Sir, – Anne Barrington argues that “there is no state aid rule stopping the Government right away from investing in the delivery of social and affordable housing”, indicating that investment of this type would be a service of general economic interest which would be exempt from the general prohibition on state aid contained in the European treaties (“Paschal Donohoe should use his Eurogroup role to help tackle housing crisis”, Opinion & Analysis, July 14th). These rules are designed to prevent distortions of competition and damaging subsidy races in the EU’s internal market.
Ms Barrington is undoubtedly correct that many forms of Government intervention in the housing market do not engage the EU’s rules on state aid.
However, just as it is important to avoid overstating the extent to which these rules limit the Government’s freedom to act in this area, it is equally important to avoid understating their effect.
While a wide range of supports such as social housing and cost rental models are likely to be permissible under the existing rules without issue, the position becomes more complicated where the state wishes to subsidise the provision of affordable homes for purchase rather than for rent.
Policies like this, including the Croí Cónaithe scheme which offers subsidies to developers to make up shortfalls in costs, pose a risk that a windfall benefit will be conferred on developers if they are not designed properly.
This risk may often be difficult to assess.
It is perhaps for this reason that the Government is currently consulting with the European Commission on the permissibility of that scheme under the existing rules.
Some of the uncertainty in relation to this type of policy may be mitigated in the commission’s upcoming evaluation of the rules on services of general economic interest which is due to published later this year. – Yours, etc,
CHRISTOPHER
McMAHON, BL
Adjunct Assistant Professor,
School of Law,
Trinity College Dublin,
Dublin 2.