Build social houses and we’ll write off your debts, Minister tells councils

Local authorities will be offered €100 million to pay off debts on condition they develop modular homes for accelerated social housing in the next two years.

In a letter to local authorities on Monday the Department of Housing outlined that lands where debts will be covered have to be suitable for the “immediate development” of social housing with construction in 2023 or “no later than 2024″ with “use of accelerated delivery models, principally off-site construction [and] modern methods of construction”.

The initiative by Darragh O’Brien, the Minister for Housing, comes against the backdrop of record numbers in emergency homeless accommodation, with 11,397 people now registered, 3,480 of whom are children.

In the letter the department outlined how “given the urgent pressures on the housing system and the gap to the target to be filled, the Minister is seeking to unblock the potential of some of these existing lands so that they can be made immediately available for public housing development.”

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Government sources believe 3,000-5,000 modular-built social houses can be delivered next year using this scheme. Mr O’Brien said it will operate as a “quid pro quo” between his department and participating councils.

“I’ll pay down debt on those sites as long as they’re developed [with social housing] where appropriate with a preference for modular,” he said.

Participating councils will be given access to two funding pots totalling hundreds of millions of euros to cover legacy debts. Local authorities carry more than €300 million in land legacy debt. Some €100 million is being made available to deal with these debts, with another €125 million set aside for purchasing more land for housing.

The measures will be funded from the department’s existing budget amid pressure on the Custom House to tackle a €500 million underspend in its budget this year.

The Government is aiming to deliver an average of 10,000 newly-built social homes every year to 2030 but there is a growing expectation it will miss these targets this year.

Government sources said the preference is to use modular or other rapid-build technologies where viable. In cases of developments with a mix of public and private housing, only the portion of debt equivalent to the portion of the site being used for social housing will be paid off.

Meanwhile, multiple sources across the Coalition said last week there is a “growing realisation” that tax breaks for developers may be needed to drive investment, despite resistance from the Department of Finance.

Sources emphasised any tax break would be targeted and limited in duration, with consideration being given to focusing the tax breaks on apartment development in urban areas, especially in the Greater Dublin region.

Coalition figures involved in the discussions said several options are being considered, including breaks based on Section 23, which allowed for capital allowance tax reliefs on rental properties but could be repurposed for building properties for owner occupiers. A cut in VAT, currently levied at 13.5 per cent on new home purchases, is also being considered.

Sources indicated that the upcoming rotation of the finance brief to Fianna Fáil’s Michael McGrath could be an opportunity to advance the proposal.

Multiple Coalition sources said last week that while there is resistance to the idea from the Department of Finance, there is what one source described as a “growing realisation” that they may be needed to drive investment.

Another said there has to be an “open mind” on the subject, despite past criticism of tax breaks for developers.

Another source said geographically-targeted breaks towards areas with pre-existing infrastructure should be considered.

“Taxation is the strongest tool at the disposal of any Government, so should we not be using it for housing?”