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

Q: Ministers have been told that the cost of fixing homes with crumbling blocks could veer towards €4bn. How has this happened?

A: The cracking of external walls because of deleterious materials like Mica first emerged in 2013 but it wasn’t until 2018 that the Government decided a grant or redress scheme would be needed. This was finally introduced in January of 2020, just before Covid-19 became the number one consideration for nearly two years.

Even then, one of the big topics of discussion centred around the extraordinary nature of the State intervention and the need to put a limit on what would be spent. Because of this, it was decided the scheme would cover 80 per cent of the repair costs, with a €247,500 cap, but this was then upped to 90 per cent. The overall cost was set at €1.4 billion and inflation was not factored in.

The new Coalition found itself under intense pressure from homeowners who said they simply could not afford to repair their crumbling homes, even with the grants. A new enhanced scheme with a far higher grant allowance — 100 per cent of repair costs up to €420,000 — was agreed. By last November, the cost of the scheme had risen to €2.2 billion, which included €400m for inflation.

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The Cabinet was told this week that the cost has risen to €2.7 billion, of which inflation is €550m. But if inflation runs consistently high, the final cost could be as much as €3.65 billion — a staggering figure. Homeowners now say the grant needs to be increased to €460,000. In a move which was potentially designed to take the political heat out of the situation, it now appears there will be three yearly reviews which could allow increases up to 10 per cent.

[ Cost of mica redress skyrockets in nightmare for Coalition ]

Q: But does the Government actually know the final cost of the scheme to the taxpayer, given the figures are rising astronomically?

A: No. Ministers were told in the Cabinet meeting this week that these figures are just estimates and that it is not possible to be definitive because more homes could end up being part of the scheme. It could take years to understand the full scale of the issue, they were told, and more counties could be affected. Naturally, this has caused angst in Government.

It was therefore decided, sources say, that all of the potentially affected homes in Donegal, Mayo, Clare, Limerick, Sligo and Tipperary would be included in the new estimates. On top of that, an extra 1,100 homes were added for other counties, should there be more bad news elsewhere. But in a sense, it is just educated guesswork, and only time will tell.

Q: How are politicians going to ensure the costs within the scheme don’t run away as well?

A: One of the ways the Government has tried to put consistency on the scheme is by asking the National Standards Authority of Ireland (NSAI) to put in place a protocol which would guide engineers and geologists in how to test and categorise the homes. Engineers Ireland also put in place another panel. The Department has, since then, appointed their own quality surveillance teams to to help set “fair and reasonable” grant levels. Only houses with a certain level of damage — specifically cracking of 1.5mm in width — can get access to the scheme. And, as part of the new legislation, the Housing Agency will be tasked with determining what works need to be done. The governance of the scheme will be a hot topic when the legislation comes before the Dáil shortly.

[ Mica reaction: ‘If they are not going to look after us it will never be forgotten’ ]

Q: There has been a lot of talk about larger homes, and the fairness to the taxpayer in fixing these. How is this being addressed?

A: It was agreed on Tuesday that a variable grant rate would be put in place of between €1,730 and €1,562 per square metre. This “reflected economies of scale” in fixing houses above 180 square metres. It was felt a flat rate would disadvantage smaller homes and provide more funding to larger homes than was “necessary or justified”, sources say. This could yet become another bone of contention politically.

Q: What other measures to save on costs have the Government looked at?

A: Another idea was that homeowners could salvage or reuse things like kitchens, bathroom suites, windows, doors, stairs and other house components. The Department felt this could be worth anywhere up to €30,000 but it is understood that a number of issues were raised: the first is that it is not yet mainstream practice in either Ireland or other jurisdictions generally to re-use components, while homeowners pointed out that a lot of this furniture, once taken out of storage, would be cracked or destroyed to such a degree that builders were refusing to re-install them. Another bone of contention has been the issue of energy upgrades.

Some homeowner representatives have pointed out that more sustainable materials should be used in the rebuild given the Government’s climate ambitions but the Mica plan is for the house to be rebuilt on a like-for-like basis, though homeowners can apply for grants from the Sustainable Energy Authority of Ireland (SEAI). It is understood specific new governance proposals are going to be put in place between the Government and the SEAI for these homes.

Q: What about including rental properties in the scheme? Are there issues there?

A: Sources have confirmed that there were concerns too about extending the payment to rental properties, of which there are around 900, at a cost of €160m. The worry was that the State would pay to fix these homes which would then be sold and taken off the rental market, exacerbating problems there. Therefore the new legislation will have a clawback provision that would kick in if the house is sold or taken from the market. The clawback of the grant could last anywhere up to 21 years, sources say.

Q: Anything else?

A: On a final note, making sure this never happens again is the most obvious way to protect the taxpayer in future. Ministers were told on Tuesday that an independent building regulator will strengthen the role of the State in construction. The Housing Agency is currently looking at how other countries do it. Another memo to Government will be brought on this. Meanwhile, a levy on the industry worth around €80 million a year could be up and running by next year, and the Government has pledged that wrong doers will be pursued.