I thank the Minister for his opening remarks. As I am sure he knows, Sinn Féin will not be opposing the Bill. We certainly feel that the proposed changes to the registration regime for approved housing bodies are necessary and appropriately drafted, and need to be introduced as a matter of urgency. It was on that basis that our committee unanimously agreed to waive pre-legislative scrutiny, although a number of us had some concerns with respect to the second half of the Bill, which I will come to in a moment.
I thank the officials for making themselves available for the briefing and for the public session of the committee meeting last Thursday. Notwithstanding the fact that we will not carry out pre-legislative scrutiny, there is a need to further scrutinise some aspects of the Bill. To give advance warning to the officials, we need a fuller explanation of the rationale for deleting "alleviation of housing need" in section 5. I do not have an issue with it, but I would like to understand the full implications of that deletion with respect to the registration regime.
I was surprised at the inclusion of the cost-rental elements of the Bill. Unlike the registration regime for AHBs, I do not think there is an urgency for the cost-rental considerations. I am not saying that changes are not necessary and I am not saying that I am not open to supporting them, but they are not urgent. They are not the most pressing changes that are needed to the cost-rental legislation and regulations. Those elements would have benefited from consideration by the committee on pre-legislative scrutiny. While the remarks I am going to make are critical, I am making them in the hope that the Minister will consider them between now and the final passage of the Bill, and before the subsequent regulations.
My biggest concern is that those changes are not dealing with the biggest challenge for the cost-rental sector, which is the rising level of rent. Increasingly, the cost-rental units that are on offer, small in number as they are, are excluding very large numbers of the people for whom cost rental was designed, namely, those households, singles and couples on incomes above the threshold for social housing.
With respect to section 15 and the revised definition of "household" and income eligibility for single people sharing, or couples sharing, I am not opposed in principle. There is, however, a potential unintended consequence, which is that people who are not able to afford a one-bedroom cost-rental home because the rent is too high will end up in what they would hope to be a short-term sharing arrangement, perhaps at the start of their careers as a nurse or a garda, or in the private sector. They may then find themselves unable to exit cost rental either into alternative cost rental, as a household in their own right, or into other forms of tenure. They may become trapped involuntarily in sharing arrangements into their late 20s or early 30s. As the Minister knows, we are already seeing that in the private rental sector. While I understand that some of the cost-rental landlords, including, in particular the LDA, were lobbying for this as part of a way of getting around the challenge of single people accessing cost rental because they are excluded under the terms of the scheme because the rents are too high for their disposable income, this is an area where some further discussion is needed. I am not against the idea but the Minister can see the point I am making.
This speaks to one of the issues that this Bill could and should have dealt with, which is the problem with the rents. If we look at some of the recent cost-rental offerings in Citywest, where the LDA bought properties from Cairn Homes in my constituency, the rents are almost €1,400 per month for a one-bedroom unit, almost €1,600 for a two-bedroom unit and almost €1,800 for a three-bedroom unit. Those are below new market rents but are above existing Residential Tenancies Board, RTB, rents in the private market. The rents are rising more rapidly elsewhere. The rents that will be announced for properties on Oscar Traynor Road, for example, will be almost €1,200 for a one-bedroom unit, almost €1,600 for a two-bedroom unit and over €1,700 for a three-bedroom unit. The rents for O'Devaney Gardens will probably be the most expensive to date at a cost of almost €1,500 for a one-bedroom unit, almost €1,700 for a two-bedroom unit and almost €1,900 for a three-bedroom unit. The problem, of course, is that it is the result of how the scheme rightly works. Eligibility requirements mean that people should not be paying more than one third of their net disposable income on rent. An ever-growing number of people for whom this form of tenure was designed simply cannot afford it. There are solutions but the issue is not being discussed.
One of my big concerns is that there is not a single funding model for cost rental. I am aware of four separate funding models currently in operation. The LDA is off balance sheet, which means, as the Minister knows, that it must make a commercial return on its Irish Strategic Investment Fund, ISIF, capitalisation. It is charged corporation tax at a rate of 25%. It is factoring in a management and maintenance rate of 40%, which is far beyond the AHB sector. All of that pushes rents in a particular direction.
We know that the AHB sector is calculating rents in different ways. One AHB is only taking into account the repayment of the primary loan to the Housing Finance Agency when calculating rent and is dealing with the cost-rental equity loan at a later stage. Another AHB is factoring in both of those payments now, which means its rents are arguably different and higher. We know that local authorities, including mine in south Dublin, have a different way of financing their first cost-rental projects. In an attempt to bring down rents, South Dublin County Council is using some of its own reserves at an assumed rate that is 2% lower than the LDA's rate or the Housing Finance Agency's rate. It seems odd that we would at the early stages allow this proliferation of financing models. It makes no sense. Surely people can be brought into a room and asked to work out the most sensible way of financing these projects to make the rents more affordable.
