Cost Rental Housing – the new Social Housing Model?

With the recent announcement of the launch of Ireland’s first cost-rental housing scheme in South Dublin, the housing landscape in Ireland is slowly adapting to respond to the housing needs across the country.

Cost-rental housing is a model of housing provided generally by the State, local authorities or Approved Housing Bodies (“AHBs”). As the name suggests, the rent charged to tenants will cover the costs incurred in delivering, maintaining and managing the properties, and nothing more. The concept allows for affordable housing to be planned in the long term and is independent of the private rental market.

Affordable Housing Bill

The Affordable Housing Bill 2020 (“the Bill”) has been published by the Minister for Housing, Local Government and Heritage. It introduces three types of housing schemes, putting affordability of housing at the forefront. Cost-rental housing is one such scheme, with the others being an Affordable Purchaser Shared Equity Scheme and affordable housing on local authority-owned land. This is linked in essence with the Land Development Agency Bill 2021.

What level of rent applies?

Part 5A of the Bill deals with cost-rental tenancies. A cost-rental tenancy is one where the rent is set by the landlord or provider at a cost-covering level. This level may be prescribed in regulations made by the Minister, but will include:

  • Development costs
  • Financial costs (including servicing debt)
  • Management costs of the property
  • Maintenance costs, to include a sinking fund

The tenancy must also be designated by an order of the Minister as being a cost-rental tenancy.

Rents may be reviewed on an annual basis, and may only be increased in line with the Consumer Inflation Indices published by the CSO, or prescribed by the Minister in regulations.

Who will be eligible for such a scheme?

The criteria will be set by the Minister in regulations. These regulations will contain criteria such as maximum and minimum household incomes, household size and composition and can relate to specific developments or specific units. The levels of income prescribed may also vary by housing authority.

Where a household avails of the Housing Assistance Payment (commonly referred to as “HAP”), it will not be eligible for a cost-rental tenancy. Where a cost-rental tenant becomes eligible for HAP during their tenancy, they may apply for HAP in the normal way, provided that they have been in a cost-rental arrangement for more than 6 months.

Benefits of Cost-Rental Housing

Cost-rental tenancies as defined in the Bill are not considered “social housing” for the purposes of the Housing Acts. As such, the tenancies are covered by the standard terms of the Residential Tenancies Act 2004 – 2020. Cost-rental tenants are therefore treated the same as tenants in the private rental sector, and with this comes an array of legal protections and obligations.

The Bill also excludes certain provisions of the Residential Tenancies Act so as to provide greater security of tenure for cost-rental tenants. Most notably, a landlord will not be entitled to terminate a cost-rental tenancy where it is selling the unit, requires it for family members, is undertaking substantial refurbishment or intends to change the use of the dwelling.

A cost-rental tenant will not be allowed to sublet the property. It is an important element of the scheme that all tenants are assessed and found to meet the eligibility criteria.

What Next?

The Bill has been approved by Cabinet at the end of 2020. Coupled with the Land Development Agency Bill 2020, when enacted, both pieces of legislation should greatly enhance quality housing at affordable prices.

How we can help

For further information on this topic or for any queries please contact Rob Gibbons in our Commercial Real Estate Department on 01 440 8300 or rgibbons@bhsm.ie.

This article is for general information purposes. Legal advice must be obtained for individual circumstances. Whilst every effort has been made to ensure the accuracy of this article, no liability is accepted by the author for any inaccuracies.

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