Rundale

By Killian O’Sullivan

LDA development in Clongriffin. Image credit: Killian O’Sullivan.

It’s been common in recent years for think tanks and commentators of a broadly centre-left stripe to present cost rental housing as the ultimate solution to the Irish housing crisis. It might be curious for something so technocratic to have a hold on the imagination, yet there has been an extraordinary amount of interest in the concept in Ireland in the last decade. The basic idea – renting out new homes for the cost of building and maintaining them, not for profit – is refreshingly simple, and obviously better than rapacious private landlordism. It also has the attraction of apparently being a tried-and-tested idea, the so-called “Vienna Model”.

However, last November, it was revealed that apartments on the former O’Devaney Gardens site in Dublin will be let for €1,900 for a three-bed – and this on a former social housing site, sold off and bought back from a private developer. How can ‘affordable housing’ be so expensive? One can point to high costs and political choices. However, too much commentary still focusses on an ideal of what cost rental could be, rather than what’s actually being established. What rarely gets noticed is the one truly unique characteristic of Irish cost rental, one that radically diverges from that elsewhere – it is explicitly not social housing. This is the key to understanding the nature of Irish cost rental, and why it will reinforce rather than break with a neoliberal housing system.

“Affordable housing”

The rationale for cost rental housing in Ireland is relatively straightforward, and one frequently argued (most influentially by a 2014 paper by the National Economic and Social Council). The Irish housing system is dysfunctional and prone to boom-bust cycles, which social housing gets caught in.  Irish social housing, in this critique, has two weaknesses – low rents, and tenant purchase. With council housing potentially run or sold off at a loss (almost two-thirds of all council houses built in the state since the 1930s have been sold), it relies on central grants – which are first on the block during a downturn. If social housing rents were to cover costs, then social housing could expand more easily. Cost-covering rents are the norm in most western European states, and where they work well, this system can deliver social housing for a broad sweep of the population and rein in private rents. More radically, as some argue, it can reduce the State’s dependence on and subordination to developers and private capital in the housing market, and actively shape the whole housing system.

At first glance, Irish cost rental appears to be the culmination of these arguments. Irish cost rental studiously follows continental examples; the rents in new cost rental units cover the costs of managing and maintaining the units and paying off the delivery costs. State funding schemes require that new starting rents are at least 75% below the local market value. Practically all cost rental units delivered so far are either owned by non-profit Approved Housing Bodies (AHBs) or the Land Development Agency (LDA).

However, there is one novel feature in Ireland. The law that governs cost rental is explicit about this – cost rental is not a form of social housing. It is instead “affordable housing” aimed quite deliberately at middle-income groups – households with net incomes up to €66,000. Since new tenants have to be able to afford their rent, there is effectively a floor on who can afford it, and by law HAP recipients are not eligible for new tenancies. So, the more expensive the rent, the higher the income needed to meet it, the smaller the group the tenure can cater for. This is a marked departure from other countries, where ‘cost rental’ is simply social housing. And while the Housing Commission tentatively backed merging it into social housing in the long term, the two still remain separate in law and practice.

This leaves cost rental as a unique stand-alone tenure. With a government target of 18,000 homes by 2030, it is all but guaranteed to remain a niche part of the housing system. The Irish model means that as delivery costs rise, so too will new cost rents, and the cohort who can afford “affordable housing” will narrow. This has the bizarre effect of restricting projects in the most expensive areas. This is why this year the Department of Housing raised the eligibility threshold, and part of the explanation for the lack of new cost rental in Dublin City.

How long this can remain politically viable is an open question. But more fundamentally, separating cost rental from social housing completely undermines the main arguments for the tenure made over the years. Academics and think tanks like NESC saw cost rental as a way of reforming social housing, making it more financially sustainable and resilient. Instead, we are creating a unique, niche tenure solely for the middle classes – without doubt good homes for tenants, but with no real chance of reforming the housing system.