We also know there are still real problems with the cost-rental equity loan. The Government has increased it to 55% but there is no clarity about what it will do with the 20% that may or may not become equity at a future stage and how that impacts the rents. We have yet to see a cost-rental project between the canals in Dublin although I have mentioned one that is in the pipeline. I am concerned about the development at Shanganagh. I do not believe that the LDA does not know the rents that will be charged. I believe it withheld the announcement of those rents from the launch event. I do not mean to rain on the Minister's parade when I say that. I am concerned that we are going to see exceptionally high rents on land that was public and for which the LDA did not have to pay market value.
I am also concerned that despite the very high levels of secure tenancy affordable rental investment scheme, STAR, subsidy to the LDA, the rents are still unaffordable. That is the case in Citywest as it will be elsewhere. I have said previously that I urge the Minister to consider the situation again. Long-term, 60-year, lower cost finance is the way to go. I have met representatives of the National Treasury Management Agency along with my colleague, Deputy Pearse Doherty. The representatives said it was possible. Until the State goes out to seek that finance, we will not know the volume or cost of it but it should be trying. The over-reliance on expensive turnkey properties is a problem. There was a failure to address new building technologies in the review of the fire safety regulations, which means we have tied our hands in terms of using some good new building technologies that are being used in London, Barcelona, Helsinki and elsewhere, and are able to deliver real cost-efficiency savings when they are done at scale. That is simply not possible here.
That is where the solution to those rents lies.
With respect to section 15 and the allocation scheme, again this is one where we could really have had a good discussion to tease it out. The idea of an allocation scheme is sensible, particularly at the early stage, but if I correctly understood the briefing from the Minister's officials, the Minister will prescribe in regulations the criteria against which allocations could be made but the cost-rental landlord will apply to the Minister to utilise some or all of those conditions to individual schemes or to their whole offering. That is the way I understood it from what the officials said. What that means is that as the volume of cost rental increases - albeit too slowly; I will come to that in a moment - we could have multiple different allocation schemes. We already know the challenge of having different allocation schemes in each local authority, but having multiple allocation schemes across the four AHBs, the LDA and the local authorities, for example, will make the situation confusing.
I do not see anything in this that would facilitate transfers across cost-rental providers. The Minister will be aware that this is a particular problem for social housing with the AHBs. If somebody is eligible for a transfer but the AHB has a small stock and cannot provide a transfer, getting a transfer from one AHB to another in social housing is virtually impossible, and it seems that problem is going to be replicated here. This is one area where we could do a good collaborative piece of work in committee with other stakeholders to get it right. If it is not right, and it is rushed through, there is going to be amending legislation next year and the year after - no matter who is in government - to try to rectify those problems. I urge the Minister to look at cost-rental transfers between cost-rental landlords. It has already come up among some of the tenants whose circumstances have changed. Even if the Minister created a mutual transfer system across the cost-rental providers, that would be eminently sensible.
With respect to provisions relating to the tenant in situ scheme, I fully accept the bona fides of the officials when they told us at our private briefing that this is legally required. They said that legislation is required in order to allow an allocation to be made outside of an allocation scheme. However, the Minister must know that this is not the problem in terms of taking the properties that have been bought by the Housing Agency and transferring them into cost-rental tenancies. The Minister gave us a figure indicating that possibly 200 properties have been bought or are close to being bought by the Housing Agency. We all know that none of those are yet cost rental. The renters there are paying full market rent. The fact that they have been protected from eviction is a good thing - I welcome that – but they are paying very high market rents. When I talk to the AHB sector, the problem is that it is not interested in this scheme. There are too many barriers in terms of financing, management and maintenance, and the dispersal of the property.
When I asked an individual in an AHB what change section 16 – if I have it right - would make to those properties that are currently in limbo, the response was it would make very little, if any, difference. They were not saying that to be awkward; it was just a reflection of the reality.
This is an example of a scheme that was opened before the scheme was designed. The problem with the cost-rental tenant in situ scheme is that it has never been put in a functioning framework. That is going to continue to be a problem. I am still of the view that the scheme is not advertised enough. It is too cumbersome. People should not have to go through the local authority. The people we are talking about do not have a relationship with the local authority. It is unnecessary to do that. Clearly, if they have made a mistake and they are eligible for social rental, a direct application to the Housing Agency could be redirected to the local authority. The Minister must also look at the way the scheme is funded, in particular given the age of some of these properties and the fact that refurbishment and repair needs to be taken into account as well.
One of the real challenges for the Opposition in terms of targets and delivery - the cynic in me would say it is deliberate, but I always like to at least try to give the Minister the benefit of the doubt - is that it is not clear what the annual targets are for cost rental in the LDA and the AHB sector. We have a little bit more clarity in the budget both this year and last year, but we have no clarity on what the LDA is meant to be delivering. Although the housing plan has annual targets for affordable homes that mix cost rental, affordable purchase and the first home scheme, the number of those that are meant to be cost rental is not clear at any stage.
The Minister mentions a figure of 1,800 cost-rental units delivered from 2022 to the first quarter of this year. I do not dispute that, but that is not what the Department's website says. The combined figures for 2022 to the first quarter of 2024 are 1,577. Perhaps somebody wants to check those and correct them. I do not mind which one is corrected but, either way, the delivery is very poor. It is way below the targets buried in a rather obtuse way in the Minister's plan.
