I thank the Cathaoirleach and members of the committee for their invitation to update it today on some of the social housing initiatives with which the NDFA is assisting the Department of Housing, Planning and Local Government, which I will refer to here as the Department.
I am director of the NDFA and a member of the executive management team of the NTMA. I joined the NTMA in August of this year.
I am accompanied this morning by Paul O’Neill, who is a finance sector head at the NDFA and has responsibility for a number of the sectors including housing.
The NDFA is the statutory financial adviser to State bodies in respect of all public capital investment projects of scale. In our advisory role, the NDFA provides a number of services including financial robustness testing, tender assessment and advice on optimum forms of funding. The NDFA also has a broader responsibility for the procurement and delivery of PPP projects other than those in the transport sector. We have a mix of skill sets within the team ranging from financial advisory, to construction, engineering, design and project management. We have built up significant experience over the past 15 years across a range of large-scale infrastructure projects in education, justice, health, tourism, transport and energy. In addition to project delivery, we also have an active role in monitoring the operations of a significant number of PPP schemes in the State.
The committee has asked me to focus on three topics relating to social housing delivery: public private partnerships, PPPs; land initiatives; and enhanced leasing.
On the first of these, PPPs, our role is extensive and includes assisting the Department and the relevant local authorities with planning, design, risk transfer, procurement and delivery. From the moment the projects are handed over to us by the Secretary General of the Department, we are formally accountable to procure these projects within a defined set of parameters, including budgetary and technical specifications. Upon completion of construction, the projects are then formally handed back to the Department, local authorities or both. I should say at the outset that the NDFA has a limited role in respect of the second and third topics that the committee has asked us to comment on, namely land initiatives and enhanced leasing. I will explain this later but will first focus on PPPs. The Government has approved three social housing schemes which will provide approximately 1,500 homes. Two of the three schemes under this initiative are in procurement.
The first scheme, social housing bundle 1, is being co-ordinated by Dublin City Council on behalf of five local authorities, and comprises six sites across counties Louth, Dublin, Kildare and Wicklow. In total, this scheme - a summary of which is included in the slides of the supporting document submitted to the Committee - encompasses 534 homes for social housing. By way of update, following a competitive tender process, a preferred bidder for this scheme, named Comhar, was selected in September 2018 and comprises a consortium of the following companies: Sisk Construction, which will be primarily responsible for the construction work; Oaklee and Choice Housing, which will be responsible for tenancy management and maintaining the homes over the life of the scheme, being 25 years post construction; Macquarie, which is involved as an independent provider of equity to the project; and the debt providers which are expected to include the European Investment Bank and Bank of Ireland. As is normal in a PPP structure, the State is not required to pay any moneys during construction. When the homes are delivered and made available to the intended beneficiaries, then the State will make monthly unitary payments over the 25-year life of the project to pay for the upfront cost of the assets and for the ongoing maintenance. At the end of the 25-year contract, the State fully owns these social homes. Construction is expected to begin on this scheme in the first quarter of 2019 with all homes to be completed in 2020.
The second scheme, social housing bundle 2, is currently being tendered with fully costed bids due to be received on 1 February 2019. There are four bidders in this process: the three bidders from the first scheme and one additional consortium. As for bundle 1, all bidding consortia include a mixture of experienced contractors and approved housing bodies. This scheme is being co-ordinated by Cork County Council and involves eight sites across the six counties of Cork, Galway, Clare, Waterford, Roscommon and Kildare. In total this scheme involves 465 homes for social housing. We anticipate that construction will commence in the third quarter of 2019 and all homes will be completed by 2021.
The third scheme, social housing bundle 3, is at pre-procurement. In September, the Department identified a Long List of 14 potential sites. The NDFA has completed a high-level technical suitability assessment of these sites. Once the list is finalised by the Department in consultation with the local authorities, the NDFA, along the other partners, will become engaged to help drive design, planning, procurement and delivery.
I have provided more detailed information in the supporting documentation on the timelines for bundles 1 and 2. As with any large-scale public infrastructure, the timelines are considerable. The main reasons for this are that the process of selecting sites and bringing them through site preparation, design and planning takes a significant period of time. The public procurement process, which can only commence once these processes are completed, also has set timelines which must be adhered to, both for legal reasons and in order to ensure robust competitive proposals are obtained.
Equally relevant is that this is the first time the Department and local authorities have been involved in PPPs in the housing sector which has involved significant upfront work by all parties. However, there is now a good framework in place and in the short term we expect it to create efficiencies in the third bundle and future delivery. In the longer term this new channel for procuring social housing could run alongside other methods of delivery and provide additionality, something that has not been available to us in the past decade.
I am aware of the ongoing debate about PPPs and value for money. The submission of robust competitive proposals is paramount in ensuring value for money is delivered to the taxpayer. Like all PPPs, the NDFA procures on behalf of State bodies and follows Department of Finance and Department of Public Expenditure and Reform guidelines on value for money. The private sector tenders must demonstrate value for money against the public sector benchmark, being the estimated cost of undertaking the project in question on a traditional basis. The guidelines are being followed in the social housing PPP programme. Best practice and current practice is to disclose further details of value for money at the appropriate time following contract award. This has happened across the education and transport sectors, as it will in the case of social housing.
The NDFA is working in an advisory capacity with various local authorities throughout the country to assist them in procuring mixed tenure developments on sites that they own. Our primary role is to provide advice on financial matters and tender assessment. Local authorities identify suitable sites and specify the tenure mix they require, that is, the breakdown between social, affordable and private homes. They go to tender in seeking bids for the delivery of housing based on the tenure mix specified. At the end of construction, the social houses are owned by the local authorities. A list of schemes on which we are assisting is included in slide No. 4 in the supporting documentation. The most progressed of the schemes is in Kilcarbery in south County Dublin. South Dublin County Council has selected a preferred tenderer and expects to sign a development agreement with this party in the next two months. Once the development agreement is signed, the preferred tenderer will apply for planning permission. Under the scheme it is envisaged to provide 975 homes, of which 30% will be social housing. On the basis of sites of which we are aware, the land initiative scheme has the potential to cumulatively deliver 6,500 new homes, of which approximately 1,500 will be social housing. However, it should be noted that all of the schemes still require planning permission and financing.
As mentioned, the role of the NDFA in enhanced leasing is limited. Our involvement to date has primarily been in obtaining market soundings on behalf of the Department and providing advice on the form of the lease to be offered. The scheme is being administered by the Housing Agency on behalf of the Department. The Housing Agency is responsible for the evaluation of submissions, selection of candidates and evaluation of market rents in conjunction with the local authorities. Our primary role in social housing provision is in respect of the three PPP bundles, with the first of the schemes expected to start construction in the first quarter of 2019.