by a private provider, subject to such conditions in return for an element of a State subsidy.

The NESC has argued that cost rental accommodation would be an alternative to renting in the private sector. In the long term it would help to moderate rents in the private sector. As cost rental accommodation is less heavily subsidised compared to the current social housing model in which rents are very low, it can become a larger sector which can cater for a wider range of people. Cost rental accommodation is a realistic and secure long-term option, quite different from the current system. It offers a way of making housing affordable, is more fiscally sustainable and will in time bring much needed stability to the housing system.

Ms Eilish Comerford

On behalf of the St. Michael’s Estate regeneration team from Inchicore in Dublin 8, I thank the joint committee for giving me this opportunity to address members.

St. Michael’s Estate tegeneration team was set up in 2001. Its membership comprises local residents, local community projects, volunteers and a worker from the canal communities local drugs and alcohol task force. St. Michael’s Estate was a local authority flat complex located in Inchicore in the Dublin South Central constituency. There were 346 local authority homes on the site which was designated for regeneration in 1998. To date, only two phases have been completed, with 175 new replacement homes being built as part of two separate schemes on adjacent sites. Currently, it is a 10 acre site ready for development. Since 2002 there have been three proposed plans for the estate, the first of which was to have been publicly funded, but it was rejected by the then Department of Environment in 2004. A city council driven plan, which provided for a large density, followed it, but it was rejected in 2005 by the local community and all 52 city councillors. It was followed a public private partnership, PPP, model which was foisted on the community and collapsed spectacularly in 2008. Following the collapse of the PPP model, the community gathered and fought and secured funds to develop a scheme of 75 state-of-the art-homes, the Thornton Heights housing scheme, which was completed in 2014. We believe the current Department of Housing, Planning and Local Government and Dublin City Council’s proposed plan under the housing lands initiative is a give-away to private developers. The developer will gain the maximum benefit from that type of development and we oppose this model. Instead we are proposing that a cost rental model be used to provide the housing and facilities. St. Michael's Estate can be a pilot scheme for a radical and workable solution to the housing issues plaguing Ireland.

Our arguments in favour of a cost rental model for St. Michael’s Estate are based on three principles, namely, meeting housing need, reducing housing costs, providing real affordable housing and the promotion of long-term housing and community sustainability. The land in St. Michael's Estate is publicly owned and ought to remain in public ownership and be used for the public good. A cost rental model would create the conditions to have a real mix of income and household types which would create more sustainable communities. Local people could live in affordable rental accommodation in their own areas. It would also allow people to live near the city, as is the case in Vienna. It would relieve the pressure and burden experienced by those stuck in the unregulated private rental sector and offer another option other than taking out a life-long mortgage which subjects people to life-long debt. As the experts have told the meeting, it would pay for itself over time, would be crash-proof and take housing out of the hands of vulture funds. A cost rental model has been discussed in Government policy documents, including A Programme for a Partnership Government, Rebuilding Ireland and Social Housing 2020.

What we want for St. Michael’s Estate is a publicly funded development to be built on this public land such that 300 homes would be built as part of a pilot cost rental model on the site. Community facilities and amenities should be budgeted for and built as part of the development. If we want communities to work, it makes sense to build them first to enable the people of Inchicore to have a benefit from the scheme from the very beginning. The tenure mix should be 150 households which would come from the social housing waiting list and that would pay differential rent, as they do now. The other 150 households would qualify from a new list created for those with incomes above the current threshold for social housing. The overall cost would be between €55 and €60 million. We are asking the committee to advocate that this funding be ringfenced in the budget. The financial outlay on the scheme would be recouped over a period of 30 to 40 years on the basis of rental revenue received from tenants.

As legislators and policy makers, we urge members to seek workable and imaginative solutions to the housing crisis. St. Michael’s Estate offers such a unique opportunity to begin a process of radical change in housing provision in Ireland.

I thank Ms Comerford.

I thank the delegates for their presentations. It is very interesting to hear the range of views of the three groups.

