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.