Council Signs Agreement to Lease Social Housing from Bartra

Scrubby grass covers the big vacant lot behind green padlocked railings on Blackhall Place, just south of a pharmacy and hairdressers, on a busy main artery through Stoneybatter.

If, as planned, 23 apartments are built to fill this gap in the street, they could be the first in the city leased to Dublin City Council for social housing under a scheme brought in last year.

The council has signed a “lease for agreement” for the homes with Bartra Real Estate Ltd under the enhanced social-housing leasing scheme, said a council spokesperson, recently.

The enhanced leasing scheme, introduced in January 2018 by the Department of Housing after meetings with, and submissions from, investment funds and developers, was drawn up to lure more private investment from bigger players into social housing.

It’s a way “to leverage off-balance sheet funding opportunities” and it “can represent good value in the long-term for the state”, said a spokesperson for the Department of Housing.

But growing leasing from for-profit companies hasn’t been welcomed by all. Some see the enhanced scheme, and its continued roll-out, as doubling down on an expensive reliance on the private market for social housing. Essentially, as the state continuing to rent, rather than building to own.

There was some logic to leasing from private players when the department had no capital funding to build social homes after the crash, says Sinn Féin housing spokesperson Eoin Ó Broin.

He ultimately disagrees still that decision, he says. But “maybe that’s justifiable, in 2009, 2010, 2011 and 2012. It’s not justifiable now”, Ó Broin says.

Cropping Up

The Stoneybatter site isn’t the only development that Bartra has been hawking as potential social housing to lease through the enhanced scheme. It’s set a target of more than 1,000 social homes over the next few years.

On Poplar Row in Ballybough, Bartra own a site with a long-empty dark-grey industrial building – once a car dealership.

It got permission in March for 39 “build-to-rent” homes there – although since that was granted, it has reapplied to add back in an extra storey that planners lopped off the first time around.

That’s been offered to the council too, show emails between Bartra’s Hazel Jones and the council’s Brendan Kenny.

Other companies have said publicly they’d like to, too.

Platinum Land, the owners of the Chivers site in Coolock – where they’ve big “build-to-rent” towers planned after councillors rezoned the land from industrial to residential – said earlier that they planned to offer apartments to the council under the enhanced leasing scheme.

As with Poplar Row, it’s unclear whether that’ll actually go ahead.

Rebuilding Ireland, the government’s 2016 flagship housing policy, says that local authorities and approved housing bodies will lease 10,000 homes long-term by 2021, to provide as social homes.

Five thousand of these would come from NAMA’s National Asset Residential Property Service (NARPS), which buys properties from NAMA debtors and receivers and leases them to councils or approved housing bodies.

The other 5,000 would be through either the “repair and lease” initiative, whereby councils pay to repair vacant homes and offset that against long-term leases for social housing, or other long-term lease arrangements – such as this enhanced scheme.

Slow Uptake

Introduced a decade ago, longer-term leases for those eligible for social housing have been slow to take off, even as short-term leases, such as those through the Housing Assistance Payment (HAP), have boomed.

In 2018, Dublin City Council took long-term leases on 61 new homes for social housing, far below its target of 440, council figures show. Council targets for leasing rise over the next four years, with plans to add 460 this year, 652 in 2020, and 653 in 2021.

Take-up of these schemes has been low in big part because the money on offer hasn’t been as good as other market options, says Ó Broin of Sinn Féin.

Most landlords are small, with one or two properties, too, and not thinking about leases for 20 years, says Ó Broin. “They’re short-term in their thinking.”

But while there was slow uptake in the first years of long-term leasing, Department of Housing officials didn’t give up on the idea.

From 2015, they worked to design a scheme that would offer “additional incentives” and “better facilitate” private investment from large institutional investors in social housing.

In January 2018, Minister Damien English launched the new “enhanced” leasing scheme – this time for bigger landlords: “to target property developers and investors who are in a position to deliver social housing on a reasonable scale”.

The government’s aim is to lease 2,500 social homes this way by 2021.

Under the older scheme, the property owner isn’t responsible for maintenance – in the newer one, it is. In the older scheme, the property owner was to get 80 or 85 percent of market rates – in the newer one, it’s 95 percent.

Under both schemes, when the lease is up, the property owner still owns the homes. So, essentially, the council would spend 25 years or so paying rent and not own the homes in the end.

Ó Broin of the Sinn Féin says he thinks the “real scandal” is that “industry got to design” the enhanced leasing scheme.

