Cost of defective block scheme could rise to €3.6bn due to inflation, Ministers warned

A new grant scheme for homes affected by defective blocks could end up costing €3.65 billion if inflation runs consistently high, Cabinet Ministers have been privately warned.

The enhanced scheme was originally set to cost €2.2 billion when it was agreed by Cabinet last November, but this has now risen to €2.7 billion. Ministers were presented on Tuesday with three scenarios of inflation which could mean the cost balloons from €2.7 billion to €3.65 billion, meaning that high inflation could add up to €1.5 billion on to the final taxpayer bill in the worst-case scenario.

The meeting also heard that there is no certainty over the final number of homes affected but that it is possible the problem will extend beyond Donegal, Mayo, Clare, Limerick, Sligo and Tipperary. The meeting was told that because it could take years for the damage to manifest, it is not possible to know the final cost to the exchequer yet.

[ Explainer: How has the Mica scheme cost €3.6bn, and will it be a runaway train? ]

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It is also understood that the new legislation, when published, will allow for the maximum grant of €420,000 to be increased by 10 per cent through a yearly review which could take place up to three times, with another three reviews allowed if the Oireachtas agrees. The Cabinet was also told that the Government intends to appoint a senior counsel to investigate any wrongdoing and that anyone found to be responsible for the issues that have emerged will be pursued. An insurance levy to raise €80 million a year is on the cards for 2023.

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The Department of Housing also plans to announce free counselling for affected homeowners in Donegal and Mayo.

Two counties, Clare and Limerick, were added to the enhanced scheme yesterday. Estimates given to Ministers show that the number of affected homes in Clare could be up to 678, while those in Limerick could range from 135 to 500. Minister for Housing Darragh O’Brien will also establish a parallel scheme for local authority and social homes which are affected by defective blocks. Up to 1,300 such homes could need remediation.

Earlier this year, The Irish Times reported that the national protocol that underpins the remediation scheme for homeowners affected by mica and pyrite was to be reviewed amid concerns about the existence of other deleterious materials in the properties.

A number of homeowners in Donegal raised concerns about the presence of pyrrhotite in their blocks, on top of the existence of Mica. The national protocol is used by engineers and geologists to assess the damage in properties where the concrete blocks are suspected to contain mica or pyrite. Despite the urgency raised by homeowners about the issue, it is understood Ministers were told that it will now be well into 2023 until this work is completed.

[ Mica: €2.7bn enhanced scheme agreed by Ministers ]

Separately, concerns have been flagged with Ministers about residential units affected by defective blocks that are situated within multiunit developments. The Department of Housing believes that many of the units may have other latent defects and so these properties have not yet been included in the new scheme. This is because a separate group will shortly report back on other latest defects, and it was considered unwise to make any decisions before this.

The legislation will state that the maximum grant payable to homeowners who demolish and rebuild will be between €1,730 moving downwards to €1,562 per square metre depending on the size of the property. For homeowners doing remedial work that does not involve demolition, the maximum grant will be €410 per square metre for the “outer leaf” of the building and €570 for inner and outer works. The Cabinet was told that this new “variable” rate was more favourable for all homes up to 200m squared in size while still being “fair and reasonable” for homes larger than that.

Meanwhile, it is also understood that concerns have been raised about potential “double funding” of energy works if they are funded by both the Defective Blocks Scheme and Sustainable Energy Authority of Ireland, and that appropriate checks would have to be put in place.