The Irish Times view on house-building: the cost of going private

Not for the first time, the State seems to be shooting itself in the foot on housing. Local authorities are paying over the odds for so-called turnkey purchases, or Part V acquisitions, which are bought directly from private developers for social housing tenants, when it would be significantly cheaper for them to build directly. The most galling example is the luxury apartment scheme being developed by the Donnybrook Partnership on Eglinton Road in Dublin 4. The company plans to sell 14 apartments – as part of its Part V obligation to allocate 10 per cent of any new private development to social housing – to Dublin City Council for €9.18 million.

This puts an indicative price tag of €762,916 on each of the nine two-bedroom apartments and €469,177 on each of the five one-bedroom apartments, and for what should be substantially discounted housing units.

Cairn Homes, meanwhile, is selling 61 apartments to Dublin City Council from the former RTÉ site at Donnybrook in Dublin 4 for an eye-watering €30.2 million. That values two-bedroom apartments at €521,377 and one-bed units at €472,797. These are not good financial deals for the State, not when the Department of Housing's own figures show local councils can build their own units at a fraction of the cost.

When developed directly by the council, the “all in” cost for a typical three-bedroom house was on average less than €300,000 and in some areas less than €250,000. The department’s figures, based on competitively tendered local authority housing projects in 2019, show the cost per unit in Dún Laoghaire-Rathdown and in south Dublin was €277,500, while in Cork and Waterford it was €264,900 and €243,100.

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The figures included hard construction costs – and soft construction costs such as land, professional fees, utility connections, site investigations/surveys, VAT and contribution to public art. The cost of two-bed apartments, which are typically more expensive to build, was also on average less than €300,000.

While local authorities do not have to bear the same risk premium in securing construction finance, the contrast in prices between publicly- and privately-developed housing raises serious questions about the Government’s housing strategy and whether it is an efficient use of public money. Would it not have made more sense for the State to withhold 10 per cent of the site and build the units itself? Either way there is simply no justification for paying over half a million euro for a basic social housing unit.

Irish governments moved away from building social houses directly, deeming the private market a more efficient model for delivery. This ideological shift combined with an increased reliance on rent supports such as Housing Assistance Payment needs to be rethought.