Bonus post: Sinn Féin’s plan for social, cost rental and affordable housing
Over the last couple of weeks I have looked at the Social Democrats and Labour Party election manifestos on housing. Back in September, I covered Sinn Féin’s housing plans for the PRS. This week, I’m returning to Sinn Féin’s mammoth A Home of Your Own plan to examine their take on non-market housing, specifically social housing, cost rental and affordable purchase. As in the other pieces, there’s loads I leave out (due to space) and I don’t pay much attention to targets. To be honest, I don’t find the whole ‘how many homes will you provide in Government’ discussion very meaningful. It reminds me of buying Christmas presents during the Celtic Tiger: everyone competing to see who can spend the most. I’m releasing this as a bonus post as I want to get all these election pieces out well ahead of November 29th.
The most striking thing about Sinn Féin’s plan is how detailed it is. It is by far and away the most detailed pre-election plan, and might even be the most detailed housing policy plan in decades, with the exception of the Housing Commission’s report. It is also noteworthy that compared to the other opposition parties, and even compared to the Government, Sinn Féin pay more attention to enhancing private sector delivery, a fact which has not featured prominently in the debate thus far.
Delivery
In terms of non-market housing delivery, Sinn Féin propose a much needed streamlining the administrative process around approvals, for example by removing the extent of Department of Housing central oversight and essentially devolving more autonomy to Local Authority level. They also want to merge the various funding schemes (e.g. CALF for social housing; CREL for cost rental) into a single Public Housing Fund.
An interesting aspect of their social housing policy is the reform of tenant purchase by ‘[r]eviewing and reforming the tenant purchase scheme to bring in into line with the affordable purchase scheme to ensure that such properties are retained within the public housing stock.’ It’s not entirely clear with this means as obviously a dwelling cannot be purchased by an individual and at the same time remain within the public housing stock. I suspect that what they intend is that either any purchased social housing unit which is re-sold most be sold back to the local authority, or that the dwelling will be sold to the tenant but that the land will be retained in a leasehold fashion (as they propose with Affordable Purchase) such that if the dwelling is re-sold it must be sold at an affordable price.
Cost rental
Sinn Féin’s document is quite critical of affordability under the existing cost rental scheme, and devotes considerable space to explaining the issues. As with the other opposition parties, they aim to reduce cost rents by reducing the cost of delivery. The highlights of their approach are:
· 60-year fixed rate market finance via the NTMA allowing for the refinancing of the existing 30-year Housing Finance Agency loans at the same or similar interest rate. Interestingly, they say that if the refinancing involves a higher interest rate (due to market conditions at the time), Government will fund the difference. This is the first mention I have seen of an idea I have proposed: subsidising the HFA interest rate for cost rental to reduce financing costs and hence rents (one of the main aspects of the Danish cost rental model). My argument is that this interest rate subsidy should be available from the outset, so that cost rental providers pay no more than a certain interest rate (e.g. 2%).
· Increasing the level of capital subsidy to reduce interest rate costs. This is also proposed by the Social Democrats, although it is a much bigger aspect of their approach.
· Shifting from the purchase of private sector developments in favour of not-for-profit developments by Local Authorities and Approved Housing bodies on public lands and the use of Part V for cost rental.
· Allowing larger Local Authorities such as in Dublin to form a single cost rental delivery body to achieve economies of scale, efficiencies in procurement and reduce development risk and in turn financing costs.
· Providing public land for free to reduce cost rental development costs, and retaining control of the dwellings in perpetuity through a leasehold model.
· Limiting management and maintenance costs to an average of 25% of rental income. My understanding (though I can’t verify this) is that AHBs are already basing their costs on a similar figure, but that the LDA management and maintenance costs are higher. I don’t see the logic of Sinn Féin’s idea here as if management and maintenance costs grow over time cost rental providers need to be able to factor this in to rent setting or the financing model doesn’t work.
The Home of Your Own document provides copious detail on different costing scenarios for cost rental. The right hand column of the below table represents the most conservative of the estimates, based on turnkey acquisition of privately developed units, and still claims to deliver rents of €1,106.
One thing I am not entirely clear on is if the Public Housing Fund contribution in the above table, which would substitute the CREL component in the current model, takes the form of a loan or grant. If it is a grant, it would represent a significant change in the model and mean that Sinn Féin are proposing an even more generous per-unit grant than the Social Democrats (who are proposing €150,000 per cost rental dwelling).
Affordable Purchase
For Affordable Purchase, Sinn Féin propose to provide public land free of cost under a leasehold model, waive development levies, and provide a contribution from the Public Housing Fund. The below table represents their most conservative estimates, which they claim will deliver houses in Dublin at €281,000.
By using the leasehold model to retain control, Affordable Purchase units which are re-sold will be capped at a price that will reflect inflation and any investment in the property, thus preventing the units from ending up back in the private market and the resident enjoying a windfall gain. The Social Democrats propose to achieve something similar but through a new ‘affordable zoning’ mechanism. It is worth noting that the downside of this from the resident’s point of view is that if house prices have substantially increased, they will struggle to finance the purchase of a new market-price home via the sale of their affordable home. Despite this downside, a policy along these lines needs to be introduced to keep affordable purchase homes affordable in the long term. As the document states:
“The benefit of affordable leasehold purchase approach is twofold. Firstly, it reduces the initial purchase price of the home. Secondly it ensures permanent affordability for subsequent buyers. The aim, over time, is to create a market of privately owned, privately traded and permanently affordable homes. This market will be separate from and parallel to the private for purchase market.”
One of the main planks of Fianna Fáil and Fine Gael’s attacks on Sinn Féin’s housing policy has been to argue that banks will not lend to purchasers of affordable housing if the land is held in leasehold. I’m not an expert on this but my understanding is that arranging mortgage finance will not prevent an insurmountable obstacle. Affordable purchasers will also be able to access the Local Authority Home Loan.
Acquisition
Sinn Féin also have a unique emphasis on the role of acquisition of second hand property for non-market housing:
“Sinn Féin believes that meeting the need for social and affordable housing involves not just new build and renovation of vacant and derelict stock, but also the acquisition of second-hand properties and private rental properties with tenants-in-situ.”
They promise to acquire 7,500 units through tenant-in-situ type schemes. This represents an important development of housing policy, which is typically focused on delivery of new units rather than the redistribution of the existing housing stock.
Overall, this is an impressive document and there is not much in there I disagree with. My main issues would be with the cost rental financing model. If the Public Housing Fund contribution (which replaces CREL) is a loan rather than a grant (not entirely clear in the document), then this is an issue as some element of equity is needed in the cost rental model and a Government grant is probably the best way to do this. Moreover, as readers will know, I favour greater use of subsidies, both an interest rate subsidy (discussed above) and especially a rent subsidy to tenants (explained here), in achieving greater affordability in the cost rental sector. I also think tenant purchase of Local Authority social housing should be abolished, rather than reformed.
What I’m reading
Social Democrats have now released their full housing manifesto.