IN THE PAST months, thankfully, there at last appears to be a growing consensus on the need for an increased supply of new social housing whose future is not as heavily dependent on private market interests. This mood change has come from different levels of society – not just advocates and those working in the social housing sector. Increased provision of well-managed social rented housing in many EU member states is seen as a key instrument in creating stability in the housing market, as well as the economy.
Success and exclusion
The success of a well-functioning housing system by a country should not be judged solely on the production of one type of housing provided – that of homeownership – a practice which Ireland espoused on many occasions at the height of the previous housing boom to its European counterparts. This lesson on self-promotion is not to be repeated again. Success of a housing system should be judged on ensuring there is a continuous supply of housing options across the population but, in particular, to those who require social housing; a ‘private’ sector will not meet their housing needs. Social housing originally was born out of market failure and the current huge levels of recorded social housing demand of almost 90,000 households indicates that the private housing market has failed, or is not an option, for many thousands of households. No other social support such as education or health policy would be left solely to the market to provide for and the same principle should apply to social housing.
This situation is particularly the case in urban areas. Dublin is the most extreme example, where the fiercely competitive private landlord sector has become an increasingly limited option for social housing applicants. Compare this to the past five years where almost four times the levels of vacancies in the private sector which were posted on sites like Daft.ie et al. This dramatically changed scenario has manifested itself in increased private rents, limited housing choice for lower income and vulnerable households, and the ultimate form of housing exclusion – that of homelessness.
The big shift in social housing delivery
The social housing environment has changed dramatically in the past five years in the aftermath of the property crash. Large capital expenditure programmes for social housing to local authorities and the not-for-profit housing sector have been replaced with a range of new and experimental housing initiatives, mostly focused around revenue funding supports. This included managing leased property, utilising vacant properties and unfinished estates.
Housing associations in the not-for-profit housing sector have spent considerable time and resources on these new initiatives since 2009. Output on these schemes, which were often not fully formed, was patchy especially where there was reliance on the private sector as partners. However, these new initiatives did yield significant new learning and skills for housing associations in providing social housing with private finance which was off the Government balance sheet and not adding further to national debt. The not-for- profit housing sector currently provide up to 27,000 homes for families in addition to special needs housing to older people, people with disabilities and homeless people throughout the country.
The significant shift since 2011 has been where housing associations innovated and used a mixture of loan finance and a limited injection of state capital expenditure for the provision of new social housing. This is a typical model in most OECD countries and which has emerged in these counties progressively over the last 30 years. In the aftermath of the housing crisis, Ireland had to short-circuit this lead-in time of new social housing financing to a few years since 2011. This mixed funding model, of private and State finance, allows State capital funding to be stretched – so, for every €1 of State funding for social housing to housing associations, this can leverage between €3–€5 of private loan finance.
It is estimated by the National Economic and Social Council (NESC), an advisory body to the Government, that up €70m has been approved of loan finance from various financial institutions. This is a start, yet still small in overall terms and the not-for-profit housing sector would not see itself as solving all social housing needs. However, this is a funding mechanism that is overlooked in terms of the potential benefits, both in terms of the Exchequer as well as meeting housing need. Resolving the administrative hurdles by Government in being able to expand this delivery route will yield more new social rented homes. This social housing financing model should be part of the new Social Housing Strategy as well as Special Purpose Vehicles to draw in finance from financial institutions and investors.
Investment and support
All of these new models should not distract Government from the fact that the provision of social housing requires additional capital and revenue funding. Capital expenditure for social housing was one of the areas of government expenditure that was sacrificed most in expenditure cuts since 2009. The period when this limited capital expenditure could be stretched any further is now well passed, and the ‘base’ of capital expenditure for social housing has to increase significantly now and over the coming years as the pipeline of new social housing increases. This would include allowing for greater leverage of private finance by not-for-profit housing associations to provide family housing, as well as specialist housing where there are already a pipeline of projects waiting to progress.
Government should also support the need to retain Part V of the Planning and Development Act 2000 where the provision of social housing was required as part of new private developments. While housing associations cannot solve the social housing crisis, it can play a productive part in meeting local authority housing needs as well working in partnership with local authorities, Nama and financial institutions and others to increase a stock of social housing supply that is well-managed and tenure of choice.
It is important to build on and recognise what has been learned and piloted over recent years to start mainstreaming social housing programmes that have a long life span, as well as addressing immediate needs. Concrete actions would begin with a new Social Housing Strategy with the necessary resources aligned to it and involving stakeholders in its implementation.
Donal McManus, Executive Director at Irish Council for Social Housing.
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