Instead of Buying Social Homes in Big Private Developments, the Council Is Shifting to Mostly Leasing Them Now

So far this year, Dublin City Council has bought just one social home from developers of big schemes, while it leased 48, show council figures.

By a provision in law known as “Part V”, councils can buy or lease 10 percent of new homes in big private developments at a discount from the market rate, to use for social housing.

It’s supposed to be a way to ensure a supply of social housing and socially mixed communities.

The government’s housing plan, Housing for All, says that councils will move away from leasing social housing by 2025.

“The Government and the Minister fully acknowledge that direct build social housing is the most efficient way of adding to the national housing stock,” says a spokesperson for the Department of Housing.

A council spokesperson said they leased these 48 homes, instead of buying them, for practical reasons.

“There has been an uptick in leasing due to an increase in Build-to-Rent developments,” they said. “Leasing has proved to be the more practical delivery option for Part V units due to the complexity of the BtR model.”

Sinn Féin housing spokesperson Eoin Ó Broin TD says that Dublin City Council can’t buy the homes because they are too expensive. The Department of Housing sets a cap on what local authorities can pay developers for social homes.

The same constraints don’t apply to leasing deals, Ó Broin said. But the leasing arrangement is even worse than paying over the odds to purchase the home.

“It’s particularly disadvantageous to the taxpayer because it costs a lot of money and you don’t own the property in the end,” he says.

Another Side to Build-to-Rent

The trend so far this year of the council leasing most of its Part V homes rather than buying them is a reversal from past years.

Between 2019 and 2021, the council bought 288 homes and leased 32 through this route, its figures show.

Said Social Democrats housing spokesperson, Cian O’Callaghan TD: “It’s another negative consequence to the over-dominance of build-to-rent in Dublin city.”

“What happens in 20 years when all the leases run out?” he said.

If the council renews the leases for another 20 years it will waste even more money and the state still won’t own the homes, says O’Callaghan. “It’s incredibly bad value for money.”

But if the council doesn’t renew the leases the tenants will face homelessness, he says.

The chief executive of Dublin City Council, Owen Keegan, flagged concerns about the dominance of build-to-rent and how that affects the supply of social homes, in his report on the city development plan.

The council analysed data from planning applications, and projected that in 2024, more than 80 percent of all of the social homes the council gets through Part V will be from built-to-rent schemes.

Build-to-rent apartment complexes adhere to different standards and there are issues around whether they are suitable for the needs of social tenants, including families, wheelchair users and vulnerable households, he says.

A spokesperson for the Department of Housing says that build-to-rent homes are not built to a lower standard than other homes in two key respects.

The guidelines for build-to-rent “allow for some limited design flexibility”, but “both the minimum apartment size standard and dual aspect ratio are identical to those set out as requirements for other apartment developments”, said the spokesperson.

And build-to-rent developments must include additional facilities and amenities like laundries and communal areas, says the Department of Housing spokesperson.

“A developer may propose flexibility in storage and amenity space for individual units on the basis of alternative, compensatory communal support facilities and amenities,” says the department spokesperson.

However, one significant difference is that build-to-rent complexes do not have to provide private outdoor space, like a balcony or a terrace. There are also more apartments permitted on each landing and often higher ratios of one bedroom and studio apartments in complexes.

Winding Up or Down?

“The Government will phase out the use of current leasing models by 2025,” says its Housing for All plan.

But O’Callaghan says that councils appear to be signing more leasing agreements than ever. “They are actually winding it up and moving towards it.”

The Dublin City Council spokesperson says the council isn’t concerned about the proportion of homes being leased under Part V instead of purchased.

“There is no concern around the leasing figures as although our preference is to acquire, we also have leasing targets to meet under the ‘Housing for All’ plan,” says the council spokesperson.

The spokesperson for the Department of Housing says Dublin City Council has a target to lease 480 social homes this year. It should lease 475 social homes in 2023, they said, 410 in 2024 and then taper down to 100 in 2025.

Ó Broin, the Sinn Féin TD, says that Part V leasing is a symptom of a wider problem in Dublin city, in that the council can’t afford to buy homes being built by private developers.

Most new homes in Dublin city are apartments, which are expensive to build, he says. On top of that, the land was often very expensive and many new apartments in central parts of the city are aimed at the high end of the market and so are finished to a high specification.

Even with the Part V discount, the developer might be looking for around €580,000 to €600,000 for an apartment, he says. “The council can’t pay that, so they enter into a leasing agreement.”

A spokesperson for the Department of Housing said that its acquisition cost guidelines for Dublin City Council for a two-bed apartment set a range of between €221,200 and €478,900, with an average or “benchmark” of €350,050.

Ó Broin says there are clear limits on what a council can spend when buying social homes, but no equivalent constraints on what it can spend on leases.

“Dublin City Council has a particularly acute problem,” says Ó Broin. “The all-in development costs are so far above the cost ceilings, that delivering social and affordable homes is going to be increasingly difficult.”

Construction inflation isn’t a major causal factor, he says, because the price of homes in Dublin city is often 50–100 percent percent above the cost ceilings.

“The real issue here is that what has happened in Dublin City in terms of the speculative impact of institutional investment capital is creating a real problem,” he says.

There isn’t much the council can do, Ó Broin says. It can accept homes elsewhere if the developer has cheaper ones to offer, but then there will be no social homes in certain areas.

The only real solution is for councils to ramp up the delivery of big public housing projects, particularly in Dublin, he says, but that will take time.

“There needs to be an emergency engagement between Dublin City Council and the department to work out how are they going to meet the, albeit very modest, social and affordable targets for the city,” says Ó Broin

“In light of the fact that virtually nothing that is being developed by the private sector is coming in under the cost ceilings,” he said.

[This article was updated at 4pm on 10 August 2022 to include an example of the acquisition cost guidelines laid out by the Department of Housing.]