I will begin with Dr. Tom Healy. His presentation was very succinct and he helped to explain the cost rental concept. It makes a lot of sense. He spoke about the housing market, the culture in Ireland of owning property and the changes we see happening because of demographic growth. The recession is over for the moment. Dr. Healy referred to the boom-bust cycle in the construction industry. From his experience of the cost rental sector and the evidence in other countries, how does he see it being introduced in Ireland? There is no doubt that we are in a housing crisis. The issues are felt across the board, including the lack of supply and affordability. There is a lack of public and social housing. There is, therefore, a real need for a housing model that would meet demand and the model Dr. Healy has outlined is potentially a good one that might be accelerated to tackle the crisis. What could be done to accelerate it, given the cultural difficulties?

There are vacant and derelict sites across the country. When we refer to a cost rental model, does it apply to new builds only or might local authorities adapt vacant and derelict sites to meet it?

With regard to the presentation made by the St. Michael's Estate regeneration team, we hear that it is a community that has hit barriers. Given what the group is stating, how can its request be accelerated during a housing crisis to make it happen? The speakers referred to the private rental market and the vultures. We need to get away from this frenzy of people buying properties speculatively which fuelled the bubble we saw in the past and from which we should have learned. Given Dr. Healy's experience, how can we avoid the bubble expanding with a system such as this that would create exactly what he said, a quality, long-term, secure rental sector that we need in this country?

I thank the delegates for their presentations. I read Dr. Healy's opening statement, as I was slightly delayed at a meeting held prior to this one. I welcome our friends from St. Michael's Estate, whom I have met on a couple of occasions with my colleague, Senator Catherine Ardagh. I will refer specifically to them.

I want to ask about the cost rental model. It has been outlined clearly how it would work. What is the view on the policy response to it? There is no question, but it is part of the solution. As my colleague, Senator Grace O'Sullivan said, we are in the middle of a housing crisis, as we have known for a number of years. There are 3,008 ha of zoned, serviced land, owned by the State, including St. Michael's Estate. I have visited many other such sites, for example, on Oscar Traynor Road, the glass bottle site and O'Devanney Gardens where work on only 58 home has been started, although 600 families lived there previously. We need to raise the level of ambition and get some momentum behind the building programme.

What would the delegates like to see happen if they were in charge? We have heard about the cost rental model and that there will be a pilot scheme, but it has not yet started. We are no further down the line four or five years on. The reason people buy instead of renting is security. It is as simple as that. That is why people enter into lifetime debt and long mortgages if they can. It is because they at least feel they own it and cannot be turfed out. We must break that mindset and ensure the cost of renting is reasonable and that there is security of tenure. We see people in the private rental market becoming homeless because it is not secure. That is why people aspire to buy. If Dr. Healy and his colleagues were in charge, how quickly would they roll out this model?

To follow on from Senator Grace O'Sullivan’s comment, can existing stock be retrofitted and have the model applied to it? We have discussed the matter as a committee. I visited a number of sites in Dublin Central the week before last on which there were hundreds of boarded up units that were listed for refurbishment by the city council. They are not included in void lists because they are due for regeneration. I was in a place on Constitution Hill where there were three generations of a family living in a two-bedroom flat, yet on the first floor of the building, there were 12 flats boarded up. People say they would do them up themselves if they were given the tools. We are caught up in regulation and over-complicating the delivery of housing. Given the hundreds of units I saw in one constituency alone that were boarded up, could they be retrofitted to have such a system rolled out?

I thank Ms Comerford for her presentation and note that Deputy Joan Collins is present. At the group's request, a number of us wrote recently to the Minister for Housing, Planning and Local Government, Deputy Eoghan Murphy, to seek a meeting with him. We have not yet had a response, but he agreed verbally to have a meeting. St. Michael's Estate should be the first because we need to show that redevelopment and regeneration are happening somewhere because they are not happening in any of the flagship developments, for want of a better phrase, such as O'Devanney Gardens. We made a call on a cross-party basis for funding for public housing on that land. We were very clear about it and Fianna Fáil supports it. We want to make sure that after years of disappointment and the project being delayed time after time, we will push for the development of St. Michael's Estate. I commend the group's members for the work they are doing. With Deputy Joan Collins and others, I hope we can meet the Minister next week. Although the Dáil is due to rise for the summer, we will still be around and want to push for funding for St. Michael’s Estate in the budget which must be a housing budget. It will be my focus and that of my party to ensure it will deliver in that regard. Since we met previously, have the members had any contact with the Department of Housing, Planning and Local Government on the redevelopment plans for St. Michael's Estate?

