Councils must not carry burden of affordable housing risks

It would be a "big mistake" and "very unwise" for local authorities to become involved in building homes for low- and middle-income buyers as part of the Government's proposed new affordable purchase scheme, the chief executive of the State's Housing Agency has said.

John O’Connor was speaking ahead of the introduction of a new affordable purchase scheme for single house-buyers earning less than €50,000 or couples earning under €75,000, which is due to be in place within weeks.

Minister for Housing Eoghan Murphy announced the reintroduction of an affordable purchase scheme a year ago whereby local authority land would be used to provide homes to people to buy at a discount of up to 40 per cent on market rates.

It will be the first to give set discounts to owner-occupiers since the previous national affordable housing scheme – it saw Dublin buyers get new homes at 30-35 per cent below market rates – was scrapped in 2011.

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The introduction of a new affordable purchase scheme was flagged three years ago as part of Budget 2016, but was only signed into law last June.

Regulations to allow local authorities to operate the scheme have yet to be published, but are due to be in the coming weeks.

Under the previous scheme local authorities both built affordable houses and bought houses from developers to sell on to qualifying house-buyers. Following the collapse of the property market in 2008, local authorities were left owning hundreds of properties they had bought from developers at the market peak which, after the crash, would cost buyers more than similar homes on the market.

‘Really dangerous’

Mr O’Connor said it would be “really dangerous” for councils to again be involved in the building or selling of affordable housing.

“It’s a mistake for a local authority to build houses itself, to be the developer and sell affordable housing. They’re not in that business, they’re not good at doing it, and they will make mistakes.”

He said while local authorities do develop social housing, the standards and guarantees required, and the expectations of a house purchaser, were very different to council tenants.

It was vital, he added, if the scheme was to go ahead that local authorities were not exposed to risk.

“Local authorities need to organise it so someone else is taking the risk. Get the developer to build them and sell them to nominated affordable housing purchasers, but don’t as a local authority get into a situation that you are guaranteeing to buy them. The local authorities need to organise themselves so they don’t get stuck with the housing.”

Sales process

Mr O’Connor said it was vital the State “does not be in the middle of a sales process” for affordable housing.

“To do the affordable right takes a certain amount of skill. The department does talk about local authorities building and selling; it’s a really dangerous position to put local authorities in.

“They don’t need to get stuck in that position, they don’t need to take on those risks. Local authorities are not in the position of selling houses. Let the affordable purchaser buy from the person that built the house.”