Leasing of new houses not a bailout, says Minister

MINISTER OF State for the Environment Michael Finneran rejected the “old hairy chestnut’’ that the Government was bailing out builders in its social housing plans.

He said: “Were we to buy houses tomorrow morning, who would provide them other than builders.’’

“This year, builders will provide the houses that my department has supplied €1.2 billion to construct and acquire. This is the long and the short of it.

“There is no bailout. My job is to try to get as many houses as possible for the 55,000 people on our housing lists.’’

The Minister of State was responding to Labour environment spokesman Ciarán Lynch who asked him about the anticipated overall cost, over a 20-year period, of the scheme for local authorities to lease new houses for social housing.

Mr Finneran said that some €20 million had been set aside by his department this year to support the leasing of at least 2,000 houses.

The primary focus in negotiating leasing costs would be the delivery of value for money. He expected that authorities should be able to secure them for at least 20 per cent below market value.

That reflected an element of risk, with the vacancies, management and maintenance responsibilities being transferred to the housing authority.

The property owner would remain responsible for any structural matters, he added.

By way of illustration, said Mr Finneran, a Dublin authority might lease a dwelling at €1,000 per month, assuming a current market rent of €1,250 for a three-bedroom property.

Over a 20-year period, on a fixed-price basis, this would cost the authority approximately €240,000 as compared with the current average cost of €330,000 to purchase a new home in the Dublin area.

This would exclude the cost of purchasing such a unit.

“When this is factored in, the total cost to the State would be more than €520,000, which would be more than double the cost of leasing the unit,’’ Mr Finneran added.

“Social housing tenants accommodated in leased properties will be charged a differential rent in the normal manner.

This rent will be used by the authority to defray the costs of management and maintenance of the property.’’ Mr Lynch estimated that the sums involved in the proposal amounted to about €300,000 per unit on a lease basis over 20 years, after which time the property would be handed back to the developer at an increased market value.

“The Minister of State would have spent less had he chased their cost value. He might even have got them for below the €200,000 that he has cited, perhaps at €150,000 or €140,000,’’ Mr Lynch added.

“Is this a proposal to help people on social housing lists, or is it a bailout for developers who cannot get rid of properties ?’’ Mr Finneran said that the scheme was for this year, and it might vary from January 1st next year.

“For example, we might decide to move to rent to purchase. Today’s options allow us to avail of properties on the market, in respect of which I have set aside €20 million,’’ he added.

“People can rest assured that this option will be supported over the 10 or 20 years.’’