I welcome Ms Comerford, Mr. Bissett and Ms Fagan. It is rotten that the community has to come here to seek a meeting with the Minister for Housing, Planning and Local Government and put forward its own proposals when it has been let down on many occasions. The group is coming forward with its own proposals. I can understand why it considers the model it has put forward to be much better than the private model.

We need to have a major discussion on the cost rental system. The kernel of the problem is that we have a private rental market that is dominating the housing system. People have been allowed to profiteer, while public housing has consistently been allowed to run down and there was no provision during the period of the bailout, in particular. We have had many discussions at this committee. There is an ideological problem because we have a block whereby public housing is not being promoted. We recently received a report from Mr. Mel Reynolds which showed that we could build 114,000 dwellings on public land owned by either local authorities or NAMA and that the biggest hoarders of land in the State were local authorities. That is scandalous. Why are we not pinpointing it? In my area Fingal County Council could build 18,000 houses. It is one of the biggest local authorities sitting on land. It seems that some local authorities are even hiding their land and not declaring it, as reported on RTÉ last week. It is not the case that we have the land and not the money because we do have the money. There is not as much left as we would like, but there is at least €4 billion in the Ireland Strategic Investment Fund which used to be the National Pensions Reserve Fund. It is being doled out for small private developments and to private businesses, but the most strategic need is for housing. The money could be used to build public housing.

One of the problems is the EU fiscal rules. There was talk about the need for spending to be off or on the books. It seems that algorithms are being used to circumvent the rules. In Damastown in my area plans for a mixed development were put forward because we would all like communities to have a variety of people. We do not want to have monocultural estates. It could be done in different ways and that is what we need to discuss. There is a burning need for social housing. There is a need for an affordable mortgage scheme for those who do not qualify for social housing and cannot buy anything in the private market.

There is a need for an affordable rental scheme, such as that to which reference has been made. There are many young people, as well as middle aged and older people, who are being fleeced and whose lives are being damaged. They would like to rent and then move on. In Britain, one used to be able to have a council flat and then move on to something else.

There are different ways whereby a mix could be achieved. We could increase the council income threshold for eligibility, which is ridiculously low at the moment. I have heard from bus workers who do not qualify. When I grew up on an estate, everybody had jobs like that so there is a problem and it should not go uncriticised by the council.

I understand the scheme but I also understand that cost rental is now being pushed because it is fiscally sustainable, according to the report by Dr. Healy. We must retrieve the cost but Dr. Healy said that, in general, rents should be below market rate. Experience in other countries suggest the level should be between 70% and 80% of the market rate. That is much better than what people have to pay at present but even 70% or 80% of the market rate is not affordable in Dublin right now. In my area, rents are €2,000 and €2,200 and I am sure it is even worse in the city. Between 70% and 80% of that is still a lot. If the aim is to retrieve the money straight away, we have a problem.

There was a report last week on breaching the differential rent scheme and there is a campaign to get people in social housing to pay a lot more. They are comparing their rents with what others are paying and are trying to divide people in this way. It is important to maintain the differential rent scheme. The problem is that it is possible to have two people - living either next door to or across the road from each other but in the same scheme - and one is paying a differential rent and the other is paying perhaps €900. We need to demand a Government that breaches the EU fiscal rules and builds housing, with affordable mortgages and affordable rental for young and old people as well as social housing. I would be happy to help the witnesses in any way in this regard.

I have an issue with cost rental being pushed by some people who see it as a way of bypassing the public system. The housing situation is getting worse and I do not think it is just because the Minister is hapless. It is a policy decision and housing is not a priority. We have to demand that public housing is built and any rules which block that need to be ended.

I welcome the presentations. I read some of these reports well over a year ago and it is frustrating to see how long it takes to get anything done. Dr. Healy referred to the question of whether something was on the balance sheet or off it but we have come so far in the housing crisis that we would look at anything that might be a solution. This offers an off-balance sheet model that could be sustainable in the long term.

We need to talk about public housing, and not social housing. This offers all of society an opportunity for a home because it goes way beyond the current social housing schemes. If we apply a differential scheme, the State will only pick up the difference so the model has huge potential. It would get over the issue of income limits because the rate would be based on a person's income. Both models propose a national body to manage it.

Dr. Kelly said that capital reserves would need to be built up. However, the credit unions have €700 million that they are waiting to invest in something such as this. The solutions are out there but they are not being delivered on, and that is frustrating.

