The government is easing the terms of a social housing incentive scheme, in the hope of encouraging pension funds and investment capital groups to deliver hundreds of homes for local authority tenants.
The Department of Housing has decided to abolish a cap on the length of lease permitted under the “leasing initiative for the delivery of social housing” following a review by junior minister Damien English.
An earlier version of the scheme attracted 24 expressions of interest, including a €100m proposal from Bartra Capital, an investment vehicle set up by Richard Barrett, the former Treasury Holdings partner. None of the projects progressed.
Barrett told a Dublin property conference last year that Bartra pulled out because the government had not approved 20-year leases with inflation-linked rental increases, the method by which they wanted to let new homes to councils.
He claimed ethical investment funds were routinely building social housing on a large scale in America, Australia and elsewhere in Europe. Mike Flannery, Bartra chief executive, said the Department of Finance would ultimately have to approve the scheme.
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A new “enhanced lease” for social housing delivery has now been approved by the Department of Finance, and will be launched this week by the National Development Finance Agency. Government sources said that the scheme has been designed to ensure the funds to build housing will remain “off balance sheet” and have no impact on government borrowing or public debt.
The new leasing agreement will allow developers to negotiate lease terms up to and beyond 20 years. This is designed to make it easier for them to raise finance for projects. Potential investors will deal with a central agency over the progression of large-scale projects. Proposed developments under the scheme must provide 20 homes or more.
“There was a lot of interest from investors and developers when this idea was first mooted under the Social Housing Strategy 2020, and a clearing house group was established within government to examine the proposals and ensure they met the requirement to be off-balance sheet,” said a government source.
“Ultimately, none of the projects met that requirement, but the analysis identified changes needed to facilitate private investment in social housing on a larger scale.”
The Housing Agency will help run the scheme and tenants will be selected from the local authority housing waiting lists.
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Bartra said this weekend it was ready to proceed with an enhanced lease for a building it owns on Pim Street in Dublin 8, where 25 out of 27 apartments are already let to Dublin city council for social housing.
Correspondence released under freedom of information shows Bartra also discussed creating “new build family hubs/hostels” that Dublin city council could lease but the authority said this weekend that this proposal had not been progressed.