The State is increasingly relying on “expensive” social housing leases
The number of social housing rented out long-term to local authorities has increased considerably this year despite criticism of their cost. A total of 918 units have been rented so far this year; just over 1,000 social housing units were rented over the whole of 2020.
Figures provided by Housing Minister Darragh O’Brien, in response to a parliamentary question from Eoin Ó Broin of Sinn Féin, also show that the average unit cost of the leases was € 17,000. This represents more than € 425,000 over a typical period of 25 years.
While this is comparable to the cost of buying or developing social housing directly, boards will not own the properties after the lease expires and will need to enter into another rental agreement. This makes it a very expensive proposition.
The numbers come amid reports that the government is considering ending these types of rental contracts as part of its new Housing for All strategy in favor of purchase contracts.
Mr O’Brien’s figures show that his department has approved 62 leasing projects so far this year under long-term leasing and enhanced leasing programs. These will deliver 783 long-term lease housing units and 135 Part V lease housing units.
The Part V planning rule states that developers must reserve at least 10 percent of new housing developments for social units, which local authorities can buy at a reduced price or rent.
Mr O’Brien said the average rental cost can vary depending on the location of the home, its size and the type of property.
“My department does not publish specific cost information at the project level as these transactions are commercially sensitive and contain proprietary information that may impact the competitiveness of the local government sector,” he said.
Its figures show that the average cost of all long-term leases approved so far in 2021 is € 17,115. The cost of the Part V rental units, which were primarily located in Dublin, varied “depending on how the equivalent net monetary value was reflected in the deal,” Mr. O’Brien said, but the average cost was estimated at € 17,512 per year.
That’s against a figure of € 15,000 earlier this year, according to Ó Broin. “These leases are bad for tenants, the taxpayer and potential buyers,” he said. “Leasing drives up housing prices up to € 50,000 per unit according to a leading licensed housing organization.
“The arguments in favor of ending this practice are compelling. Boards should buy these properties for social and affordable housing, not to line the pockets of investment funds. “
New social housing leases are expected to be phased out and local authorities urged to make compulsory purchases of vacant homes as part of the government’s new housing strategy for all, to be released later this month. The strategy is expected to increase existing funding for direct construction and state ownership of social housing.
This comes amid criticism that rental agreements represent bad value for the taxpayer.
The government has been criticized for the number of apartment complexes or start-up properties, bought outright by institutional investors for the rental market, which is seen as making it more difficult for young people to buy.
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