State cost rental scheme could 'deprive' first-time buyers of homes 

Under the Cost Rental Equity Loan scheme,  approved housing bodies will rent properties to tenants for a minimum of 25% below open market value. Stock picture.

A senior Government official raised concerns the State's cost rental scheme could possibly result in "depriving" first-time buyers of opportunities to purchase homes.

Under the Cost Rental Equity Loan (CREL) scheme, for which €35m was set aside in Budget 2021, approved housing bodies (AHBs) will rent properties to tenants for a minimum of 25% below open market value.

The scheme, which will deliver 390 rental homes this year, aims to assist those on “moderate incomes” who are above the income threshold for the affordable housing list.

It will see long-term loans on “favourable terms” made available from the State to AHBs to cover up to 30% of the development or acquisition cost of new cost rental homes, with the remaining 70% being covered through long-term commercial loans from the Housing Finance Agency.

Correspondence between the Department of Public Expenditure and the Department of Housing, obtained under the Freedom of Information Act, questioned the impact acquiring properties directly from developers could have on first-time buyers.

In an email on September 28 last, Clare Costello, principal officer in the Department of Public Expenditure, said: "Whilst it is comforting to hear that the proposals won’t impact on the AHB’s social housing delivery pipelines, is it not the case then that the AHBs will be competing with other buyers for these properties thus depriving first-time buyers of these opportunities?"

In response, Department of Housing official Robert Nicholson acknowledged there “may certainly be schemes” consisting mainly of houses and duplexes where the “cost rental could reduce the availability of properties” to the first-time buyers' market.

“This is something we would need to be factor in to [sic] the [competitive] application process,” he added.

Ms Costello also raised concerns about the “assumed average acquisition cost”, adding the €400,000 per unit seemed “extremely high”.

She questioned how such a high cost could be justified, citing departmental analysis that the average cost of a two-bed in Dublin City Centre is €275,000.

Mr Nicholson said cost rental would be targeted in urban centres with “acute affordability challenges, likely apartments and initially Dublin centric”, adding that average dwelling costs for recent turnkey schemes were between €336,308 and €350,279 in Dublin.

Sinn Féin’s housing spokesman Eoin Ó Broin said his big concern about the scheme was the rent, which he said will be between €1,000 and €1,300.

He added the cost of renting an apartment in Dublin under the scheme should be between €700 and €900 per month to cater for people who are just above the social housing income threshold.

A spokesman for the Department of Housing said AHBs sourced cost rental homes “prior to them coming on the market” and that over 70% of the 390 homes are apartments or duplexes.

“The long-term intention is that future CREL-funded schemes will have the option of using a design-and-build model, potentially utilising public land, which can bring cost savings but has a longer lead-in time before homes are delivered," he added.