Slotting into a dysfunctional system

Irish cost rental is being implemented in a system with a deep reliance on a dysfunctional private development sector. The Irish housing system has been characterised by repeated crises for decades. Between 1995 and 2012, the state experienced one of the most pronounced property bubbles and devastating crashes in modern economic history. The private development industry since has been completely unable to overcome its own structural deficiencies. The current housing crisis is above all a crisis of the inability of the private development sector to meet need.

State responses to the housing crisis have consistently acted through private capital, private landlords, and private developers. The rapid expansion from 2014 of the Housing Assistance Payment (legally defined as a “social housing support”) entrenched reliance on the private rental market to fill in for social housing. The leasing of thousands of homes for social housing at enormous expense is another “hyper-efficient transfer of public  wealth to private hands.” The development sector has also been remarkably successful at turning its ‘viability’ problems into state supports, not least through lobbying sympathetic governments. Planning changes such as looser apartment standards and the Strategic Housing Development regime all sought to boost developer profitability. Schemes to support homeownership, such as Help to Buy, provide huge supports to developers by inflating house prices to more profitable levels. The suspension of development levies took a more direct approach to channelling hundreds of millions of euro in subsidies and tax breaks to the sector, with practically nothing sought in return.

However, social housing schemes can also intimately rely on the private development industry. Last year, 71% of newly built social homes were ‘turnkeys,’ homes bought off developers, with AHBs particularly reliant on them. Turnkey sales provide a ready buyer for developers, and another state solution to their ‘viability’ problems. The state also outsources the building and maintenance of social housing through public-private partnerships. Even state agencies supposedly set up to direct delivery end up falling back on private developers. The LDA was established to deliver homes on public land, and to acquire and develop land for public housing. However, it too is heavily involved in buying turnkey homes. It now aims to buy 5,000 ‘unviable’ homes directly off the private sector through ‘Project Tosaigh,’ all to be cost rental, as in Citywest in Dublin where rents reached €1,750 for a three-bed.

This is the system that cost rental is being introduced into – a deep-seated reliance on the private sector, despite that private sector’s inability to deliver enough housing. The LDA’s new homes show how cost rental can easily slot into a wider set of neoliberal policies that prop up private developers when their profits are at risk. The state also has longer term ambitions to involve the private sector in cost rental. The new Secure Tenancy Affordable Rental scheme explicitly seeks to attract private investment in cost rental housing, backed by state funds. Under this scheme, private investors will be able to develop and rent out cost rental homes for at least fifty years, with the homes remaining privately owned. The Housing Agency argues this will “address challenges in the housing sector, hit by the combined effects of construction inflation, increased financing costs, and interest rate induced softening of yields.” The scheme allows private investors a “reasonable profit” for delivering cost rental homes. How much private sector interest this will attract remains to be seen, but this is far removed from the old reformist visions.

Why social housing matters

You could argue that Irish cost rental is simply being implemented wrong, that the original ideal is not being followed correctly, or that it is not ‘real’ cost rental. However, the problem with ideals of ‘real’ cost rental is a tendency to confuse technical details with the wider benefits of social housing. Consider the popularity of the ”Vienna Model” – Dublin City Council even ran an exhibition on it in 2019. This equates Vienna’s extremely successful social housing system with cost rental housing (despite the city’s municipal housing not applying strictly cost-covering rents). But this misses the deeper story of Viennese housing – a decades-long project by a powerful left-wing city government to build huge amounts of social housing.

Social housing at its best is not simply a system of non-profit housing with a sound financial model. It is a means of democratically reshaping housing and overcoming the failures of capitalist housing systems. Despite the many varieties of social housing and its tangled relationship with neoliberal governance, at its heart it still privileges social need over profit. Irish cost rental simply doesn’t have those goals, because it is not social housing. It does not tackle homelessness, long social housing waiting lists, or the state’s exorbitant spending on HAP, because it is not designed to. It is for the ‘squeezed middle,’ who are seen as above social housing. It is a way of providing cheaper housing for middle-class groups without having to broaden social housing from the bottom up. Ultimately, divorced from a wider programme, it will not reform a dysfunctional housing system.