Government officials met with fund managers and investors of different stripes, including well-known players such as Bartra and Ires REIT.

Department officials have also met with representatives from Arcadis, McAvoy Group and Marcon Capital, with Bolt Capital and Venn, and others, show minutes of meetings.

Fund representatives had several asks: from guarantees of continuity in payments, to access to state land, to a higher rental payment, show emails and memos from Department of Housing officials.

Some requests weren’t possible, officials said in memos, such as a request for upward-only annual rent reviews.

More Interest

Eighteen months since it was launched, the enhanced leasing scheme hasn’t delivered any housing yet in Dublin.

But more than 100 homes are being considered in the Dublin area for enhanced leasing, said a spokesperson for the Housing Agency, which is managing the scheme, in early June.

They wouldn’t say from who, where, or at what cost. That “could prejudice” discussions and the delivery of “much-needed social housing”, they said.

“The lead-in time for occupation was always likely to extend beyond 2018 in most cases,” said the spokesperson.

Beyond the enhanced scheme though, too, “there has been a marked increase in the number of homes leased through standard long-term leasing arrangements because of the increased market interest”, they said.

Are They Good Value?

Some lease arrangements, the ones whereby an approved housing body leases and ends up as the owner, say, are reasonable, says Ó Broin of Sinn Féin. “They’re pretty good value for money.”

But leasing homes in private ownership and not owning them at the end – the kind of lease for which the council has just signed an agreement with Bartra – isn’t good value, he says. “They’re the super expensive ones.”

Leasing for 17 or 18 years, he says, would cost roughly the same as the capital needed to build a home. “So, after 20 years, basically, you start to lose significant money financially.”

Meanwhile, the lifecycle of a council house could be 60 or 80 or 100 years, he says. “Over an 80-year lifespan, you’re paying four times what you would have paid.”

Bill Nowlan, founder of Hibernia REIT and more recently Urbeo Residential, says the cost of providing social housing comes down largely to the cost of money, and who is using it.

State borrowing is the cheapest money, approved housing bodies are somewhere in the middle, while the most expensive is private equity, he says. Higher financing costs means higher rents.

“It probably costs the state three or four times as much per annum to go for the advanced leasing system than it would be to borrow the money and pay interest on the debt,” said Nowlan, who was also part of the consultations around growing investment in social housing.

In areas “where prices within the general housing market are higher”, the cost of leasing is higher than construction or acquisition, found a 2018 spending review by the Department of Public Expenditure and Reform. (The report refers to Fingal and Meath.)

But a spokesperson for the Department of Housing said that long-term leasing “can represent good value in the long-term”.

Figures for upfront capital spending don’t capture social housing costs in full, they said.

In particular, the cost of managing and maintaining homes, or dealing with any structural issues or renovations which “under the enhanced leasing scheme, are borne by the lessor”.

Alison Gilliland, a Labour councillor and head of Dublin City Council’s housing committee, says she would prefer the council be responsible for maintenance. “It can be confusing for tenants. It could go around in circles before the issue is actually resolved,” she says.

Over Time

For tenants, long-term leases do offer more stability than tenants get under shorter leases such as the HAP, says Gilliland.

“Fundamentally, we need to build and own it ourselves,” she says. But “I would rather us enter into long-term leases like this one, than paying out HAP.”

Ó Broin says that there’s still an issue later down the line if, when the 25-year lease is up, that isn’t renewed. “Either way, either the tenant loses out or the taxpayer loses out.”

Instead of leasing, more money could be spent upfront to create mixed-income developments that cover their own costs in the future, he says.

“It’s not just that it would be cheaper to frontload the capital now, but if you change the model to have social rental and cost-rental in the same developments, actually, ultimately it would be self-financing,” he says.

Nowlan says he doesn’t think that local authorities have the competence at the moment to go back to building housing on a grand scale – and that one issue at the root of that is that rents for social homes don’t cover the costs of maintaining and managing them.

“We have a broken system, and the state are having to cope with the short-term consequences of trying to operate within a broken system,” he says.

“The right thing to do long-term is to change the system and build more housing directly,” he says. But “politically, they’re trapped”.

To solve it, there needs to be a move to a “cost-based rent” for social housing with those unable to cover it given rent supplements to support them, Nowlan says. “That’s done all over Europe.”

Dublin City Council wouldn’t say how much rent per month had been agreed for the Bartra complex in Stoneybatter once it’s built. “We are not in a position to give any further detail on the lease payments,” said a spokesperson.