Wednesday 17 January 2018

Taxpayer to fund developers - with no guarantees on prices

Under the terms of the €225m so-called Local Infrastructure Housing Activation Fund, developers and local authorities were required to broker deals where it was agreed 40pc of all new homes would be sold at prices at least 10pc below market rates. Stock photo: PA
Under the terms of the €225m so-called Local Infrastructure Housing Activation Fund, developers and local authorities were required to broker deals where it was agreed 40pc of all new homes would be sold at prices at least 10pc below market rates. Stock photo: PA
Paul Melia

Paul Melia

Major developers are in line to receive millions of euro in taxpayers' money to help offset the cost of building homes - but there are no guarantees they will be affordable.

The Government has committed to providing funding for global firms including Lone Star, Starwood Capital and Hines which jointly control assets worth billions of euro in Ireland and across the globe to help build roads and other infrastructure needed to open up land for housing.

Under the terms of the €225m so-called Local Infrastructure Housing Activation Fund (Lihaf), developers and local authorities were required to broker deals where it was agreed 40pc of all new homes would be sold at prices at least 10pc below market rates.

They could alternatively strike a deal to reduce the cost of each unit, in return for receiving taxpayers' money.

But the Irish Independent has learned no agreements have yet been reached, despite a July deadline passing. No money has been transferred to developers or councils.

Local authority sources say only a "handful" of affordability agreements, which would allow key workers to buy homes in built-up areas, have been sent to the Department of Housing for approval.

The Luas stop at Cherrywood in south Dublin. Photo: Steve Humphreys
The Luas stop at Cherrywood in south Dublin. Photo: Steve Humphreys

Not until deals are concluded can monies allocated under Lihaf, announced last March, be drawn down.

The major players involved also include Kennedy Wilson, and between them they control assets valued at billions of euro across the globe. They are landowners, or in negotiations with local authorities about building homes on publicly-owned sites.

Big players in the Irish market include Cairn Homes, which is named by councils as being involved in seven separate developments. Receivers acting on behalf of Nama are also in line for State support, as are developers including Gannon Homes, Castlethorn Construction, Ballymore and Cosgrave.

In all, more than 50 developers or agencies are involved.

An examination of application documents sent to the Department of Housing in October last year shows in many cases, developers refused to set out concrete proposals to ensure homes were delivered at affordable prices.

In one case, a council advised that a developer suggested if the Lihaf funding was not forthcoming, the profit margin on a home would be reduced to 10pc. This return would not be sufficient to allow investors to fund the scheme. In Cherrywood, where a new town on lands controlled by 11 owners is planned, Dún Laoghaire-Rathdown County Council told the department housing prices in the county were a "significant outlier" compared with other areas. It added that owners would provide land for roads and infrastructure free of charge, in return for "offsets" in development contributions which would help reduce house prices. Despite a requirement to set out how the affordability condition would be met, other developers merely stated they were "satisfied" to discuss delivery of affordable housing.

Cork City Council said, in relation to a site on South Docks, that it was "premature" to set out how affordability would be achieved. It suggested that viability on the site was "borderline", and that measures such as VAT reductions should be considered for affordable units.

On a site in Maynooth, Co Kildare, the council said no commitment on affordability had been secured, but that it had received confirmation that the "quantum of affordable housing will be proportionate to the cost of the infrastructure".

In some cases the developers, or a group of developers, directly control the landbanks. In others, they are working with local authorities to provide homes on council-owned land or in partnership.

Lihaf only applies to large-scale developments of more than 500 units on Dublin sites, and more than 200 outside the capital. Some 74 applications were made for funding from 21 of the country's 31 local authorities, totalling some €800m.

Some 34 were approved across 15 councils. The total cost of the projects is €226.46m, of which €169.65m will be funded by the exchequer, and the remaining €56.81m by local authorities.

More than half (€113m) will be provided to the four Dublin local authorities and a further €46m to Cork city and county councils.

In return for funding, developers and councils have committed to provide at least 22,830 new homes across all sites by 2021. It's also proposed that over the longer term, an additional 46,000 units can be delivered on these sites.

The Department of Housing confirmed no agreements have been finalised.

"The department currently has a number of both draft and provisional final agreements from a number of local authorities, which we are in the process of examining to ensure that they ascribe to the criteria set down in the terms of the fund," it said in a statement.

Irish Independent

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