I am an advocate of the cost-rental model, which Dr. Healy put forward two years ago, because it could be a game changer for our society. We should not get hung up on whether it is on the balance sheet or off it. We have to get the concept out there. We should not differentiate between social housing and cost rental - it should all be public housing. A person should be allowed onto a social housing list whether he or she earns less than or more than €42,000. It is important not to have divisions such as this in communities and there should be no NIMBYism about which people should be allowed to live in a community.

St. Michael's Estate is an example of how this can work. It is important that we get behind the St. Michael's Estate campaign for public housing on public lands because we have had reports that there is land for the OPW and the local authority to build 114,000 houses. We have to get the message out to the broader community. The regeneration team has been fighting for 20 years for proper housing, which would be for people in the community and not those from outside. They are not going to be houses for €340,000 or €400,000, which very few in my community in Inchicore could afford. What emphasis is the regeneration team putting on the role of amenities in the proposal? It was suggested that the amenities be built first.

The witnesses, including those from NERI and Dr. Healy, have all played a very important role in respect of this issue. The NESC report on cost rental has been hugely influential. Inchicore should be the first large-scale example of its deployment. We have a small project in Enniskerry but it is not big enough in scale. There is potential for this to change our entire housing model and if we can get the Inchicore site done it will be hugely important. It is so obvious because everyone agrees that the system of subsidising rental is not working. It is incredibly expensive and maintains a divided and ineffective housing market and rental model.

I was very glad that our motion supporting cost rental passed with all-party support in the Dáil earlier this year. What is frustrating, however, is that the Department has been so slow, even though the Minister is making noises that suggest he agrees and despite the fact that it is in the programme for Government.

The inability to translate that outward support for a concept into effective action is deeply frustrating.

While the Minister states that he is talking to the EIB and has one or two projects in mind, we should be thinking of ten or 20 projects, not just in Dublin but also in other cities. We should start in Inchicore within a matter of weeks and secure the necessary support for the capital funding to have a working model. I know the site well. It is located ideally close to the centre and meets all the national objectives in terms of restoring life to the core and creating diverse communities whose members can live close to work and schools. My simple message is that this is crying out to be done. I commend Inchicore and, in particular, Ms Comerford, Ms Fagan and Mr. Bissett on showing such leadership. The State must respond to make this happen. The NESC report presents the economic analysis that gives us confidence that this is the right thing to do. I am deeply frustrated that it has not been turned into reality on a scale required to deal with the housing crisis in this city.

Dr. Tom Healy

There were a lot of questions. I will try to deal with them as quickly as possible. The first related to how long this would take and how it would be done in light of the culture that exists. The culture is very much that people should buy their own homes and that if they are renting long term in the local authority sector, they should have the right to buy their own homes. That is something we will have to rethink, as is the idea that a sprawling, low-density city is still possible and feasible. Paris city would fit well within the perimeters of our M50 and families can live there without the need, necessarily, for private transport. There are public facilities and services. I am not saying it is easy for people to live in those sorts of cities, but it is possible. There is an excellent public transport system of course.

The problem right now is that houses and apartments are being built in all sorts of places well outside Dublin. While there is nothing wrong with that, one has to ask where the commuter trains, extra tracks, bus corridors and other facilities, including medical and educational, are. Water is a major issue in parts of north County Dublin. It may be connected to recent new housing developments, I do not know, but there is clearly a need to look at all these things in the round. That is where local authorities and other public agencies have a crucial role to play. The housing needs of asset fund managers are not the top social priority right now in Ireland, but we should take note that 55% of asset fund managers polled recently in the UK said they were preparing to redomicile to the Republic of Ireland within five years of Brexit. One might ask what that has to do with Inchicore, the East Wall or Ringsend, but, in fact, it is a significant issue because it will place huge upward pressure on the demand for accommodation in Dublin city areas.

To get to the point, in our proposal on cost rental, we suggest the establishment of a single entity to be called the "Housing Company of Ireland". It could, of course, could be called any number of things. This company would sit beside and outside general government at central and local level and could do the work of designing, commissioning, building and maintaining services over time. It would gradually build up in terms of new builds as well as in terms of converting existing property also. The potential for the latter is limited, but it is there, in particular in some urban areas. The point touched on by the people from NESC is that this is a potential game changer. However, that does not mean it can happen overnight. It will take five, ten, 15 or even 20 years of cultural shift. We have to realise that we are grappling with 40 years of bad social policy, starting with the sidelining of the Kenny report in 1974 and the implications that has had for land values and land management over four decades, the dropping of a modest proposal to tax vacant sites in the 2014 budget and the policy of gradual withdrawal of the public sphere from housing. This problem did not begin in 2008, rather it goes back to at least the mid-1980s when, mirroring developments in the UK, local authorities withdrew significantly from the supply of housing. We need to unravel those unwise policy choices, which will take time.

