State increasing reliance on ‘costly’ social housing leases

The number of social housing units being leased to local authorities on a long-term basis has increased significantly this year despite criticism of the cost involved. A total of 918 homes have been leased so far this year; just over 1,000 social homes were leased in the whole of 2020.

Figures provided by Minister for Housing Darragh O'Brien, in response to a parliamentary question from Sinn Féin's Eoin Ó Broin, also show that the average per-unit cost of the leases was €17,000. That works out at over €425,000 over a typical 25-year term.

While this is on a par with the cost of buying or developing social housing units directly, the councils will not own the properties after the lease expires and will have to enter into another leasing arrangement. That makes them a very costly proposition.

The figures come amid reports that the Government plans to discontinue these types of leasing arrangements as part of its new Housing For All strategy in favour of purchase agreements.

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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 schemes. These will deliver 783 dwellings under long-term lease agreements and 135 dwellings under Part V lease agreements.

The Part V planning rule stipulates that developers must set aside at least 10 per cent of new housing developments for social units, which the local authorities can buy at a discounted rate or lease.

Mr O’Brien said the average lease cost may vary depending on the location of the home, its size and the property type.

“My department does not release specific cost information at a project level as these transactions are commercially sensitive and contain proprietary information that may impact on the competitiveness of the local authority sector,” he said.

His figures show the average cost of all long-term leases approved so far in 2021 is €17,115. The cost of the Part V lease units, which were mainly in Dublin, varied “depending on how the equivalent net monetary value has been reflected in the agreement”, Mr O’Brien said, but the average cost was put at €17,512 annually.

That’s up from a figure of €15,000 earlier this year, according to Mr Ó Broin. “These leases are bad for tenants, the taxpayer and prospective buyers,” he said. “Leasing is pushing up the cost of homes by as much as €50,000 per unity according to one leading approved housing body.

“The case for ending this practice is compelling. Councils should be buying these properties for social and affordable housing, not lining the pockets of investment funds.”

New leases for social housing are expected to be phased out and local authorities directed to make compulsory purchases of vacant units as part of the Government’s new Housing For All strategy, which will be published later this month. The strategy is expected to expand existing funding for direct builds and ownership of social housing by the State.

This comes amid criticism that the leasing arrangements represent poor value for money for the taxpayer.

The Government has come under fire over the number of apartment complexes or starter-home estates, being bought outright by institutional investors for the rental market, which is seen as making it more difficult for young people to buy.