DUBLIN CITY COUNCIL’S chief executive has heavily criticised the government’s failure to pay infrastructure-funding development contributions on the increasing amount of social and affordable housing under construction in the city.

In a report to councillors, Richard Shakespeare said the absence of development contributions or some other compensation from central government was “unsustainable”.

In a stark warning, Shakespeare said failing to fund infrastructure and community facilities alongside housing delivery will “lead to a lack of social cohesion and to community fragmentation and social isolation”.

“The cost to society, local government and the state will negatively impact current and future generations,” his report states.

Social and affordable housing projects are exempt from paying the council development levies, with which it funds local infrastructure and facilities including roads, flood defences parks and community amenities.

In a controversial move, councillors agreed this week to scrap the current blanket exemption from development charges for cost rental housing developed for the council by charities and co-operative housing bodies. Cost rental is a non-profit model of housing development, with rents set below market rates and people on moderate incomes who might not qualify for social housing eligible for tenancy.

Shakespeare told councillors the existing exemption for cost rental was “unsustainable”.

Hotels backlash

The new development levies scheme, which will apply from 1 July, will double the charge for new hotels in the capital, under a measure tabled by the Green Party. Hotels will now be levied at twice the rate of other commercial developments in the city.

Councillors have also agreed to charge new advertising structures such as billboards – which were previously not levied – at four times the usual commercial rate.

In recent years there has been a growing backlash against the proliferation of new hotels in Dublin. Green Party councillor Feljin Jose said many small sites that could have been used for housing have instead been used for hotels or aparthotels (a form of serviced apartment).

Development levies from hotels raised €2.7 million last year, so that could be doubled under the new scheme. A large, 300 bed hotel alone could be worth €1 million in levies to the council, Jose said.

Cost rental controversy

The removal of the exemption from levies for cost rental was opposed by approved housing bodies, which told the council it would undermine the viability of developments in the city and threaten delivery.

Sinn Féin voted against the local authority’s new development levies scheme this week, citing this measure. The party’s Séamus McGrattan said the change could be the “death notice for cost rental”. His party colleague Daithí Doolan said levies on cost rental developments would be passed onto tenants.

Sinn Féin councillors said they sympathised with the difficult position the council had been left in by central government.

A senior council official emphasised at a meeting on Monday that exemptions can be applied for cost-rental developments on a case-by-case basis, and this is set out in the new rules. However, housing bodies have warned that this still leaves considerable uncertainty hanging over any cost rental development.

The council official said that development levies were likely to comprise only between 1% and 3% of the overall budget for a cost rental development, and the new rules specify that if any development levy could jeopardise a development an exemption must be made available.

The council has previously written to the Department of Housing to highlight the pressure placed on the council’s capital programme by the fact that over 50% of development in Dublin city is social and affordable housing, which is exempt from development levies.

In the past, central government provided grants towards the development of community facilities when public housing projects were being developed, but this is no longer the case, the official said.

The council has not received a response from the Department of Housing, the meeting was told.

Shakespeare’s report to councillors stated that the council “fully recognises” that a balance must be struck between securing sufficient funding from development contributions to fund infrastructure and ensuring the rates are not too high to impede development. 

Infrastructure projects that will be funded by development levies between 2026 and 2029 include a new bridge over the Liffey in the docklands, improvements to pedestrianised streets in the city centre and a number of flood alleviation schemes.

Amenities projects that will be funded include improvements and redevelopment schemes at playgrounds, libraries, parks, sports grounds and swimming pools.

The Department of Housing was contacted for comment.