Dáil Éireann Debate, Thursday - 13 July 2017
2. Deputy Eoin Ó Broin asked the Minister for Housing, Planning, Community and Local Government his plans to ensure that no LIHAF funding will be released to developers that have not provided for a proportion of the units in their development to be sold at an affordable price that is less than €300,000 in Dublin and at appropriate levels elsewhere. [33571/17]
View answerI am looking for a very specific update on the roll-out of the local infrastructure housing activation fund and, in particular, what the affordability return for taxpayer money will be in specific developments. Will the Government and Department keep to the original proposal from last August that at least 40% of the units in each of these developments should come in at 10% below market price or could some developments have no affordable units in them at all, as the previous Minister, Deputy Coveney, seemed to suggest the last time he took questions?
The aim of the local infrastructure housing activation fund, LIHAF, is to relieve critical infrastructural blockages to enable the accelerated delivery of housing to address the shortage of supply in urban areas.
The Exchequer funding under LIHAF goes directly to the local authority which will procure the infrastructure through normal public procurement. The State receives a dividend in the form of accelerated housing supply once the blockage to development is removed, land for the infrastructure, as well as much-needed social housing under Part V. In seeking to secure improved affordability on private housing, it was initially proposed that a capped price point would be set on a percentage of the housing. However, it was subsequently recognised that setting a cap in 2016 for housing that would be developed up to 2021 and beyond was problematic and would have adversely impacted the commercial viability of some sites, with consequential negative impacts on overall supply.
Accordingly, a more proportionate way to recognise the contribution of LIHAF that will encourage housing supply and deliver an affordability dividend has been put in place. Two options are available to local authorities in seeking to reach agreements with developers, one which sets a minimum number of houses to be offered at 10% below market cost, including under €300,000 in Dublin, and a second option where a cost reduction related to the LIHAF contribution could be spread over the housing development as a whole.
This second option means a smaller reduction in price over a greater number of houses, giving more purchasers a potential saving, but not affecting the viability of the development and more accurately reflecting the contribution of LIHAF to reducing the overall costs of providing the new homes.
No drawdown of funding can occur by local authorities until cost-reduction commitments have been agreed and signed between the local authority and the developer. It is expected that all agreements will be finalised by the end of this month.
I thank the Minister. One of the questions I put to departmental officials in the committee two weeks ago was whether it would be possible for a development to secure LIHAF funding where there would be no affordability dividend in that development. The official said it could be possible. When we raised it with the former Minister for Housing, Planning, Community and Local Government, Deputy Coveney, previously he said that if there was no affordable dividend in the actual development, the money would not be released. I am asking the Minister the same question. If a local authority comes back, for example, in Cherrywood, and if despite the expenditure of €15 million of taxpayers' money none of the units there come in at below €300,000 which would be the minimum affordable criterion at a push, will the Minister give a commitment that the money will not be provided in such circumstances?
It remains to be seen what will be agreed by different local authorities in respect of the sites that are being developed or opened up thanks to the LIHAF funding. It is important that the local authorities use that funding to leverage as much affordability as they can. Obviously, there is optionality open to them.
Whether we are considering Cherrywood or any other site, we have to bear in mind exactly what proportion of money is being brought to bear by the Government relative to the overall amount of money that would be required to develop the site, how that money is being invested and what it will release for the community that will be there. The most important thing is that we are seeing new supply. The affordability commitment can and must be made. If LIHAF funding is being brought to bear on any development through a local authority to open up that new supply, there must be an additional affordability criterion above and beyond the existing Part V commitment under the development.
The problem is that supply in itself will not automatically guarantee affordability. I go back to the questions Deputy Cowen raised. Every time anybody in this House asks about affordable rental or affordable purchase, the answer is, "We're looking at models". The truth is that the Government does not have any models. I understand one project is about to be developed involving the Housing Agency and two approved housing bodies in Dún Laoghaire. That will be the first possible affordable rental model. However, I am hearing that the entry-level rent will not be anything close to affordable.
The difficulty will be that if €15 million of taxpayers' money is drawn down in a project such as Cherrywood and if none of those units comes in at below €300,000, people will rightly want to know if it is a good use of taxpayers' money. The Minister's answer is a little better than that given by his predecessor. It would help local authorities in their negotiations if the Minister says very clearly that if there is no affordability dividend with actual affordable units, then money will not be released.
We need to be clear when we talk about the purpose of the fund. LIHAF exists to facilitate investment by the local authorities of taxpayers' money to ensure pieces of land can be opened up for the development of housing. We need to bring that supply of housing online. We also have to cater for different price points. It goes back to a point that Deputy Boyd Barrett alluded to earlier in that if we can get people into homes they can afford to buy - whatever affordability means to them as an individual in terms of what they earn and the percentage of their income they are happy to put towards accommodation - and if it takes pressures of things like the rental market and off families who are struggling to find places to live at affordable rent, it has a knock-on effect throughout the system.
Affordability will depend on a number of different factors that input into the cost of construction, one of which is land. In certain parts of the city and the country, the land costs will be much higher and that will have an impact on the type of affordability that can be leveraged by the State in relation to that particular site. We have to look at this on a case-by-case basis in terms of the contracts local authorities are now finalising. Each of the different developments that are accessing LIHAF funding will be finalised towards the end of this month and they will then come to the Department to see what has been agreed.
