Law change will ‘not incentivise’ cuckoo funds to buy social homes

Cuckoo funds have not been incentivised to buy up homes for social housing, Minister for Housing Darragh O'Brien has said.

It emerged in the Dáil on Tuesday that investment firms will not have to pay stamp duty surcharges on bulk-house purchases if they lease them to local authorities.

The measure will come into force through an amendment to legislation on Covid-19 supports that will exempt investment funds from the 10 per cent surcharge, which was announced earlier this year in an attempt to stop bulk-buying of estates by large investors.

Currently funds that bulk buy properties engage in 25-year leases with local authorities, who rent the homes at market rate with the fund owning the property at the end of the period. The Taoiseach on Wednesday said the Government will move to ensure properties of this sort would ultimately be owned by the State.

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Opposition parties have accused the Government of helping vulture funds to profiteer and reneging on a promise to stop the bulk housing sale.

However, Mr O’Brien said the amendment would “protect social housing delivery” and applied to a limited number of homes where lease agreements between local authorities and funds were already in place.

Small exemption

“There are some leases that are on the way where about 2,500 families that are going to be housed in these homes,” he said.

“If anyone is telling me now that we shouldn’t make an exception so those families are not housed in the short-term I’d like them to put the argument to me. It is a small exemption that will be time bound.”

The Opposition was “scaremongering” on the issue, he said.

“It will not incentivise bulk buying by cuckoo funds of social homes. A lot these are in the pipeline already with local authorities. The concern is these homes would be jeopardised if this amendment was not put in place.”

The amendment would also protect the mortgage to rent scheme for people in mortgage arrears, and the repair and lease scheme used to bring vacant properties back into the rental system, he said.

Mr O'Brien was speaking in Balbriggan on Wednesday where the State's first cost rental scheme was opened for applications.

Housing association Clúid is offering 25 homes at Taylor’s Hill, to the west of the town, at rents of between €935 and €1,150 a month, almost half of local market rents for similar properties.

Prospective tenants for the Balbriggan houses must have a net household income of no more than €53,000 per annum; not be in receipt of any social housing supports, and not own a property.

Lottery system

Clúid is using a lottery system to select from eligible applicants, with those chosen permitted to move into the homes next month. Clúid also manages 85 social homes in the estate built by developer Glenveagh.

The 25 houses are the first of 440 cost rental homes expected to be provided by the end of this year in Dublin, Kildare and Cork. Tenants will pay rents that are at least 25 per cent below the national average.

Under the cost rental system, rents are based on the cost of building, managing and maintaining the homes, and not market rates. The scheme is aimed at workers who earn too much to qualify for social housing supports, but cannot afford to buy or rent on the open market.