A more "expansive concept" of the cost rental model, which is not "overly reliant on public funding" must be considered, the Minister for Housing Darragh O'Brien has said.
Mr O’Brien said “alternative funding streams” such as the European Investment Bank and international pension funds may play a “central role” in the delivery of cost rental homes into the future.
Mr O'Brien was addressing an online event to mark the publication of the Supporting the Irish Housing System to Address Housing Market Failure report, commissioned by the Irish Council for Social Housing and produced by Prof Padraic Kenna, at the Centre for Housing Law, Rights and Policy at NUI Galway.
Under the Cost Rental Equity Loan scheme, tenants pay rent that covers the cost of delivering, managing and maintaining the homes only.
The scheme allows for long-term loans on “favourable terms” made available to approved housing bodies to cover up to 30 per cent of the development or acquisition cost of new cost rental homes.
Mr O'Brien said this year will see 440 new cost rental homes in Ireland and that he will be bringing the Affordable Housing Bill, which contains extensive provisions to place cost rental on a statutory basis, to Government "very shortly".
Mr O’Brien said the legislation will define cost rental housing in law and will “empower me to designate cost rental homes and set the eligibility criteria for tenants and their households”.
“Over the longer term and in order to deliver on our objectives for cost rental, we must also consider a more expansive concept for the model. This would be one that is not overly reliant on public funding and I think that’s key,” Mr O’Brien said.
“One that can deliver cost rents to a wider group, can maintain the delivery of housing in a counter reciprocal way and that can lead to provision of homes at sufficient scale to mean that cost rental can have an impact on rents across the wider sector.
“That’s the ultimate policy objective of the cost rental model and this requires that we look to attract investors to achieve moderate but consistent and sustainable levels of return on investment.
“To this end, I intend to include provisions in the legislation that facilitate equity returns but that allow for those returns to be capped at acceptable rates. Alternative funding streams, such as the European Investment Bank, international pension funds and other parties interested in this long-term and sustainable form of housing may play a central role in the delivery of cost rental homes that scale into the future.”
The report indicates that State support for cost rental will not distort the housing market, but will contribute to a “properly functioning housing system”. It confirms that such support is in line with European Union rules known as services of general economic interest, which are decided by member states, such as Ireland.
Prof McKenna said approved housing bodies should have a key role in delivery and management of cost rental homes as it “chimes with their non-profit mission”.
“To ensure that these cost rental homes remain truly affordable, this model must be large-scale and long-term,” Prof McKenna added.
“To protect State investment, safeguards are needed to ensure that these homes don’t become part of an offshore fund’s asset portfolio. Equally, tenant purchase would completely undermine the economic basis of the cost rental model in Ireland.”