I will comment briefly on the question of affordability raised by Deputy Coppinger. This is important. Clearly, we are not suggesting one single rent level for everyone. There is a possibility, which my colleague Mr. Goldrick-Kelly can discuss further, of cross-subsidisation whereby families with higher incomes could pay a somewhat higher rent level, still below the market rate. That would enable other families or individuals to pay a bit less. It is undoubtedly the case, however, that some form of subsidy would be required for households on very low or modest incomes. It would be a better use, frankly, of the housing assistance payment to apply it for that purpose than to continue with the existing arrangement where the Exchequer is, in effect, subsidising private landlords in a market that is out of control.

May I intervene? I have to leave in ten minutes. It is very interesting to hear Dr. Healy say that it should still have a bearing on the person's income.

Ms Rita Fagan

We really appreciate being here because we do not often get to sit at tables like this to discuss large policies and models. I come from a local authority flat complex. Like any other community, people go out to work and pay rent. They do not get their accommodation for free as the prejudice out there suggests. People pay according to the income coming into the home. A lot of our communities have been prejudiced by what is said about them but like many public communities, they live quietly alongside others. For nearly 20 years, St. Michael's Estate has been involved in the battle for homes. The management of the estate was removed. I have been a community worker on the estate for 30 years. When we think about the big picture, we have to support estate management in communities, whether it is cost rental or no rent. That is an element that was taken away and the drugs then took over the city. In the long run, people could not take any more because everyone else, including the police, had pulled out. We lost a publicly-owned, very rich piece of land in the city with 346 homes and 1,500 people on it. If we had gone with the first plan that we sat down on, people would be living in their homes now. Ideology came into it, which meant public private partnerships.

We fought very hard and we have had to change our minds on cost rental and to realise that the land is very valuable. If we were calling for public housing on it, we probably would not get it. We have seen through the work of Mr. Bissett and Ms Comerford in other places that cost rental is a whole other model to consider in seeking to have some public housing and accommodation for others who cannot get mortgages.

We have shifted towards that. After 20 years, the State has a moral duty to build on the site a good and sustainable community that has facilities, green spaces and 300 homes, giving people a chance to have a home. The Chairman might say that I have gone off topic, but we should be building public housing. There should also be new models. Young people who have been exposed to Europe or have travelled know that there are ways other than mortgages.

We have valuable land. The Constitution was mentioned. Many of the communities that have been red marked were poor people living on valuable land. We urge the committee to consider supporting the cost rental model for St. Michael's Estate, given its facilities and green land.

Ms Eilish Comerford

Deputy O'Brien asked whether the Minister for Housing, Planning and Local Government had responded to us. We met him a few weeks ago and put our case to him. He told us that he would get in touch and probably visit the site to have a conversation with us, but nothing has happened. In fairness, we need to follow that up ourselves with a request.

The frustrating thing is that we have been waiting 20 years for the vacant site in Inchicore to be developed. The cost rental model is attractive for us because some people on the waiting list have been there for 11 years and are getting nowhere. They find it difficult to get private accommodation. The monthly rent for private accommodation in Inchicore is €1,600. People have to move out of their area. There are also people who are just above the income threshold, so they do not qualify for social housing, but they want to live in the Inchicore area in Dublin 8 near the city centre. A new state-of-the-art children's hospital is being developed on James's Street, which is ten minutes away on the Luas. If we do not have affordable accommodation, we will probably not attract people to work in the hospital. The idea of the model's cross-subsidisation is to make housing affordable so that most of someone's income is not spent on accommodation, leaving him or her little else to spend on anything else.

The schemes under Dublin City Council's housing land initiative could result in private development. Many people cannot afford to take our mortgages. They do not even qualify for mortgages. Prices are so high in Dublin that people cannot even afford to buy under the affordable housing scheme. That results in people being in situations where, if they get sick or lose their jobs, they may lose their homes. We must consider other solutions.

