Partner, Fidelma McManus, recently wrote an article for Public Sector Magazine rounding up the some of the latest solutions being proposed to address the critical housing issue and how effective are they likely to be. Read the original article here or below.
Tackling the Housing Crisis
It comes as no surprise that in 2018 The Oireachtas Joint Committee on Housing, Planning and Local Government were advised that the housing situation in Ireland would get worse in 2019. Latest figures show that 50% of people who become homeless are from the private rental sector and with rents escalating rapidly, there will be a continuing flow into homelessness until radical action is taken.
The latest figures from the Department of Housing show that more than 10,000 people accessed local authority managed emergency accommodation in February 2019. The key issue remains the same: there is a lack of supply to the market. In simple economic terms, supply is not meeting the demand.
What are the latest solutions being proposed to address the critical housing issue and how effective are they likely to be?
1) The Home Building Finance Ireland Act 2018
On the 3rd of December 2018 the Home Building Finance Ireland (HBFI) Act came into force. Its main aim is for the HBFI to make finance available for residential development in the State.
Traditional lenders remain active in the market however they are more cautious than before and whilst new lenders have entered the market there is still a shortfall of funding available to developers. The introduction of HBFI is a measure designed to provide access to funding to developers and to deal with the current shortage of funding. The Act envisages the HBFI as an independent body in the performance of its functions which may lend money for the purpose of funding of residential development in the State. Such lending however must be on commercial terms. Its focus is to contribute to the economic and social development of the State and enhance the competitiveness of the economy.
What are the limitations/challenges faced by the HBFI?
- Under EU rules the HBFI must be on the same market rates and terms as competitors in the market. The HBFI is effectively a commercial lender. Accordingly, it needs to ensure that any commercial activity carried out is on the market equivalent terms of its competitors which in this scenario would be the traditional lenders and the new lenders that have recently entered the market.
- The total amount loaned or paid at any time by the HBFI shall not at any time exceed €750,000,000. This means that it will only be able to supply a small percentage of the funding that is required in order to bring housing supply up to the level needed.
- The HBFI's role is solely that of a commercial lender to the market. It will not have any involvement in the development stage or process and therefore will have no control over how the money is spent by the developers or the functionality of the delivery of new houses to the market.
So whilst it is welcome progress and should address some of the deficiencies with regards the lack of funding available to certain smaller developers, there are obvious limitations and the real effect and success of HBFI throughout 2019 and beyond remains to be seen.
2) The removal of height restrictions on buildings in cities and large towns
Another obvious issue adding to the housing crisis is the lack of space in our cities and large towns for development. This has been compounded by the height restrictions on buildings imposed on developers by local authorities. A knock on effect of this is the emergence of urban sprawl. This has seen the commuter belt extend further and further away from cities and large towns and does not represent a viable solution.
Limits on the heights of buildings have now been abolished in all cities and large towns which is a radical change to our planning laws. The new changes are guided by the National Planning Framework in response to Department of Housing guidelines. The Framework envisages future population growth will be largely focused in existing built up areas. In comparison to other cities throughout the world, Dublin is very much a low-rise city. However, the Minister for Housing, Planning and Local Government, Eoghan Murphy is one of the key members trying to change this in order to find solutions to help our worsening housing crisis. The first major building development taking advantage of the decision to scrap height caps has just been granted planning permission by An Bord Pleanala for 380 apartments in seven blocks up to eight storeys high on Griffith Avenue. The application initially faced opposition from local councillors on the grounds that the proposed development would be in contravention of the local authority's development plan and substantially breach the height limits for the area. The decision to grant permission for the high rise development, notwithstanding the opposition, is a positive one with favourable implications for future high rise building proposals.
What are the limitations/challenges faced?
- Notwithstanding the ability to now build upwards, it remains significantly more expensive to do so. There are more planning issues to consider. Fire safety issues become more relevant. More lifts are required. All of this means that construction costs are higher. This in turn means the cost of purchase or renting for the consumer is higher.
- Higher buildings mean longer construction periods. This delays the delivery of more properties to the market in the immediate future.
- There is likely to be ongoing local opposition to high rise development in certain areas and, although such opposition has not been successful to date, it is likely to lead to delays in obtaining planning permission and only time will tell if further challenges will be faced by developers seeking to take advantage of the decision to abolish height limits.
3) Residential Tenancies (Amendment) Bill 2018
The Government approved the publication of the Residential Tenancies (Amendment) Bill in December 2018. The Bill contains a number of measures, designed to enhance and strengthen the powers of the Residential Tenancies Board (RTB) and tackle some of the difficulties in the private rental dwelling market. Among the measures are:
- Providing powers for the RTB to investigate and sanction landlords who engage in improper conduct, including raising rent above permitted levels in rent pressure zones (RPZ) and the power to initiate an investigation without receiving a complaint from tenants.
- Making it a criminal offence for landlords to implement rent increases that contravene the law, that do not adhere to new definitions of a substantial change, failure to cooperate with an investigation and failure to register and update tenancies with the RTB.
- Providing a legal definition of "substantial change in the nature of accommodation provided under the tenancy".
Limitations/challenges of the proposed amendments
- The deliberate and flagrant breach of the rent restrictions in RPZ's was the trigger for the onerous sanctions proposed under the Bill. Up to November 2018 some 331 disputes over rent reviews, mostly in RPZ's were referred to the RTB. However, the Bill does not address what will happen when these RPZ's expire. It is likely that the Bill will be amended as it continues its legislative passage as there is a genuine concern among tenants as to what protection, if any, they will have when the RPZ expire.
- A legal definition of "substantial improvement" has been long overdue. This was a mechanism being exploited by landlords to increase the rent (outside the permitted thresholds in RPZ's) where minimal alteration actually took place. The question is whether the current definition is tight enough — it validly includes reference to the requirement for additional rooms, however it does not address if a room is sub divided (which can be done quite easily) and whether this would suffice? Criticism has also been levied at the Building Energy Regulation upgrade provision and the fact that arguably a BER upgrade may not require a massive change or significant alteration.
- We have already seen difficulties faced in relation to previous amendments to the Residential Tenancies Act. The Tyrellstown Amendment was introduced to prevent the sale of 10 or more rented units in a development at any one time. However in the last couple of weeks there have been reports of 9 tenants being served with termination notices in an apartment block in west Dublin and 15 tenants served with termination notices in north Dublin, where the Landlords have stated that the Tyrellstown Amendment does not apply due to undue hardship that would occur to them if they were forced to sell the units without vacant possession. Minister Eoghan Murphy is currently in consultation with the Residential Tenancies Board and we await hearing of the outcome of the discussions.
An Oireachtas Housing Committee report in February 2019 has been critical of the Government's approach to solving the Housing crisis and has raised a number of concerns relating to construction in Ireland post-Brexit. It warned that delays in construction completion times could occur if there are changes to the Customs Union following Brexit and said the Government needed to apply a more dynamic thinking to solving the housing crisis going forward. It recommended that housing protections such as RPZ's needed to be strengthened to protect tenants affected by sharp increases in housing demand. It remains to be seen if the Residential Tenancies Amendment Bill 2018 can help and if the RTB can really enforce these new proposed powers.
It also remains to be seen if the Home Building Finance Ireland Act will help to deliver the necessary funding to developers to allow them to provide new homes to market. We will watch this space with interest to see if urban centres in Ireland will become more 'high-rise' in the future. What is clear however is that there is an urgent need to find results and help resolve the housing crisis in Ireland.