Sir, – Reports of new proposals from the Government to partially fund the construction of new student accommodation projects again bring to light some of the obstacles posed by the EU’s state aid rules. These rules seek to prevent distortions of competition and harmful subsidy races in the EU’s internal market.
The Swedish government implemented a similar aid scheme in 2016 that was adjusted in 2019, providing grants for landowners or construction businesses that built rental housing in areas with housing shortages or student accommodation in areas with institutions of higher education. The relevant legislation also fixed maximum rents that could be charged for different types of accommodation.
Two important lessons are worth drawing out from this scheme. First, the European Commission found that Sweden had breached the state aid rules by implementing this scheme without notifying the European Commission in advance and obtaining its approval. It seems likely that the equivalent scheme here will also have to be notified to the European Commission which may cause delays. Any subsequent changes to the scheme would also have to be notified.
Second, this type of aid was ultimately approved by the European Commission, suggesting that a similar scheme could be implemented here. However, the European Commission relied on the fact that the controls on the rent that could be charged were not excessively restrictive as they ensured that rents would be less than 20 per cent below the market rent for a similar property. It also relied on the observation that the grant to the average housing unit supported by the scheme covered approximately 20.3 per cent of construction costs.
This suggests that the Government may be constrained in its ability to restrict the rent for such properties. It may also make it more difficult for the State to fund up to half of the construction costs, as requested by some of the university authorities. – Yours, etc,
CHRISTOPHER
McMAHON, BL
Adjunct Assistant
Professor,
School of Law,
Trinity College Dublin,
Dublin 2.