What Does Affordable Rental Mean . . . and for Who?

Towards the end of last year, one of the biggest debates at Dublin City Council was what should go on the scattered lands it was looking to work with private developers to put to use.

Councillors eventually voted for a mix of 50 percent private residential, 30 percent social housing, and 20 percent affordable housing for these council-owned sites.

But it was unclear exactly what “affordable” meant for those sites at Oscar Traynor Road in Coolock, O’Devaney Gardens, and St Michael’s Estate in Inchicore.

“We feel affordable rental is the best option, but we’re keeping the option of affordable mortgage there as well,” said Assistant Chief Executive Brendan Kenny, back in January.

There are an estimated 1,350 homes and apartments planned for the lands, and 270 of them are supposed be affordable housing.

But what does that mean, and who should get access to them?

Developing Plans

Right now, that still hasn’t been decided, said Sinn Fein Councillor Daithi Doolan, who chairs the council’s housing committee.

The council is looking at two different models in other countries to see what has been developed there, he said. One would be to use voluntary housing associations to build and run affordable-rental homes.

The other would be for a large investment company, such as an insurance company, to make a long-term investment and then retain ownership of the properties, he says. (They would likely be apartments.)

“It is something we absolutely need to address for people who don’t want to buy, or can’t buy, and who don’t qualify for social housing,” he says.

Doolan says he thinks the council is leaning towards an affordable rental model, whereby the rent is set at 70 percent of market rates.

And he says he would like to see housing associations build and run the schemes, rather than private developers.

“I’d be leaning more towards the housing associations myself as it would be more transparent and accountable,” he says.

Housing associations – also known as “voluntary housing associations” or “approved housing bodies” – are independent, not-for-profit charities that provide housing.

Housing Associations

They say they’re ready. “This could be done tomorrow and it would pay for itself,” says Simon Brooke, head of policy at Clúid Housing.

“The only thing the state would need to do is give us a loan for the initial 20 or 30 percent, which they would get back,” says Brooke.

Brooke says that Clúid Housing would use a model similar to the one they use to build social housing at the moment.

Housing associations get a loan from government for between 10 percent and 30 percent and borrow the rest from the Housing Finance Agency, he says. They pay the state back in full, but they pay them last.

If the state were willing to lend them 20 or 30 percent of the cost of building the affordable properties, he says that they could borrow the other 70 or 80 percent and use the income from tenants to repay that loan.

When the larger loan was repaid they would then repay the state. Ultimately, the housing association would own the properties going forward and could then rent them out at a low cost to low-income families.

He envisages that tenants of affordable housing would pay according to their income.

“That is viable and that would work. In the long term, the state would have a growing stock of housing for rent, that could be rented out at very low rents without any government subsidy at all,” Brooke said.

But some are unconvinced by the idea of depending on housing associations.

Workers’ Party Councillor Eilis Ryan says the state should build the housing itself, tying rent to income. It would benefit from greater economies of scale, and can borrow at the lowest rates, she argues.

Alternatively, researchers at the Nevin Economic Research Institute argue that there should be a commercial semi-state set up by the government to provide a mix of social and affordable housing.

In this vision, tenants pay a rent that covers finance and construction costs and low-income families are supplemented through existing schemes.

Government Help

Above the local-authority level, the government has also been thinking about affordable housing, and how to provide it.

In its Strategy for the Rental Sector, published in December 2016, the government committed to delivering some affordable rental accommodation.

“The cost of providing rental units is to be permanently reduced by lowering the initial investment and development costs for providers,” said a spokesperson for the Department of Housing.

That could be for housing associations or private developers, they said. (It’s unclear, though, how the state would ensure that any savings to private developers would be passed on to tenants.)

This would mean that apartments or homes could be let at below-market rates, without the need for ongoing rental subsidies, he said. Local authorities in so-called rent-pressure zones, including Dublin, will secure sites and examine proposals from interested providers, he said.

“There is a group of people who cannot afford to buy and they cannot afford to pay market rents, and the government has acknowledged that for some time,” says Brooke of Cluid Housing Association.

The government’s effort would help keep costs down for any builder, be it a private developer, a housing association, or the state. This could make affordable housing more affordable.

Tried and Tested

UCD lecturer Michael Byrne, who is a member of the Dublin Tenants Association, has been looking into existing methods of public-housing provision in Austria and Denmark.

Austria provides 22 percent of their population with affordable housing, and they spend around the same as Ireland, which provides just 8 percent of people here with public housing, he says.

In Austria, the housing associations are big, well-established and efficient, Byrne says, which is really important when you are providing housing.

They borrow start-up capital of 10 percent of the costs from the city council and secure the rest from private banks, he says. The major loan is not guaranteed by the state, so it is totally “off balance sheet” for the state.

Banks are happy to lend to these housing association as it is a well-established system. “It‘s very low-risk, so they can borrow at very low rates, ” he says.

Byrne acknowledges that this might be more difficult in the Irish context because the set-up would be less familiar to some lenders, but says that credit unions here have expressed an interest in lending money for public housing.

In Austria, public housing is largely self-financing, says Byrne. “The state doesn’t really subsidise it, but nobody makes profit from it either, and it can provide better housing cheaper than the private sector.”

Both Austria and Denmark tie the cost of rent to the cost of the property, which assists them when borrowing.

“If you tie it to cost you have a clear revenue stream,” Byrne says. If the tenant’s income falls, she or he can claim rent supplement in both Austria and Denmark to help cover the rent.

But for Who?

There’s another important question in addition to which model should be used to provide the affordable rental homes. Who should be eligible to live in them?

Councillor Ryan said she asked Dublin City Council that and was told that it would not be for people who qualify for social housing.

“So it will only be people on more than €35,000 a year, who will be able to get the affordable rental,” she said.

(Neither Dublin City Council nor the Department of Housing Press Office responded to queries about who they think would be eligible for affordable-rental schemes.)

As Brooke of Clúid sees it, people who qualify for social housing should be able to apply for affordable housing too.

He says it should be open to anyone who is spending more that 30 percent of their income on their rent.

“There is a generally agreed international measure of affordability, which is that if you are paying more than 30 percent of your income on rent, you’re in trouble,” says Brooke.

In Denmark, there are no income thresholds for public housing, and in Austria they are so high that 80 percent of the population qualifies, says Byrne. The principle is that everyone should have access to public housing.

There are waiting lists and sometimes lotteries are used, says Byrne. But as he sees it, it is good that there is a genuine mix of incomes in public housing in those countries in social housing.

That could work in Ireland too, said Brooke of Clúid. You would simply have an income qualification, and after that you would have to do a lottery, he said.