Taxpayers’ money used to fund a controversial €450 million plan to help people buy city centre apartments will be safeguarded, the Minister for Finance has pledged amid growing concerns about the scheme.
Under the heavily criticised Croí Cónaithe plan, the Government will pay developers €450 million in subsidies to cut the cost of building 5,000 apartments in the Republic’s cities, making these homes more affordable.
Paschal Donohoe acknowledged that the Government was aware of concerns about using taxpayers’ money for the scheme, which Sinn Féin has dubbed “madcap”.
The Minister said the Government would “absolutely ensure that we have the right procedures and the right governance regarding the use of that fund”.
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He said the scheme was designed to support apartment building in areas that lent themselves to this type of high-density development. “And in the absence of that kind of support, we believe those homes would not be built,” Mr Donohoe said.
[ Policymakers and planners ignoring housing crisis realities, conference toldOpens in new window ]
The Minister made his comments as well-known builder Michael O’Flynn warned that the Croí Cónaithe plan could fail because it was impossible to calculate its likely cost.
Addressing the Urban Land Institute Ireland conference, Mr O’Flynn argued that the scheme required developers to build apartments without knowing what subsidy they would receive, meaning they could not calculate each project’s value.
Speaking after the gathering, Mr O’Flynn pointed out that no builder could risk funding an apartment scheme under those conditions. “How do you fund that?” he asked.
He argued that the Government and policymakers continued to ignore the centrally important issue of costs when they tried to tackle the housing crisis.
Estimates of the likely cost of Croí Cónaithe’s run to €450 million, while reports say builders could receive up to €144,000 for each apartment they finish in cities outside Dublin.
The scheme sets a maximum of €120,000 per apartment, but because property prices are lower outside the capital, developers can argue for an increase of up to 20 per cent, adding €24,000 to the subsidy.
They will have to demonstrate that there is an actual gap between the cost and what buyers can pay before qualifying for the scheme.
Minister for Housing Darragh O’Brien told the Urban Land Institute conference in a recorded address that developers had approached the Housing Agency about taking part in Croí Cónaithe.
“I’m happy to report that we have had a lot of interest in the scheme already,” he said.
Mr Donohoe explained that Croí Cónaithe was designed to make apartment building viable in places where it was needed.
Apartments cost an average of €400,000-€450,000 each to build, but mortgage-lending rules mean most buyers can only raise about €300,000-€350,000.
Consequently developers either focus on suburban homes or build apartments only where they know investors will buy the entire block up front to rent out the homes.
According to the Government, Croí Cónaithe is meant to bridge the gap between the cost of building apartments and the cash that prospective buyers can raise.
Mr O’Brien said the State aimed to support the construction of 5,000 apartments in Cork, Dublin, Galway, Limerick and Waterford between now and 2026.
The Government is targeting proposed apartment blocks that have planning permission but have not been built because the cost to do so would exceed market prices.
According to some estimates, planners have given permission for up to 70,000 apartments around the State, but many remain unbuilt because of the so-called “affordability gap”.
Under Croí Cónaithe, builders will have to agree to sell the apartments to owner-occupiers and will have to begin construction by the end of March next year.
