Committee of Public Accounts (PAC) finds spending on Housing schemes do not provide value for money for taxpayer and are not long-term solutions to social housing needs

In its Report on engagements with the Department of Housing, Local Government and Heritage, the Approved Housing Bodies Regulatory Authority, Home Building Finance Ireland, the Housing Agency, and the Residential Tenancies Board, PAC identifies key matters arising from the Committee’s engagements across 2022 and 2023 with the Department and the related Housing bodies.

Based on its analysis of the matters under examination during its engagements, the Committee highlights five issues and makes a total of 15 corresponding recommendations:

1. Oversight of, and expenditure on, the Housing Assistance Payment (HAP);
2. Lack of value-for-money from long-term leasing;
3. The absence of a breakdown of the cost of social housing bundles delivered through public-private partnerships (PPP);
4. The use of virements to transfer monies between subheads without prior formal sanction;
5. Shortfall in the delivery of new builds for social housing.

Deputy Brian Stanley, Cathaoirleach of the Committee of Public Accounts, said: “The Committee previously reported in 2021 that ‘the current level of spending on short-term housing supports such as HAP and RAS, and long-term leasing schemes through which the State does not acquire an asset at the end of the lease, does not represent value for money’. The Committee recommended at that time that the Department of Housing, Local Government and Heritage work to substantially reduce the annual expenditure on HAP from 2022 and instead focus on increasing capital expenditure on housing stock that will remain an asset of the State.

“However, expenditure on HAP only fell by less than €3 million from 2021 to 2022, with the overall expenditure on HAP amounting to €539 million in 2022. HAP expenditure was €537.4 million in 2023, while overall HAP expenditure from 2014 to 2023 was just under €3 billion. While it is clear that active HAP tenancies decreased in the years 2022 and 2023, this is not happening at a fast enough pace to result in significantly cutting expenditure on a scheme that does not result in value-for-money for the Exchequer.

“Almost 17,000 new households were supported by HAP in the same period. When new RAS households in that period are included, there were 19,500 new households supported by both schemes in 2022 and 2023. The Department still includes HAP and RAS tenancies in social housing delivery and the Committee does not consider HAP and RAS tenancies to be effective solutions to social housing delivery in terms of value for money.”

Deputy Stanley said: “The Committee reiterates its belief that the HAP scheme is not providing value-for-money. The Exchequer continues to fund the scheme to the tune of well over half a billion euro annually but the State at no point acquires the housing units supported by HAP. The State would receive rent for a unit within its own social housing stock – the State does not receive a cent back from the scheme. The Committee also questions the effectiveness of the scheme as a support for tenants, as many HAP tenants are making top-up payments.

“The Committee makes four recommendations to the Department on the HAP and RAS schemes. These include that the Department conducts and publishes an assessment of value-for-money from the HAP scheme, including a comparison of the value-for-money obtained from public-private partnerships, and its own build schemes; and that the Department uses all of its resources effectively to ensure that it meets its targets for new build social housing units, therefore ending dependency on the private market for meeting social housing needs.

Regarding the long-term leasing of housing units, Deputy Stanley said: “Long-term leases for the four Dublin local authorities alone amounts to 52% of the 3,831 long-term leases delivered from 2019 to Q3 2022. That proportion grows to 73.3% for the same period when the local authorities for Cork City, Kildare, Louth, Meath, and Wicklow are considered. The Committee is concerned that almost three-quarters of long-term leases have been delivered in areas where prices in the general property market are high, and therefore it is likely that construction or acquisition would be cheaper.”

In correspondence to the Committee in October 2023, the Department informed it that 6,382 long term leased units were supported under the Social Housing Current Expenditure Programme (SHCEP) at the end of Q2 2023, at an average annual cost of €14,402. These units will cost €360,050 on average over the lifetime of the 25-year lease.

“Deputy Stanley said: “The Committee calculates that the State will have spent approximately €2.3 billion (or €92 million annually) on the 6,382 units, should the full 25-year lease term be realised. The Committee views long-term leases as a costly short-term solution to the continual need for social housing, a solution whereby such homes do not become an asset of the State on completion of the lease. The Committee makes five recommendations in this area, including that the Department provides it by April 2025 with a value-for-money review of long-term leasing schemes, broken down by schemes managed by local authorities and Approved Housing Bodies, compared to the construction and/or acquisition of social housing.”

The Committee also questions the value-for-money achieved through expenditure of €639 million on a Public-Private Partnership (PPP) to deliver a total of 999 social housing units in Dublin, Cork, Galway, Waterford, Clare, Kildare, and Roscommon – at a value for construction and life cycle costs of approximately €640,000 per unit.

Deputy Stanley said: “There are five further bundles of social housing units to be delivered through this programme, which are projected to see approximately 3,500 more units completed. If these units were also projected to cost €640,000, this would result in a total cost of €2.88 billion for all seven bundles in total.

“The Committee had asked for a breakdown of the cost per unit delivered in the first two bundles of the programme. However, the Department could only confirm the construction cost per unit of €222,000 and €277,000 respectively. The Committee is concerned that it cannot evaluate whether the units delivered through this PPP programme represent good value-for-money, as commercial sensitivity means the total cost, minus construction costs, in the tenderers’ models will remain confidential ‘until a specified period of time has elapsed’. The Committee is of the view that this timeframe is vague, and failing to provide the total costs of the schemes may hinder true scrutiny of the PPP’s cost modelling for decades, for a programme projected to cost almost €3 billion and which may even exceed that figure depending on inflation.”

The PAC Report on engagements with the Department of Housing, Local Government and Heritage, the Approved Housing Bodies Regulatory Authority, Home Building Finance Ireland, the Housing Agency, and the Residential Tenancies Board is available on the Oireachtas website.

The Committee of Public Accounts is a standing committee of Dáil Éireann which focuses on ensuring public services are run efficiently and achieve value for money. Further information on the role and remit of the Committee can be found here.