Social housing: Can councils afford Dublin’s sky-high prices?

It’s a predicament across the world. In New York, the city authorities offered developers tax breaks if they committed to making a certain percentage of new builds available for affordable housing. The canny developers came up with a solution that wouldn’t affect prices at their ritzy tower blocks: creating a separate entrance, or a so-called “poor door”, for those buying the affordable option. The city subsequently banned the practice, but doing so had the knock-on effect of curbing the development of affordable homes altogether.

Here in Ireland, Dublin City Council has lately been faced with a dilemma of its own. With the cost of new developments in Dublin's city centre reaching ever-exorbitant highs, should it fulfil the requirements of its social housing diversity remit by acquiring units at sky-high prices in these developments? Or is it better off to forgo the goal of social inclusion by availing of better-value homes elsewhere?

So far, it seems, Dublin City Council is following the latter approach and, in terms of securing value for money, it’s hard to argue with this. But what does it mean for the future of the Government’s affordable housing strategy known as Part V?

Part V

First introduced back in the early 2000s, Part V of the Planning and Development Act 2000 provides for social and affordable housing obligations by requiring developers to sell a certain proportion of any new builds to the local council to be used as social housing. And it’s not just developers selling nine or more residential units that must abide by Part V; the proliferation of “build-to-rent” developments which have sprung up right across the capital must also abide by the same obligations.

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In the early years, up to 20 per cent of the development was to be made available to the local authorities, but developers often got around this by making a financial contribution instead.

Since 2015, however, the cap was reduced to 10 per cent, and the financial payment option no longer applies. But this doesn’t mean that developers – or councils – no longer have other options. Under the legislation, councils can come to an alternative agreement, such as acquiring land on site, or leasing or acquiring units off site.

And this is what’s been happening in Dublin’s city centre.

An ‘alternative approach’

Since 2015, prices in Dublin have risen by about 25 per cent. But the rate of price growth for the sale of entire apartment blocks must be considerably higher. Consider 6 Hanover Quay, for example, which was built by Cairn Homes and sold to Carysfort Capital last year for some €101 million. At an estimated cost of €800,000 per apartment, it would surely represent very poor value for a council with a severe social and affordable crisis on its hands to pay so much for a small number of homes.

Unsurprisingly, then, the council opted for an alternative, agreeing instead to acquire 13 units at the nearby Castleforbes Square development in the IFSC, for an undisclosed price.

And it's not the only luxury block that the council has passed on. None of Capital Dock, Landsdowne Place, the Reflector building or 6 Hanover Quay have social housing, and the council is currently in negotiations with Ires Reit on its Part V obligations at the former Tara Towers Hotel. Ireland's largest private landlord is acquiring 69 units on the site – which is being developed into a new hotel by Dalata – for about €600,000 each. The council told us that its preferred option is to acquire units on site but, at that price, it will be difficult again to extract much value from this location.

Social housing uptick

Despite the challenges, Part V is succeeding in boosting the housing stock of local councils. Last year, for example, Dublin City Council says it obtained 98 units via Part V, for a total cost of €18.2 million, or about €185,840 per unit. These included 19 homes at the Marianella development in Rathgar; five at Terenure Gate; and seven at Sybil Hill Road, Raheny.

This is up on the 72 homes it acquired in 2017, and 2016, when it acquired none. Moreover, it expects this figure to grow substantially, up to 207 this year, and by a further 300 units in 2020 and 2021.

In Fingal, Part V acquisitions were also up last year, reaching 110, up from 89 in 2017 and 12 in 2016, while, in south Dublin, the council acquired 145 homes via Part V last year, up from 51 in 2017 and 29 in 2016.

Dún Laoghaire-Rathdown County Council didn’t respond to a query on the number of properties it has acquired via Part V in recent years, but it did note that, last year, its acquisitions included five units at Belarmine in Stepaside, five on Bird Avenue, Clonskeagh, and six units in Bishops Gate, Kilternan.

Neither Fingal nor south Dublin said that they entered into any alternative arrangements with developers, which shows that the true spirit of Part V is being upheld – at least in some parts of the capital.

City centre

Which brings us back to the city centre. The role of Part V is, according to a Department of Housing briefing, “to advance the aim of achieving a social mix in new developments”.

And the council is doing this, at many of the aforementioned developments. But, with property so unaffordable in the docklands area, what is it to do?

Earlier this year, Brendan Kenny, Dublin City Council's head of housing said that, while the council wants to acquire units on the site of new developments, "that is very difficult in the docklands, because the costs involved do not represent good value for money."

The real problem, however, is not that the council is getting better value for money elsewhere, but that the issue has become so widespread it raises the question of what purpose Part V now serves. In years gone by, many of Dublin’s ritzier developments judiciously sidestepped the issue of social housing; the challenge facing Dublin City Council today is that the issue is not confined just to a handful of developments in the posher parts of town. Today vast tracts of the docklands are now being redeveloped for the sole use of a certain cohort of deep-pocketed dwellers.

One of the few exceptions is Dublin Landings, which was designed to "introduce a new standard of rental product in Dublin". Its 268 apartments were recently sold by Seán Mulryan's Ballymore and its partner Oxley for €175.5 million (or about € 654,850 each) to US-headquartered property giant Greystar. The council tells us – though it didn't disclose how much it paid – that it has managed to secure 30 of these apartments in Block B for social housing.

If it can do it here, maybe it can also do it elsewhere.