Today's housing issues can appear complex and irresolvable to many but there is a truly exciting new approach that will provide affordable homes for low and middle-income households and help solve our housing crisis.
It's generally referred to as 'cost-rental' housing and it's the common feature of successful housing systems in Europe where it underpins stability, choice and affordability in housing markets for rental and purchase. Cost-rental schemes are innovative and well-designed, adaptable and inclusive neighbourhoods with high-quality homes providing great places to live and helping achieve the carbon- neutral development model we need to tackle climate change.
In Ireland cost rental would provide mixed-income neighbourhoods where nurses, guards, teachers, retail workers, cleaners, artists, IT professionals and others can live close to their work and in their communities rather than spending hours commuting with huge personal stress and negative environmental impact.
Unlike the market setting ever higher rents, cost rental are homes where the rent is always affordable over the long term as it is linked to both net household income and the cost of building and maintaining the home. Cost rental provides real security of tenure as tenancies are lifetime, and you can make your apartment or house a permanent 'home for life'.
Cost rental is the norm in European countries like Austria, Denmark and the Netherlands where the majority of housing in cities such as Vienna are this form of public rental housing provided by not-for-profit housing companies and public municipalities. Unlike social housing here in Ireland, which has very restrictive income eligibility, cost rental is available to all households. This is a holistic general needs approach to housing provision.
The Irish Government's advisory body, the National Economic and Social Council, has repeatedly recommended cost rental, while the Housing Agency believes "cost-rental public housing should be a major part of the housing we provide".
However, only two cost-rental pilot projects are under way, in Dún Laoghaire and St Michael's Estate in Inchicore. The pace of development is worryingly slow, and rents proposed for a two-bedroom apartment in the Dun Laoghaire-Rathdown project are €1,200 a month. Is this truly affordable?
Genuinely affordable housing is rental/mortgage costs below one-third of a household's net income. Today's average wage of €39,000pa means around €800 a month for housing costs. Cost of rents must, therefore, be between €700 and €900 a month for average earners.
How can we roll out this model? Firstly, we need to restructure our investment pathway in housing so development costs of housing are reduced to levels where cost rental is affordable over the long term. This requires a change to capital and revenue expenditure on housing to allow a unitary rental model to develop where public and private providers are treated equally under fiscal policy and tax relief and subsidies are used to steer investment into long-term, sustainable and affordable housing.
Finance can come from the Housing Finance Agency, European Investment Bank, the Infrastructure Reserve Fund, and credit unions, and State borrowing at very low interest rates. This makes more economic sense than social housing subsidies like HAP where the State pays €800m per year to private landlords but achieves no new investment in housing provision. HAP money should support cost rental as a long-term public investment in affordable homes. This will align with longer-term approaches of EU financial entities looking to invest in Irish housing.
Secondly, a dedicated public homes and community building agency should be set up to roll out new cost-rental development with local authorities, not-for-profit housing associations and housing co-operatives, and limited-profit housing companies. This will create an exciting new housing tenure - affordable community housing. It must be available to all incomes, but initially it must prioritise low and average-income households experiencing the most significant housing stress today. The State can put up the finance through exchequer funding, long-term, low-cost loans, land and infrastructure to make cost rental work. Local authorities and Nama have enough land to build 114,000 dwellings. The IDA, OPW, CIE and other State agencies have significant land. Land Development Agency and local authority plans to dispose of this land must be changed and used to build cost-rental homes, social housing and co-operative rental and ownership. Similarly, Nama land sales should be halted and used for cost rental rather than becoming 'co-living' pods, expensive student accommodation and investment vehicles for speculators.
Unfortunately, Government commitments to cost rental appear more spin than substance. Just as HAP is spun as social housing, family hubs spun as homeless solutions, two cost-rental pilots are being spun as delivery. The Government appears ideologically fixated against the State playing a major role in housing.
Instead private property developer-investor-finance interests clearly dominate policy. This will not work to deliver housing for all. Instead a target should immediately be set to build 5,000 cost-rental homes within 18 months, and aiming for 10,000 per annum within three years. Our housing system remains broken and Government policy is failing. Cost rental is a new vision and a real solution. It's time for the Government to deliver.
Property & Mortgages
The list of grievances at the heart of the Irish housing crisis remains very long. Twelve years after house prices started to fall and close to six years after they began rising again, the problems with housing seem as intractable and contradictory as ever.