Tuesday 17 July 2018

Small change for buyers as builders handed State funds

But bulk of discount homes will be affordable, minister insists

Stock Image: Bloomberg
Stock Image: Bloomberg
Paul Melia

Paul Melia

Buyers will be given maximum discounts of less than 8pc off the price of a new home under a controversial scheme where developers receive State funding to help boost housing output.

Details of deals struck between landowners and local authorities reveal more than half of 20,000 homes to be built under the LIHAF (Local Infrastructure Housing Activation Fund) scheme will be social and affordable, with maximum discounts of €20,000 on offer.

However, in some cases, discounts as low as €2,100 will be applied, representing less than 2pc, and landowners have also received more than €2m in funding, despite refusing to provide any discounted affordable homes.

LIHAF involves the State investing €195.7m in roads and other essential services to open up land for development. In return, at least 10pc of all units must be for social housing and landowners were also expected to provide affordable homes.

However, in some cases units will be sold at only a tiny discount from the market price. The cost reductions per unit range from €2,171 in one Dublin City scheme at Belmayne, rising to €20,000 at two projects in Cork, at Glanmire and Midleton. Average discounts range from 1.4pc to 7.7pc.

In all, 30 projects across 14 local authorities on public and private land will benefit. Some 19,979 units are expected to be delivered by 2021, of which 3,274 will be social units to be offered to local authorities and housing bodies while another 7,986 will have an affordable element. The rest will be sold on the open market.

Eoghan Murphy. Photo: Doug O'Connor
Eoghan Murphy. Photo: Doug O'Connor

Housing Minister Eoghan Murphy said that if the €195m had been used to build homes directly, it would have delivered fewer than 800. He said the LIHAF model generated a higher return while also opening up lands for development which would otherwise have remained idle.

"This investment will stimulate much wider investment in developing housing on a large scale and we will see a return on this investment in terms of cost reductions on the new homes, with many homes being made available in the next couple of years that will be targeted and priced for first-time buyers," he said.

But housing experts have raised concerns about some aspects of the deals. Among the projects to benefit include one of 620 homes on Cork's South Docks where all units will be build-to-rent. Some 10pc will be for social housing, and the State allowed to rent 40 affordable units for up to 25 years.

The Department of Housing said the units would be rented at a discount, and the funding would help deliver a potential 8,000 homes over the longer term, and represented a "very good return".

In schemes in Cork, Kildare and Kilkenny, where the projected cost of a three-bed home will range from €286,000 to €300,000, landowners refused to commit to providing any affordable homes but have been given more than €2m in funding.

In a number of other cases, there is no detail on the price to be levied on affordable homes and some councils may decide to build clusters of affordable units instead of applying a discount across the entire scheme.

Dublin Institute of Technology housing lecturer Lorcan Sirr said discounts in some cases were so small they could be "pointless".

"Discounts of €2,500 won't even buy a kitchen and may be regardless as pointless," he said. "It's also surprising the department would agree to release funds when there's no agreement on the affordability elements.

"The guys who own this land would have factored in the infrastructure requirements when they bought it, so this is just the cherry on top."

However, in six schemes all homes to be delivered will be social or affordable. On some sites co-owned by the State and private developers, up to 47pc of homes are social units. There are also commitments in other Dublin sites to sell up to 600 homes for €320,000 or less.

On the discounts, the department said the benefit to the State was not just a matter of securing a lower price, but also to open up public and private sites for development.

Irish Independent

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