Worries About Early Estimates for Rents in City's First Cost-Rental Pilot

The “cost rental” model is being pitched as the solution to high rents in the city, and the proposed pilot at St Michael’s Estate in Inchicore held up as one to watch, says Social Democrats Councillor Gary Gannon.

It’s true that it seems the model to follow, Gannon says. But he says he’s worried about the current estimates – albeit early, very provisional, and rough – for future rents in the development.

At the moment, “€1,300 per month appears to be the figure arising from costing analysis carried out so far”, said the council’s Assistant Chief Executive Brendan Kenny, in a response to a query from Gannon earlier this month.

Gannon says that’s “a very significant rent that would be out of the reach of the majority of people – or certainly a lot of people”.

But there are ways to get that figure down, and measures the council is looking at. “We would like to bring that cost down to €700 or €900 and that is going to need some kind of intervention,” Kenny said in June.

Several factors play into what the final rents are – from construction costs, to how good a deal the council gets on financing, to how much of a subsidy it gets from central government for site infrastructure.

It would also be fruitful to look at how to reduce maintenance and management costs, said John O’Connor, chief executive of the Housing Agency. “They are a very significant issue.”

Rita Fagan, a community activist at the St Michael’s Family Resource Centre, says she and her fellow campaigners wouldn’t be happy if the rents were set at €1,300 a month.

“We won’t be accepting that,” said Fagan, who is one of the campaigners behind the push for all of the homes on the land to be public.

Out of Reach

The redevelopment of the land at St Michael’s Estate has been a long time coming, with the wider site first put forward for “regeneration” in 1998 – when it was a 346-home council-owned flat complex.

In the intervening years, one proposal collapsed, while others were rejected.

The current plan is for roughly 470 homes on the council-owned plot, with 30 percent to be social homes, and 70 percent to be cost rental.

Cost rental homes are those for which the rents are based on what it costs to deliver, manage and maintain them – rather than market rates.

Social housing is generally for those in greater housing need, with rents calculated as a percentage of household income.

For the planned homes at St Michael’s Estate, the rough estimate for the cost rents of €1,300 a month is “an average figure over a mix of one bed, two bed and three bed units”, said a council spokesperson, by email.

But it’s still early and the final construction costs are unknown so it isn’t possible to predict accurately what the rents will be, wrote council official Kenny, in the recent response to Gannon’s query.

Fagan, the local activist and community worker, said she and her colleagues have a different goal in mind: “The people who we are expecting to be able to live there, we thought up to €900, maybe.”

Gannon, the Social Democrats councillor who asked Kenny for the up-to-date figure, said he thought it was important for people to know the kind of ballpark the project is currently in.

“I think that needs to be on the public record that that’s what we’re dealing with at the moment,” he said. “If we’re still headed towards that model, let’s know what it entails now unless there is substantial subvention.”

Gannon says that €1,300 isn’t so different to the estimates for “affordable rental” that the Social Democrats have calculated for O’Devaney Gardens.

Should a plan from Dublin City Council’s ruling group of councillors – Fianna Fáil, the Green Party, Labour and the Social Democrats – for an approved housing body to take on 30 percent of the apartments go ahead, they estimate that an approved housing body would charge an average of €1,360 a month, says Gannon.

A spokesperson for Dublin City Council said that there are too many “variables and unknowns” to predict what any rents could be for those proposed “affordable rental” homes at O’Devaney Gardens.

The council still needs to select an approved housing body, who needs to negotiate with the developer and sort out any necessary financial package, they said.

Comparing Projects

So far, there’s only one cost-rental project underway in the country.

Work started in September on 50 two-bed cost-rental homes – and 105 social homes – at Enniskerry Road in Stepaside. The cost-rents there are set to be €1,200 a month for two-bed apartments.

They could have been higher. The site was challenging and awkward, with some legacy costs too, officials at the Housing Agency have said.

But the project got a subsidy of €80,000 per home from the serviced sites fund, said Jim Baneham, head of housing delivery for the Housing Agency, at a hearing before the Joint Oireachtas Committee on Housing in June. (Usually, the amount per unit under that fund, which is managed by the Department of Housing, is capped at €50,000.)

The loan is also from the European Investment Bank, but funnelled through the Housing Finance Agency – and over 40 years, rather than the usual 25 to 30 years. That length of loan “is unique in this context and is a significant element in keeping costs down”, said Baneham.

With those interventions, the rents were set at €1,200 a month – a figure that, when the loan is paid off, could go down too.

A spokesperson for Dublin City Council said that it wasn’t involved in the Enniskerry Road project, so isn’t familiar with all the details there.

But “the difference in estimated rent levels may be related to the term of the years for the loan taken on by the developers”, they said. Dublin City Council’s analysis for St Michael’s Estate is based on a loan for 25 years.

John O’Connor, chief executive of the Housing Agency, said on Monday that he thinks similar low-cost financing could be arranged for St Michael’s Estate.

“I think Dublin City Council are a big organisation. They should be able to organise similar funding,” he said. “It does help significantly.”

Dublin City Council’s analysis also hasn’t factored in any possible contribution from the serviced site fund, said its spokesperson. “But an application for same will be made in due course.”

Eoin Ó Broin, the Sinn Féin TD and housing spokesperson, said on Monday that those same two levers – a longer loan and an increase in the subsidy through the serviced sites fund – could be used to lower rents at St Michael’s Estate.

“Rents in St Michael’s shouldn’t and don’t have to be €1,300 a month,” said Ó Broin. They could be below €900, he said.

“That would give you entry-level rents at a more genuinely affordable level, particularly for modest-income working households,” he said.

Other Ways to Cut Costs

A spokesperson for Dublin City Council said that another factor that will play into the final rents – beyond construction costs, loan terms, and subsidies from central government through the serviced sites fund – would be the cost of management fees and any sinking fund.

O’Connor, of the Housing Agency, also said there’s lots of focus on the capital costs. But costs around management and maintenance fees do need to be discussed more too, he said.

For the cost-rental homes at Enniskerry Road, of the €1,200 in monthly rent, €750 is to pay back the finance and €450 is for management, maintenance, and sinking funds and provisions for the future for upgrade works, said O’Connor.

“We need to actually address the whole question of the running and the maintenance costs of these developments,” he says.

Figures at the moment seem overly conservative, he says. “You still need an amount, but we still think it’s too high.”

Going forward, architects could think more about how designs affect maintenance and management costs, he said. They could look at cutting out basement car parking, for example.

“And have a situation where if somebody wants to pay for car-parking, they pay for it, but if they don’t want it and want to keep the rent down, that you don’t have to have a parking space,” he says.

There are also questions to tease out around what responsibilities tenants take on, he said.

Commonly, rental properties are looked after for the tenant. But for longer-term tenancies, which are closer to home ownership, could tenants take over more responsibility for maintenance themselves?

“If they’re paying a lower rent, kind of trading off between rents and what you get,” said O’Connor.

Fagan, the community activist at St Michael’s Estate, says she can see the project taking a long time to deliver, or being challenged still by others.

“But it doesn’t matter, we’re not going away. Twenty-one years we’re fighting for that land,” she said.

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Author:

Lois Kapila: Lois Kapila is Dublin Inquirer's editor and general assignment reporter. She covers housing and land, too. Want to share a comment or a tip? You can reach her at [email protected]

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