Wednesday 23 October 2019

State admits there is a risk of developers reneging on social housing agreements

The Government relies heavily on
The Government relies heavily on "turnkey" units to meet the country's housing demand (stock photo)

Michael Cogley

There is "always a risk" that private developers will renege on agreements to build social housing, the Department of Housing has admitted.

It follows news that a developer walked away from its deal to sell 36 social housing units to an approved housing body.

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The developer has since decided to sell the units privately, which are being advertised for prices between €210,000 and €245,000.

The move has sparked fears that it could undermine a major part of the Government's social-housing pipeline.

The department said that the developer had made a "commercial decision" to renege on the sale.

"It must always be borne in mind that due to the nature of development most construction projects have intrinsic risks, irrelevant of the contract and construction type," it said in a statement.

"However, there is always a risk to the housing body or the local authority that the developer will renege on the contract for various reasons improved market value, financial or legal issues, or as mentioned above issues around compliance and certification may arise."

The Government relies heavily on "turnkey" units to meet the country's housing demand.

Turnkey units are homes typically purchased off plans from developers.

Contracts used by the State are similar to those used by normal homebuyers buying individual houses, usually involving a deposit and final payment upon completion. These agreements leave the State open to a developer reneging on the deal or being gazumped by another buyer.

The department insisted that neither has been reported as a "significant issue".

Rather than buying from private parties and competing with first-time buyers, opposition parties have repeatedly urged the Government to build on its own land.

Last year the State spent €125m buying new homes off private developers. Councils in Dublin, Cork, Kildare and Waterford bought 466 turnkey homes in 2018.

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