The Irish Times view on State housing policy: an over-reliance on the private sector

The cost differential between publicly- and privately-developed housing appears to be significant

The cost differential between publicly- and privately-developed housing appears to be significant. Photograph: Cathal McNaughton/ Reuters

The cost differential between publicly- and privately-developed housing appears to be significant. Photograph: Cathal McNaughton/ Reuters

 

Internal Department of Housing figures, published this week, shed light on how much local councils are paying for so-called turnkey acquisitions, which are bought directly from private developers for social housing tenants. In several areas, the average cost of these acquisitions was €350,000- €400,000 per unit and nearly double the cost of the social housing units developed directly by the council.

The department cautioned the figures covered “a range of dwelling types at various price ranges”, while noting that the cost of delivery can vary greatly depending on the area. Nonetheless, the cost differential between publicly- and privately-developed housing appears to be significant.

A recent report by the Society for Chartered Surveyors (SCSI) bears this out. It put the delivery cost of a new three-bed, semi-detached home in Dublin – via the private sector – at €371,311. However, it says for social housing delivery, generally the cost of land (-€60,823), cost of development levies (-€8,800), sales and marketing costs (-€8,400), and finance and developers margin costs (-€59,387) can be removed.

This can amount to savings of around €140,000-€160,0000 per unit, the SCSI says, meaning the three-bed unit should cost between €210,000 to €230,000 to deliver if developed directly by the council. But if it is more cost-effective for local councils to build themselves, why aren’t they?

Is this because local authorities are tied up in red tape when they go to build themselves? Insiders say it takes on average 18-24 months for a council to begin a development once it has jumped through the various approval, value-for-money, tendering exercises imposed on it by central government. Streamlining this process seems to be key to unlocking further housing supply at cost-effective rates as does giving councils greater independence to take on bigger projects. Somewhere along the line we’ve denuded councils of their power. This has led to a gradual erosion of expertise, particularly in areas like housing, and an over-reliance on the private sector.