Idea that only councils should build social housing is nonsense

Not true that State can deliver much more cheaply than private sector

‘It seems that some of those who opine on the state of the housing market will clutch at straws to prove that the State can deliver housing much more cheaply than the private sector.’ Photograph: Cathal McNaughton/Reuters

‘It seems that some of those who opine on the state of the housing market will clutch at straws to prove that the State can deliver housing much more cheaply than the private sector.’ Photograph: Cathal McNaughton/Reuters

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The recent rejection by Dublin City councillors of proposals to build new homes at Oscar Traynor Road was a significant setback to efforts to tackle one of the biggest housing challenges this country has ever faced. Not only was the chance lost to get families off the housing list and allow for many more to buy their own home, but the decision would appear to have been made based on ideology and misunderstanding of the facts.

The reaction that followed the decision was sometimes scathing but often, unfortunately, favourable. Many welcomed the rejection of the building of private homes on the site, even though that housing would have added to the social mix of the locality and be delivered in tandem with social and affordable homes. Some observers on these pages went so far as to say that the decision would not even result in a delay in the provision of housing at the location, should the council executive simply decide to build.

‘The delivery of privately owned, rented and local authority homes by the private sector is a feature of every functioning housing market in the world.’ Photograph: Rui Vieira/PA Wire
‘The delivery of privately owned, rented and local authority homes by the private sector is a feature of every functioning housing market in the world.’ Photograph: Rui Vieira/PA Wire

This analysis is flawed. So too is much of the commentary on the recent report by the Irish Government Economic Evaluation Service (IGEES), which examined the State’s social housing build programme and which many have used to justify their view that it is cheaper for local authorities to directly build social housing rather than relying on the private sector to do so within their own developments.

IGEES itself admits in its analysis that it has arrived at the comparative cost for public sector direct builds despite a dearth of data and that it “can often be the case that the data is not recorded completely or accurately”. The report also notes that “data from the six local authorities under review . . . included incomplete data entries”, that the six case studies were based on incomplete data and that “paper-based” processes make it difficult to arrive at a complete record of social housing delivery costs.

Neither does the IGEES report use comparable public and private models of housing delivery upon which to make an analysis. Higher density and higher cost “regeneration projects” are omitted from the public numbers but included in the average private sector projects.

Even with its flawed approach, IGEES suggests a directly-built local authority house will cost €230,000, while one built by the private sector and ready to have a family move in comes in at a cost €258,000. On the assumption that the €230,000 cost includes VAT - which is not clear- the difference of €28,000 includes the costs of land and finance for the developer. As the State excluded more complex projects, it may well be that if they were included there would be no cost differential at all or that the private sector could deliver homes more cost effectively.

No wonder the analysis comes with the caveat that “the views presented in this paper do not represent the official views of the Department or Minister for Public Expenditure & Reform”.

‘Just not on’

No wonder, either, that Brendan Kenny, Dublin City Council’s Head of Housing went on Newstalk radio last month “to dispel the notion that Dublin City Council, and local authorities, can build cheaper than other ways”, saying that “the idea that direct build by the local authority is cheaper, it’s just not on”. And that the suggestion of it being cheaper for a local authority to build “is just not true”.

More recently, Kieron Brennan, chief executive of Co-operative Housing Ireland CHI) is reported in this paper as saying that the acquisition of so-called turn-key properties bought directly from private developers for social housing tenants is key to solving the State’s housing crisis, adding that there was no way the Government’s 50,000 target could be met without the acquisition of turn-key housing and that the public versus private argument was misplaced.

On December 1st, the Minister for Housing Daragh O’Brien provided some additional insights in an answer to Richard Bruton in the Dáil. It noted that in Dublin City and Fingal, since January 2019, the cost of a direct build has been €382,000, while the cost of a “turnkey” has been €373,000.

What we need is a strong and expanded State-backed direct build programme to complement private sector delivery
 

It seems that some of those who opine on the state of the housing market will clutch at straws to prove that the State can deliver housing much more cheaply than the private sector, with the secondary argument that the price of land is the root of all problems being often deployed to buttress their case.

Neither of these assertions is true. All such arguments do is distract from the real answers, leading to the cancellation of plans to deliver homes at Oscar Traynor Road and elsewhere.

Given the seriousness of the housing crisis, we need to forego ideology and promote realistic solutions that will drive delivery. What we need is a strong and expanded State-backed direct build programme to complement private sector delivery, given that the evidence emerging and supported by data, points to the private sector as a cost efficient and significant partner for the State in realising their ambitious social and affordable housing objectives.

With household sizes falling, and the need for more compact cities to meet the challenges of climate change, that means delivering the right type and size of housing. Even the IGEES report notes “oversupply of larger units, which do not match the social housing need should be avoided, which may necessitate increased . . . construction of smaller units on public land”.

In this context, the report notes - astonishingly - that only 9 per cent of local authority units built - that it examined - were for single people despite the majority of the local authority housing lists being made up of single people.

It also means recognising that most people aspire to own their own homes and then taking the requisite measures to make that a reality. This means examining shared equity and shared ownership models that have been successful in other countries that faced similar challenges to ours.

The delivery of privately owned, rented and local authority homes by the private sector is a feature of every functioning housing market in the world. The evidence shows that in Ireland, as elsewhere, this can be done efficiently and at a cost that is not out of line with the direct build of those homes by local authorities.

It is imperative that we recognise these facts and get building.

Pat Farrell, chief executive of Irish Institutional Property

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