Not so new kid on affordable housing block to make his mark

Ronan King tells Dominic Coyle that a tax credit system used in the US could work well here

The State's public service is paralysed by fear of failure, according to accountant turned would-be social housing entrepreneur Ronan King. The concentration on ensuring that mistakes are not made rather than on executing projects, means that the Republic is losing out on a broad range of fronts, he argues.

An accountant and partner with BDO Simpson Xavier for many years, he refers to an Economic and Social Research Institute (ESRI) study that foresaw congestion on roads and in housing as key threats to the potential of the Irish economy to grow.

"Despite the fact that there is a lot of money in the economy, congestion in these areas is impacting on quality of life," he says. "Knowledge workers have multiple choices. They don't have to live here and where they do live will depend on housing affordability, work travel times and general quality of life."

Mr King, who has been chairman of the transport and infrastructure committee of Dublin Chamber of Commerce, says that the State has serious problems in delivery on planning.

"A senior former civil servant told me that it is now all about process auditing and there is such a fear in the civil service of making a mistake and being found to make a mistake that people spend all their time looking over their shoulder for when the decision-making process is audited.

"Whether it is a road system or a conference centre, their whole focus is on not making a mistake. Meantime, the country is losing out hugely."

He points to the 15-year battle for a conference centre as a case in point. Millions of euro has been spent on putting proposals together and holding competitions and millions more in EU grants has been passed up but still Dublin has no proper conference facility.

Meanwhile, rivals are taking the business and all the downstream income it provides for tourism and the retail sector.

"There is a growing business in the civil service of looking for reasons not to get things done," says Mr King, noting that civil servants objected strongly to both Ardnacrusha and to the IFSC, projects that would have died but for strong political backing and which now seem intricately woven in to our success as an island economy.

He acknowledges that there are tighter restrictions now coming out of Europe but argues that other countries are getting things delivered while we are finding reasons not to do things.

"The decisions we are not making now are going to impact hugely in next five to 10 years - whether it is about infrastructure, housing, tourism or early education," he insists. "It is about confidence and just going for it."

Mr King is taking a bit of his own advice. He has just announced that he is leaving BDO Simpson Xavier to channel his energies in a new direction - the provision of affordable housing. He will join Frank Gormley's Howard Holdings as director of business development. His main focus will be to drive the growth of affordable housing in partnership with developers and government.

"What we are looking to do is to get to a position where we can offer, say, a €300,000 house for €150,000," he says.

The model he proposes is one that he says has succeeded in providing 1.2 million homes in the US since 1986. It boasts simplicity and is framed to ensure that all parties gain something from the exercise.

The "housing for tax credits programme" works by the government issuing tax credits in return for a set number of affordable homes.

The tax credits are issued to a financial syndication who puts together private investors to fund half the cost of the houses.

From the developer's point of view, they are paid the full market price for the house and from the owner/tenant's point of view, they get to buy a house at an affordable price.

The benefit for the private investor funding the deal is the tax credit, which gives a guarantee return on the deal - the Howard Holdings proposal is 7 per cent after tax, which is attractive compared to what is available elsewhere for such a low-risk investment.

For the State, the payoff comes in providing accommodation for the workers needed to drive economic growth. In addition, it gets a cut of the capital gain on the property.

As Mr King envisages it, any sale within five years would see the full gain go to the State to stop churning of such properties. Thereafter, the gain would be split between the State and the owner, initially on a 50:50 basis, with the State's share declining to around zero after 30 years.

The State can determine how many homes are built under the system and where, but they can be dotted throughout developments rather than being built as a low-cost block or ghetto.

In fact, the critical element is that they are not low-cost because the return for the State comes when the properties are sold on and poorly built properties will not have a resale value.

"Everyone we have spoken to loves the idea for its simplicity and its workability," says Mr King.

The design of the deal and the fact that the investment is driven by the private sector will, Mr King believes, get around the paralysing caution of the civil service.

First, however, he has to persuade the Minister for Finance and his mandarins to accept the idea of a new tax credit at the very time the Department is reviewing all existing credits with a view to eliminating them.

In the late 1990s, Mr King was parachuted on to the board of the Special Olympics organising committee by Bord Fáilte. His brief, in his words, typifies the cautious nature of the public service.

At a time when the collapse of the bid to host the World Equestrian Games was fresh in the mind, he was told to pull the plug on the enterprise if it looked like being a non-starter or a long-term drain on State funds.

The board, led by Mr Denis O'Brien and chief executive Ms Mary Davis, put together an event that showcased the best of Ireland and illustrated what could be achieved with the right attitude and drive.

If the Republic is to continue to attract the people it needs to drive its economy, Mr King believes we need to get back to the idea of quality of life for those working here and value for money for the visitors we hope to attract.