That brings me to the revised targets the Minister is going to publish at the end of the year. We are all very interested to see what they are. Could he make a commitment in that regard? In addition to whatever the macro target is, and within that whatever the social and affordable target is, he should give us clarity on what he believes is needed and how many affordable-rental units are to be delivered by the local authorities, the AHB sector and the Land Development Agency.
For all his faults as Minister, the Minister's predecessor, and his predecessor, Deputy Coveney, gave us very clear targets for the publicly funded housing projects, so that we could all track them. While the Minister has continued to do that for social housing, he has not done it for affordable purchase or cost rental. The Housing Commission has made a very clear recommendation. It has said it believes at least 20% of our housing stock needs to be social and affordable. For it, affordable means cost rental. To meet that, the Minister would have to more than double the annual output of social and affordable homes. That would require a level of capital investment way beyond anything that is in the budget book, and way beyond anything that is in the national development plan.
The Minister is aware that we have set out what we believe is required in our alternative housing plan, which is an average of 5,000 cost-rental units a year over a five-year period as part of our affordable purchase scheme. We also need to start bringing those rents down. I am convinced from my conversations with the LDA, AHBs and local authorities that with the right set of policies and financing mechanisms, we could start bringing the rents of new cost rentals down to or below an average of €1,000 a month. If the Minister does not do that, the consequences will be rents continuing to rise - this will put pressure on him and his Government, if they remain in power, to increase subsidies to close the gap - and the creation of a medium-to-long term risk for cost-rental providers. There is a huge inbuilt risk right now for the AHBs in particular, but also for the LDA because their rents are above existing renters in the private rental sector. We know the private rental sector can be volatile, but what will happen in five, six or ten years' time if both existing and new rents in the private rental sector fall below cost rents? Cost rents cannot track them down; they are locked into a cost-recovery model. The idea that the State's so-called affordable cost rental would be more expensive than existing rents, which is the case today, and also new rents, is a level of risk that I do not believe the Minister has acknowledged, certainly publicly. Perhaps he has been discussing it privately with his colleagues and others. I will wait to see the outcome of that.
The Minister has given us an indication of the one amendment he will bring to the Seanad, on the capitalisation of the LDA. I remind the House that last October he attended a press conference after the budget and he announced an additional €6 billion of capitalisation for the LDA. We know he did not have approval from the Departments or Ministers for Finance and Public Expenditure, National Development Plan Delivery and Reform. Haggling went on from October to December, when the Minister got an extra €2.5 billion in capitalisation, half of it from the ISIF last year and then another half from a source to be announced this year. The Minister seems to indicate that the additional capitalisation in the amendment will be from the ISIF. I thought it was going to be from the Minister for Finance because in his budget speech he referred to the AIB share sale. The Minister might want to clarify that in case I have it wrong. However, that still means the LDA has a shortfall of €3 billion plus in its financing arrangements to fund the target for its delivery plan out to 2028. I accept that it can borrow, but it has made it patently clear, publicly and privately, that the interest rates are too high. What that means is, today, even with the reannounced €1.25 billion that the Minister promised last October and again in December, and then announced last week, the LDA has a huge shortfall. The Minister knows my criticisms of the LDA model - not of the LDA staff or their hard work, but of the way in which LDA policy and legislation have been enacted - but even if I thought the LDA as a residential developer was a good thing, it is €3 billion short for its current business plan.
On the NewERA report, we have only seen a heavily redacted version of it under FOI but it is an important report nonetheless. It has raised significant concerns about the fact that the LDA is paying more for new build on its own land than it is for turnkeys, which makes no sense. Turnkeys obviously involve private land at market values and the private developer's margin, neither of which are costs on the LDA's own development projects on land acquired from local authorities or the Housing Agency. Also, most of what it is doing at the moment is not spending money now but, rather, entering into forward purchase arrangements for homes that will be delivered in 2026, 2027 and 2028. There are real questions over the deliverability of that business plan. I appeal to the Minister to use his influence with the Minister for public expenditure and reform and the Minister for Finance to allow that NewERA report to be published in full and to allow full transparency for the public and for Members of the Oireachtas. We need to see the extent of the challenges that NewERA, as the watchdog, in part, of these kinds of State agencies, has identified in respect of the ability of the LDA to deliver.
My own view, and I make no apologies for it, is that the LDA should not be involved in residential development. It was such a missed opportunity not to have a Land Development Agency solely focused on active land management. That is what the original version in the national planning framework called for. Unfortunately that original wording has been removed from the revised draft. Unless we actually have an active land management agency with comprehensive compulsory purchase order powers, including existing use value compulsory purchase order powers, then whoever we task with delivering social and affordable homes will not have the adequate pipeline of land required to meet either the Government's inadequate and modest public housing targets or the far more ambitious targets that many of us, Sinn Féin, the Housing Commission and other members of the Opposition have. I would appreciate in the session with the officials on Thursday if they could come back on some of these issues. Likewise, I would appreciate if one of the Ministers of State in the Department could respond to some of these points in conclusion. I reserve the right to submit a Seanad amendment to the cost-rental elements of the Bill because I do think they need significantly more work.
