The decision by Clúid, the housing association, to cancel the cost-rental portion of its flagship development of 140 homes in the Dublin suburb of Cabra has raised important questions about the Government’s plans to deliver thousands of such homes under the revised housing strategy published late last year.
Cost-rental homes are seen as a long-term alternative to purchasing and are aimed at those who fall between the stools of eligibility for subsided social housing and having the wherewithal to rent privately or purchase a home.
There is no target for cost-rental homes in the current housing plan, but they are included in a wider affordable housing target of 90,000 homes by 2030. The previous plan set a target of building 2,000 cost-rental homes a year.
Demand for cost-rental homes is high. Research by the ESRI published this month noted that the schemes launched to date have been oversubscribed. The reason for their popularity is that rents charged on cost-rental homes can be up to a third less than comparable private schemes. As the name implies, the rent is linked to the cost of the development and does not include the profit that a private developer could expect to make. Approved Housing Bodies or State agencies build them and costs are brought down by the provision of free or subsidised land by the State, plus the availability of grants and long-term low-cost borrowing via the Housing Development Agency.
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The problem that has now arisen relates to the requirement that the estimated lifetime cost of maintaining a cost-rental property must be covered by the rent.
Clúid argues this means the cost-rental portion of its Cabra development will not be financially viable if the association fulfils its objective of charging rents 25 per cent below market rates. The housing body has instead opted to build 40 social housing units, the maintenance costs of which are met on a pay as you go basis from local authority funds.
The extent to which the problem encountered by Clúid could bedevil other cost-rental schemes is not clear. There are number of elements of the Cabra scheme – which is spread over several stories and included lifts – which are associated with high maintenance bills.
However, the problem is not going to go away. Neither is it unique to Ireland. Solutions have been found in other jurisdictions that include breaking the link between rents and maintenance costs by pooling these costs across cost-rental projects and back-stopping them with a central fund. There is no reason why some variation of this approach would not work here. And it should not be beyond the Government to put one in place expeditiously if it is serious about reaching this vital part of its housing targets.
