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Report Gives Green Light for Large Scale State Investment in Cost Rental Housing

– No State Aid Related Obstacles –

Press Release, Thursday 29th April

Research being launched today, Commissioned by the Irish Council for Social Housing (ICSH) and produced  by Professor Padraic Kenna, at the Centre for Housing Law, Rights and Policy NUI Galway, confirms that state support in new cost rental housing is in line with EU rules known as services of general economic interest (SGEI), which are decided by Member States, such as Ireland.

The report, Supporting the Irish Housing System to Address Housing Market Failure, indicates that State support for cost rental will not distort the housing market, but will contribute to a properly functioning housing system. It outlines how the EU SGEI framework, and the specific conditions that are applied to individual Member States, enable them to support their housing systems to address housing market failure. Highlighting the gap in the market supply of affordable rented housing in Ireland, this report clears the way for larger scale state support in a cost rental scheme, which is badly need to address crippling rents in the private rented sector. The Irish Government will legislate on the terms and conditions of any cost rental programme in the forthcoming Affordable Housing Bill.  

Speaking at today’s launch Donal McManus, ICSH Chief Executive says, “Our sector has been calling for cost rental housing for a number of years to embed affordability in our housing system. The 2020 Programme for Government commits to a cost rental model that creates affordability for tenants and a long term sustainable model for the construction and management of homes. 390 cost rental home have been approved this year by the Minister for Housing, Darragh O’Brien, to be delivered by three AHBs. Building on this, and as part of the Government’s forthcoming ‘Housing For All’ policy initiative, we would support the recommendation in Professor Kenna’s report that the Government should introduce a multi-annual cost rental programme to ensure continuous delivery of cost rental housing over the coming years. This research provides a comprehensive view on how EU SGEIs operate in the housing sector and identifies that the public policy objective of meeting citizens’ housing needs, where this need is not being met by the market, is one of a number of reasons as to why cost rental housing is consistent with EU SGEI rules.”

SGEIs, such as social and affordable housing activities deliver outcomes in the overall public interest that would not be supplied by the market without public intervention. The concept of a service of general economic interest is an evolving notion that depends, among other things, on the needs of citizens, technological and market developments and social and political preferences in the Member State concerned.  Irish state support in this area has been recognised as an SGEI in EU law for over twenty years.

Author of the report, Professor Padraic Kenna, of the Centre for Housing Law, Rights and Policy NUI Galway, says “An affordable and good-quality home is essential for every person’s well-being and social participation. Reliance on markets has largely failed to ensure adequate and affordable rented housing, even for households in secure and well paid employment. In Ireland, It is widely acknowledged that many private sector rents are unaffordable, except for a small proportion of the population, and this constitutes a market failure. The two elements that are required for a Member State to make lawful use of SGEIs are economic activity and market failure. AHBs should have a key role in delivery and management as it chimes with their non-profit mission; they are managing homes not real estate assets, and there is no conflict between the interests of shareholders and tenants. AHBs are in it for the long-term and there is no leakage of state investment.To ensure that these cost rental homes remain truly affordable, this model must be large-scale and long-term.  To protect State investment, safeguards are needed to ensure that these homes don’t become part of an offshore fund’s ‘asset portfolio’. Equally, tenant purchase would completely undermine the economic basis of the cost rental model in Ireland.”

Mr McManus added, “AHBs are entrusted by local authorities to provide accommodation, which is in line with their non-profit Articles of Association and charitable status. This has been accepted by the European Commission as meeting the criteria for social housing SGEIs. The Affordable Housing Bill 2020 sets out a new legislative basis for cost rental delivery in Ireland. And the Cost Rental Equity Loan (CREL) scheme, announced in Budget 2021, will see the Department make €35 million in loan funding available to Approved Housing Bodies for the purpose of providing cost rental housing. Cost rental schemes, with currently proposed rents of €1,200 per month, will facilitate those in the income deciles who cannot afford to rent in the private market. However, to achieve affordable rents of €1,200 per month requires State Aid.  Current cost rental housing plans include 50 units at Enniskerry Road, County Dublin, 306 units at Shanganagh Co. Dublin and a planned cost rental scheme of 400 units at St. Michael’s Estate, Dublin 8. However, in the context of approximately 340,000 private tenancies in Ireland, a multi-annual cost rental delivery programme is required to ensure that this form of tenure is scaled-up to meet the housing affordability needs of Irish households.”

Download: Presentation by Professor Padraic Kenna, Centre for Housing Law, Rights and Policy NUI Galway (author of the Report)

Download the Report here: Supporting the Irish housing system to address housing market failure: Cost Rental Housing and Services of General Economic Interest (SGEI)

Download the Report Executive Summary here here: Supporting the Irish housing system to address housing market failure: Cost Rental Housing and Services of General Economic Interest (SGEI) – Executive Summary

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