This Government is fully committed to implementing a new Cost Rental sector in Ireland. Significant progress has already been made through the Enniskerry Road pilot project supported by Serviced Sites Funding, the new Cost Rental Equity Loan (CREL) scheme, and through legislative provisions in the Affordable Housing Bill 2021, which was recently approved by Government and is now published. Our approach to Cost Rental has been modelled on similar successful models elsewhere in Europe.
Cost Rental homes will be governed in line with provisions in the forthcoming Affordable Housing Bill, which defines Cost Rental in Ireland for the first time and will regulate tenancies in which rents only cover clearly defined costs. The Bill sets out how 'financing costs' are an element of the overall cost of delivery to be covered by rents, and that this category includes both interest on debt funding and also a limited return on any equity investment. While the precise figure for this limit on equity return will be set in Regulations, it is intended that it will be informed by the moderate return permitted for Limited Profit Housing Associations in other jurisdictions where the model operates very successfully.
Delivery of Cost Rental is expected to be through public and charitable bodies initially - Local Authorities, the Land Development Agency (LDA), and AHBs. It is also expected that State resources will support this initial delivery. In particular, AHBs will utilise the CREL scheme administered by my Department and the Housing Agency, together with loans on more commercial terms from the Housing Finance Agency. Allowance for a limited return on equity will permit AHBs and the LDA to invest their own funds in a sustainable manner, receiving a small return through rents and growing their resources.
While past experience has shown the difficulties in designing a Government policy intervention to be delivered 'off-balance sheet', the legislation has been drafted so as not to prohibit private sector involvement in future years. Some element of private investment may help to deliver Cost Rental at large scale in high-cost locations, in the context of limited Exchequer resources and the difficulties of securing reasonably-priced finance when projects are largely or wholly debt-funded. Although equity returns will regulated and limited, there may be interest from non-State investors able to take a long-term view or with a particular emphasis on environmental, social, and corporate governance (ESG) factors.
If a private body is willing to commit to making homes available within the Cost Rental framework for a period of at least 30-40 years, such additional provision at no cost to the State would be positive. Private sector providers would be limited to the same allowable costs as Local Authorities, the LDA, and AHBs, with the same limited return on any equity investment. A private body would also be subject to the same Regulations, which will include the application process for landlords, eligibility criteria for tenants, mandatory elements of tenancy agreements, and an auditing process under which landlords must retain records and supply them to the Minister on request.
