Dublin City Council pays 40% over the odds for construction of social housing, audit finds

Dublin City Council has been paying in excess of 40 per cent more for the construction of social housing than private sector developers, an independent audit of more than 1,000 Dublin homes has found.

Council officials had been “severely restricted” in their ability to control costs within Government and EU procurement rules and systems, according to the report by public management consultancy Seán Ó Riordáin and Associates Ltd and Trinity College economics professor Ronan Lyons.

The “review of the construction costs associated with the council’s building of housing units” was commissioned by the council after concerns were raised in 2021 that it was paying a “premium” for the construction of social housing with costs that were significantly higher than those achieved by approved housing bodies (AHBs) and private developers.

The analysis of 28 housing schemes across the three sectors, with a total of 1,023 homes built between 2019 and the end of last year, found the council was paying 23 per cent more than AHBs and 44 per cent more than private developers for a similar two-bedroom apartment.

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When the all-in costs of development were taken into account, and the apartments weighted for their size, the review found one-bedroom apartments provided directly by council cost €335,000, 11 per cent above the equivalent figure for AHBs (€303,000) and 34 per cent above the figure for “Part Vs “(€250,000). Under Part V legislation developers are required to allocate a number of homes for sale to local authorities for social housing.

For two-bedroom homes, the council construction costs of €514,000 were 23 per cent above the AHB average of €418,000 and 44 per cent above the Part V average €358,000.

The council paid an average of €600,000 for the construction of three-bedroom apartments during this period. However, as only a small number of “non-council” three-bedroom properties were built during the three-year period, they were excluded from the analysis.

The difference in costs could, in part, be attributed to the differing nature of the projects, the report said. Council schemes were generally smaller, with an average of 43 homes compared with a private sector average of 180, of which 18 were set aside for social housing.

Council schemes were typically regeneration or “brownfield” sites which were more costly to build on than private developers’ greenfield sites.

Nonetheless, “it would not be appropriate to conclude that cost differentials between public and private delivery can be explained entirely by scale... and wider project nature”, the report said.

“Issues such as the application of public procurement rules and the impact of policy shifts, application of differing standards in the use of construction materials, etc, can and do impact upon the cost environment for both public and private delivery of construction.”

In addition, it said “councils do not have the option of entering into long-term commercial relationships where long-run production of construction materials and predetermined fixtures and fittings can be facilitated as is the case for private-led investment”.

The systems used to develop these homes meant the capacity for council officials “to make substantive decisions around cost control was severely restricted, particularly when there were changes in regulatory specifications and requirements at a national level that had an impact on costs”.

Following the introduction of the Government’s Housing For All policy, an international cost management framework was being introduced to local authorities which should assist in the council controlling costs, the report concluded.

Fine Gael councillor James Geoghegan said it was “a serious concern that proper accounting and cost control measures and procedures were not in place” when these homes were built. “Because of how these projects were managed, the council was not able to maintain control over costs, and what this report shows is that Dublin City Council paid a premium price for that.”