An affordable-housing scheme planned for a site near Sandyford at first did not look like it was going to be particularly affordable.
From a glance at the slides from a recent Housing Agency presentation, it looked as if the rents on the 50 two-bed apartments were going to be metered somehow off market rates – which have been soaring.
But that isn’t the case, says John O’Connor, chief executive of the Housing Agency, which provided the land for the project.
It’s a cost-rental pilot project, so the rents will be based on the construction costs plus the design fees and operational costs. If those can be kept low, the rents will remain low too.
The presentation was more of a guesstimate that the pilot would offer rents at about 20 percent below market rent when the homes are done, which is supposed to be by 2020, he said. (Until bids come back for tenders, it’s impossible to know for sure.)
“In terms of saying its 20 percent, it could be 20, it could be 30 percent below even what the current market rents are, and it was just to give an indication that they will be below the market rents,” he said.
“It’s still likely to be €1,200, €1,400 per month,” said O’Connor. “But it will be significantly below what the market rents are.”
Can We Make It Cheaper?
Daft.ie figures for the end of last year show listed average rents in South County Dublin at €1,511 for a one-bed apartment, and €1,732 for a two-bed house.
Most of the two-bed apartments listed on Daft.ie in Sandyford on 3 April were well over €2,000 a month, and one short-term rental was €4,000 a month.
So if two-bed apartments in the pilot project do rent for €1,200 a month – which would match up to an apartment that cost in total roughly €240,000, said O’Connor – they would be significantly cheaper than what is now available.
This would also mean that households renting these apartments would need to earn roughly €43,000 a year to be spending a third or less of their income on rent, the rule of thumb.
The Ó Cualann Cohousing Alliance in Ballymun sold its cheapest two-bed for €140,000. Those were houses, though, rather than apartments. Also, roads and services were already there for the land, says O’Connor.
“We will look at if there’s opportunity to get funding towards roads and services like Ó Cualann did. Then the price would be brought down further,” said O’Connor. “There’s some possibility of that happening.”
At the moment, though, the Housing Agency is assuming that there are no subsidies as such going in, apart from the land, he said.
The critical thing in cost-rental housing projects is the cost to build in the first place, says Orla Hegarty, an assistant professor at UCD’s School of Architecture.
“Hard construction costs for apartments last year were no higher than they were 10 years earlier,” says Hegarty, who has been tracking them, although the market is now facing challenges with labour and skills shortages which lead to price inflation.
It’s still possible to look for ways to keep down the prices that contractors charge for the work – and without lowering standards through cutting design standards, she says.
That might include using smaller contractors to encourage competition. Or, splitting out and phasing large building projects and procuring components and materials at scale, she said.
So, for example “start ordering 100,000 doors, tendering them across Europe […] if [a supplier has] an order book full of a standard door for four years, you’d get them for half of what you’re paying now,” Hegarty said.
Tendering building work in the current market without a different strategy will return high prices, said Hegarty.
The current system of procurement is inefficient and it spreads risk to the contractor in a way that adds costs, too, she says.
O’Connor said that, while nothing is going to be change in the tendering process for the Enniskerry Road site, there might be ways to keep costs down in future contracts.
One innovation might be to have the contractor take over as the design team too, he said. “So rather than saying there’s an additional cost because the architect designed it wrong or something, that the developer takes responsibility or contractor takes responsibility for that.”
According to a spokesperson for Dún Laoghaire-Rathdown County Council, “works are currently progressing to bring this project to tender stage in the next six weeks”.
Once the contractor is chosen, the scheme will take about two years to build, they said.
That might seem like a long time. But O’Connor says it will take a few months once the tender has gone out to get the bids back, and a contractor appointed.
“It’ll take a year and a half to build, you know, it’s not a straightforward site, because of the size of it even: 155 houses and apartments,” he said. (Alongside the 50 cost-rental apartments, there are plans for social homes.)
The scheme has been on standby for some time. Planning permission was first granted in 2007 for affordable and social housing on the site.
A Housing Agency report from 2015 said that it was “expected that construction work will commence in 2016”. A lack of a cost-rental scheme from the Department of Housing though meant that the project stalled.
O’Connor of the Housing Agency said, “It was expected on the cost-rental side that the Department of Housing might introduce an affordable rental scheme. And, basically, it was waiting to see.”
“There was one that was proposed but it wasn’t agreed to by the Department of Finance and it didn’t proceed,” he said.
The Long View
O’Connor said that the Housing Agency, which transferred the land to the Dún Laoghaire-Rathdown County Council for free, copper-fastened how it can be used going forward.
“We’re putting in conditions even for the long-term, that the costs have to be kept down,” he said.
That means at the end of 25 years, rents should plummet. “When all the finance is paid off on that, then the rents can be brought down very significantly,” he said.
In the meantime, rent increases will be kept low, he said. Rental increases have been capped at 50 percent of consumer price inflation.
So, the benefit of the Enniskerry Road project isn’t just that the rents are initially likely to be significantly cheaper than market rents – it’s more to do with what happens in the longer term, says O’Connor.
Affordable rental is a good use of state lands, and a welcome addition to the past affordable-purchase schemes, he said.
“You need it to be in state ownership, or in housing-association ownership, you know, so there isn’t a private-sector party trying to profit upon it in the future,” he said.
O’Connor says that those countries that have succeeded with cost-rental programmes are those where politicians and policymakers have thought long-term.
“It’s not something that you have an initiative today, and a different initiative in a few years time,” he said.
“Countries which have achieved much lower rental costs over time have been ones that have a policy and stick to it, year after year, and decade after decade. So I think it does need that.”