We need leadership in government. In the past 20 years, a new Inchicore primary care centre and a sports complex have been built and Richmond Barracks was redeveloped, but only 175 homes have been built. Something is wrong in the housing sector if we cannot get this right. We are asking the Government to show leadership. We welcome the cross-party support for this campaign. We urge committee members to table a motion on ring-fencing funding for this project and to do whatever it takes to implement this model at St. Michael's estate.

Regarding Deputy Coppinger's point, we support public housing and it should continue to be resourced alongside this model. We would be happy to meet the Deputy at any time she likes.

I thank Ms Comerford.

Dr. John Bissett

I thank the committee for the invitation. A few points struck me. It is important not to forget that the housing issue has to be tied to the issue of economic equality. When we discuss the sliding scales of possible rental structures within the cost rental model, the ideal situation would see no income differentials between people. There is significant economic inequality between groups in this country, so we need to consider this matter seriously. It is not the housing that creates the economic inequality. Rather, the housing reflects the economic inequality. Our public housing system is not essential in and of itself and has not just manifested somehow. It is purely a reflection of the inequalities that exist within society. What we get in the public housing sector at the moment is a particular class of people who are clearly defined and demarcated on the basis of income. We should aim for a radical reduction of income and wealth inequalities across society. That would aid us phenomenally in changing how our housing structure looks. We are doomed to repeat mistake after mistake if people continue to be poor living in public housing. To use the dreaded word "holistic", the State cannot divorce housing policy from issues of economic inequality. They have to be addressed together.

I ask the committee members to think, please, about how they will deal with this question as legislators. I would challenge them on whether they have an interest in it and believe it is important, given that the State seems to believe it is not important, that economic inequality can continue regardless and we can have a society that is based on class and gender axes and is increasingly divided racially, given that poorer immigrant communities now live on the fringes of the city in high-rent private accommodation. This is a fundamental issue.

Home ownership has been engineered through policy decisions. Dr. Conor McCabe's book, Sins of the Father, describes how housing policy was manufactured in Ireland in the 1940s, 1950s and 1960s just as it was manufactured in other countries. Large capitalist organisations saw housing as the mechanism for wealth extraction and capital investment. They continue to view it as a mechanism for wealth extraction.

The thrust of the cost rental model is to make housing a public good. I take Deputy Coppinger's point. Ms Comerford and I are involved in a group called Housing Action Now. We do not just want to see this done on a local level in St. Michael's Estate, crucial as that is. Rather, we want to see it done at a national level. Given that we view housing on a European level as well, we are also involved in the European action coalition for housing.

At the national level, it is critical that we be able to meet the scale of our housing problem. Housing policy and Rebuilding Ireland have failed. They are not doing what they are supposed to do. The reason for this is that the current Administration still believes that the market has all of the solutions to the problem, but it does not. The State will have to make an intervention. Within the field of power that is politics, one Administration will be replaced by another because people know that the scale of society's housing crisis is problematic for them. The State has to respond at some level. The market does not have the solutions.

Regarding home ownership, a significant number of people in mortgage debt are at risk of repossession due to the housing policies that caused and drove the previous crisis. As such, it is not as simple as saying that home ownership is still the way to go. Using St. Michael's Estate as an example, the idea behind the cost rental model is to change our housing system and policy.

During the crash, and as outlined in the NERI paper - other people have given presentations at St. Michael's Estate - the Austrian housing system continued building sustainable blocks of housing year on year because the state was geared up to deliver its housing policy and meet need. We need a sustainable housing policy. It does not take much common sense to work out that leaving it all to the extraction of wealth from the housing system will be problematic. The consequences of that policy can be seen everywhere.

I wish to clarify one or two points because I did not speak in the first round. This is cross-party and we normally take the politics out of this committee to get houses built, but I did sit at the national economic dialogue all day where we had various stakeholders across many different sectors and then there was the break-out session for housing and housing delivery. The commonality that was around that table was not to touch policy now because it is working. While it has taken time to get to the point where it is now, they are starting to see those indicators of commencement orders, houses being built and local authorities having targets and the funding to do it, although that has taken time, but they are saying that those indicators are moving in the right direction. I am not disagreeing with anything that was said. I am just putting that out because that is what came from the national economic dialogue. Local authorities have applied for funding for delivery, the procurement process has been changed from eight stages to four stages and other streamlining has happened.

