Hundreds of affordable homes held up because of funding woes, says not-for-profit developer

Ó Cualann Cohousing Alliance, the not-for-profit developer, launched a new round of 32 social homes for older people in Parkview in Ballymun on Tuesday.

The co-op has planning permission to build affordable purchase homes on another site in Ballymun too – but those are held up because of the way the government funds such schemes, said Hugh Brennan, the CEO of Ó Cualann.

And, yet more affordable homes that are held up in South Dublin too, he said.

The state provides a subsidy for affordable homes, but doesn’t cover the initial costs of getting a project off the ground, says Brennan. “There is an affordable housing fund set up if you’re building on local authority land but it comes too late.”

Brennan says he has been pushing for reform so he was surprised to read in The Currency that Dublin City Council had paid Bartra, a commercial property developer, in staged payments to build affordable homes at O’Devaney Gardens in Stoneybatter.

Brennan says the major difference is that Bartra didn’t need the money. “If they did the deal with us they did with Bartra we would be absolutely laughing,” he says. “We wouldn’t even need to go to a bank.”

As the housing crisis continues to deepen and construction costs increase, a puzzle has been how to deliver affordable homes in Dublin as fast as possible.

Dublin City Council hasn’t responded yet to a query sent on Monday asking whether Ó Cualann could get a similar deal to help it crack on with affordable housing projects and save money on finance costs, savings that would be passed on to homeowners.

A spokesperson for the Department of Housing says it uses many different funding models.

“Stage payments are supported by the Department where the procurement process undertaken by the local authority or Approved Housing Body and the contractual arrangements they enter into it provide for them,” says the spokesperson.

The financing question

For a developer building a local authority affordable housing scheme, the government provides a subsidy of €50,000 to €100,000 per home, depending on the density of the housing development, says Brennan.

If the all-in cost of building the home is €360,000, and Ó Cualann gets the €100,000 subsidy, it can then sell the home to a homeowner for €260,000, he says. It sells to homeowners at cost, he says.

At the moment, the challenge is finance, he says. Especially for the early steps in a housing project, to cover site assessments, architects’ fees and other professional fees for the planning permission application, he says.

“You scrabble around and you look to get it, and we have some supporters who are prepared to invest in Ó Cualann at a reduced rate,” he says.

A philanthropic investor loaned the housing co-op €400,000 at 0 percent interest so it could get cracking on the designs for the affordable housing in Parkview in Ballymun which it launched yesterday, he says.

“Just because they believe in what we are doing,” says Brennan. “They shouldn’t have to. The state could easily step in there.”

After it finds a way to fund those initial works, Ó Cualann still has to approach commercial lenders to try to secure finance to build the homes.

Most other housing charities build and manage social housing, so they own property which they can use as equity to borrow against and then build more homes, says Brennan.

Because Ó Cualann sells all the homes it builds to new homeowners it doesn’t own property to use as equity, he says.

Ó Cualann is part of a partnership that got planning permission to build 625 homes, including 383 affordable, in Killinarden in South County Dublin in March 2023, says Brennan, but it has struggled to secure sufficient finance to build out the scheme.

In September last year, the Land Development Agency offered to buy Ó Cualann out of that project in Killinarden but hasn’t yet, says Brennan. So that is stalled.

What should happen?

Brennan says that despite escalating costs, the government’s affordable housing subsidy is enough to bridge the gap to make their homes affordable for buyers.

If it were paid at the beginning of the process though, he says, Ó Cualann would be building more affordable homes.

And, the struggle to secure finance delays development, and construction costs keep rising, so ultimately that means higher house prices, he says.

“Either a small builder working on social homes, or an AHB like ourselves, who don’t own or manage any property, you have to source all that yourself,” he says.

Small building contractors provide better value than large developers because they tend to have a lower profit margin, says Brennan. “There are small things they are missing that could get small builders back in the business”

He can’t understand why a major developer, that didn’t need the money, got a better deal than small building firms and housing charities that are genuinely struggling to secure finance.

“What has caused most angst is that Bartra managed to get 100 percent finance for the affordable homes in O’Devaney,” says Brennan.

According to The Currency, Dublin City Council is funding Bartra to build affordable homes at O’Devaney Gardens with monthly payments. When Bartra sells the affordable purchase homes to the homeowners nominated by the council, it will then repay the council.

That’s exactly the type of deal that Brennan says could help small builders and social developers to crack on with supplying affordable homes, quickly.

“If you are prepared to do it for a developer like Bartra, why won’t you do it for your own approved housing bodies, who have a track record?” Brennan says.