The Ó Cualann model is mentioned in Aoife Moore’s article article ‘Many issues unresolved in scramble to get coalition deal done’ (Irish Examiner, June 11).
There appears to be some misunderstanding in Fine Gael about how the model works. There is a perception that providing affordable housing is expensive for the state — it is not.
Affordable purchase, where the land is provided at a discount by the state or local authorities even if development levies are waived, is at worst cost neutral, and can actually contribute directly to the exchequer.
This is because as soon as the house is sold, the State gets 13.5% in Vat, 1% in stamp duty and 10.5% minimum in other taxes collected during the construction process, eg, PAYE and USC paid by construction workers, consultants, managers, etc.
If we assume the net cost of a new A2 rated, three-bedroomed house is €200,000, the State will collect at least €50,000 for each house sold and the subsidy in the form of discounted land and waived development levies comes to considerably less than this.
Construction finance is sourced privately, off balance sheet, from banks or investors and this is repaid by purchasers’ mortgages.
Affordable purchase, therefore, is cost neutral, even if the land is provided by the State.
People who benefit from the Ó Cualann model also have more disposable income to spend in their local community.
For every 1,000 affordable homes an extra €6.5m of income is generated in the local economy each year. This can have a huge impact on local businesses especially in the post Covid-19 era.
To conclude, the Ó Cualann model for affordable housing can and should be replicated and scaled, at no cost to the exchequer, in all large urban centres around the country and in other areas of high demand.