I understand the frustration with St. Michael's Estate and, while everything is being put in place to make things happen, the complexities around that are very frustrating and I accept that. We have to get it right. This is taxpayer's money so it has to be invested in the right manner. Otherwise it would be a misuse of taxpayer's money. There are ongoing negotiations nearing finalisation with St. Michael's Estate and we will bring back the comments about the Minister and the Department visiting the site.

Did Dr. O'Connell wish to come in?

Dr. Larry O'Connell

I will make an overarching remark to begin. The NESC has made it very clear in terms of international evidence that the market does not provide for more than 60-70% of people's housing needs anywhere. It is not just in Ireland. Every country finds itself having to intervene proactively in the market to cater for the housing needs of society. The recent NESC report makes it clear that such intervention cannot just be arm's length. It needs to be much more proactive in terms of engaging on the land issue. In the view of NESC, that is clearly required in the direction of policy.

On the issue of cost rental, I sometimes think of it as akin to talking about a start-up. We have a rental model that is a single type of provider. All of the market rental is provided by a profit-oriented business model. We are trying to encourage a new business model with cost rental. That will lead to a very disruptive change which will make the market more balanced in the end in that there will be competing providers making very different offerings. If a disruptive technology like that is being talked about, any start-up needs support, such as from Enterprise Ireland, to get off the ground. Once it gets off the ground, we have seen, as Deputy Eamon Ryan has pointed out and when the international economic model is looked at, that it can be sustainable. In the start-up phase, however, there are issues and difficulties that have to be resolved, and Deputy Coppinger referred to some of those, such as how the levels of rent would be set, how its connection with existing rental payment systems would be worked out, how the fact that rent may still not be affordable for people is dealt with, and other policy interventions may be required in such cases to make cost rental affordable. Those issues need to be worked out. I am not in a position in any way to comment on Government policy and I will not be an apologist for it but it is a fact that some of those issues have to be worked out and that modelling needs to take place. It is my understanding that such work is under way.

A certain amount can be done to model those exercises, look at the literature and work out what needs to be done. If progress is going to be made, however, and a recent NESC report is clear on this, then projects are the key to doing it. It is heartening for us to see that the policy system receptive to it now, and Mr. Cahill has been one of the people championing cost rental for many years, but it is fantastic to hear of a project coming from St. Michael's Estate and a group which is looking at this and saying it can see how this can work. To move forward on this will require many projects. That will work out some of the remaining issues and that is the key to working forward. We believe that there is an appetite now within the system for cost rental and that it is accepted. To resolve some of the issues, modelling will be required but in the end it will require projects to make progress.

Does Mr. Cahill wish to come in?

Mr. Noel Cahill

I will comment briefly. On how we might get started with cost rental, in the first instance, a local authority which has land would be in the position to do some cost rental developments. The issue of being on or off the books has slowed things up too much. There would be benefits if an entity could be created formally outside the government sector. One of the benefits would relate to the economic cycle. When recessions come, there is invariably pressure to cut spending. In the Austrian case, however, cost rental providers have continued to build during recessions, something that has been facilitated by the fact that the entities are formally outside of government. One could start with local authorities but ideally cost rental would be done with other entities such as a public body that operated on a somewhat commercial basis, but there are various models.

Does Mr. Goldrick-Kelly wish to come in?

Mr. Paul Goldrick-Kelly

I will make a short intervention reiterating what has been said, but there is an overarching aspect to this in that what would be a game changer is the idea of an integrated market. The key here is that the cost rental model would enter into the market as a large enough player that it would influence developments elsewhere. Private sector, for-profit providers would have to respond to rents set in this cost rental model. It would act not simply to house people on current lists, which is undoubtedly important, but also act to stabilise the market as a whole and prevent these swings back and forth. That would influence the question of profitability or percentage of market rent. This system itself would enter into the setting of market rent. Markets would have to respond to the rents in the cost rental sector.

It should be seen as an intervention with many facets. There is the intermediate term of housing people who need to be housed, and that is crucial, and the issue of supply, but there is the longer-term issue of having a housing market that is stable over time and is not subject to these swings which we have seen.

I will bring in Deputy Pat Casey and Deputy Eamon Ryan for 30 seconds each because we are well over time. I will be a stickler on that.

Ireland has a social housing stock in or around 9%. If we are to move to the cost rental and public housing model, what percentage of the housing market does Dr. O'Connell think the State should control, either through a housing company of Ireland or directly through the State which would have a sustainable balancing factor on the market?

On the model itself, I am not sure how long Austria has the cost rental model, but as soon as the loan and finance costs are paid, I assume that the rent does not come down and that the money is reinvested. Is that reinvested in replacement of stock or in a combination of replacement stock and-or bringing the cost of renting down even further? That is why I am not too sure exactly how long Austria has that system in place. Is that the vision Dr. O'Connell sees because the big cost in all of this is the finance cost? If we start this today, in 20 years an entire cost and expense will have been removed, but yet, I assume that the tenant will not get an 80% reduction in the rent. Something that might happen there is that it is reinvested into replenishing the supply and-or subsidising rent moving forward.

I was also at the national economic dialogue and, in the discussions I had and in some of the public forum discussions, I heard many people calling for a cost rental model. I accept that more housing has been built but it is still a fraction of what we need. It is not a party political point when I say that I fundamentally disagree that we need to leave things as they are. We need a radical change in our housing policy. What Dr. Healy said about the mistakes of the past 40 years is so true and I do not see us changing. This is not a numbers game. It is about changing society. Dr. O'Connell is right that we must test it and learn from our mistakes, but we need ten projects and not one or two. We need St. Michael's by all means, but we need ten projects. If we do not do it now, the horse will have bolted. This is when we have the money, the growth and the population to cater for. If we are not willing to reform and do things differently, my children will grow up in a society where the same housing crisis and issues will come back and this will have been a missed opportunity. I must register a completely different view on the desire for radical change at scale.

I know Deputy Ryan was not at that break-out session, but I am just relaying what was said by some who are professionals in this area, including approved housing bodies, the Construction Industry Federation, An Taisce, chartered surveyors and the Royal Institute of the Architects of Ireland. I am just relaying the commonality. These are people who work in the sector. With regard to the housing summit and licensing agreements, where we have State-owned land or lands with more than 100 units, 23 initiatives are under way for delivery on licensing agreements. There are many pieces to this and cost rental is one of them. I believe cost rental is a huge piece of the solution to the crisis. I commend those involved with St. Michael's Estate on their commitment to the regeneration of the site and I wish them the very best of luck. I do not know whether anybody wants to come back in on any particular comments to finish up.

Dr. Larry O'Connell

With regard to the number of projects, NESC calls for an ambitious programme of flagship projects and not just one. We can provide further details on how rents have changed in Austria. There would be a drop at the end of the line, and it is very important with regard to pensions that people's rents do not stay high. There is a programme of reinvestment and the rents stay stable. At the point when somebody reaches retirement, one would hope the rents would drop and would be significantly lower. Mr. Cahill will comment on the composition.

Ms Rita Fagan

The maintenance of any community is very important. When things are let run down, they change.

The cost rental model includes a maintenance fee within it, which is vital. It is what has been lacking in local authorities.

Mr. Noel Cahill

With regard to the size of the sector, we did not put on number on it. A number of European countries have approximately 20% or more than 20% social housing. The highest share of social housing I am aware of in a European country is the Netherlands, where it is approximately one third. Here, it needs to be substantially higher than it is at present. Over time, we would be looking to get to 20%, including existing social housing. With regard to what happens to rent in the long term, it will generally be the case that surpluses build up and they become the equity which can be used to fund some of the cost of new developments. Austria has a feature whereby, in the very long run, there is a massive fall in rents. There are reasons for and against it. It is more common that it does not fall massively. The funding can be used for new development and refurbishment.

I thank all of our witnesses for coming in today. As ever with housing, we would love more time but we have a voting block coming up in the Chamber. I thank all of the witnesses for attending today and for the information they have shared with us.

Before we finish up I wish our clerk, Fiona Cashin, the very best. She is not going on maternity leave just yet but this is her last committee meeting. She will be hugely missed because she is a tremendous asset to the committee. She has been vital to the delivery of many reports on issues we have been trying to proceed with. I wish her and her partner all the very best for the future. She will only be dying to get back in here to get a bit of rest. She might come back in here to get a bit of sleep when she has a newborn.

The joint committee adjourned at 12.26 p.m. until 9.30 a.m. on Wednesday, 19 September 2018.