Lynch welcomes Comptroller examination into housing lease initiative
Issued : Sunday 14 March, 2010
Statement by Ciarán Lynch TD
I would like to welcome the indication from the Office of the Comptroller and Auditor General that they will initiate an investigation into the Social Housing Leasing Initiative, announced last year by Housing Minister Michael Finneran.
I wrote to the CAG late last year and outlined to him my concerns over the scheme, which I don't believe to be an efficient use of public funds.
Last week, I heard back from the CAG's office with an indication that they accept that an in-depth investigation is warranted.
The CAG has already completed an investigation into affordable housing which is to be considered by the Public Accounts Committee, and the examination this scheme may well be conducted as a follow-up.
I have real concerns about this scheme and I don't believe that any real consideration has been given by the Government to the relative merits of leasing over purchase.
Some €20 million was set aside in 2009 to lease properties on a 10 or 20 year basis, with substantial sums to be allocated in future years also, but house prices have dropped considerably recently, so it would seem to make much more sense to buy the houses.
In addition, the maintenance and upkeep of the properties will be the liability of the local authority with the result that the builder/developer will at the end of a 10 year period be handed back the property in pristine condition which will have gained considerably in market value and which will have yielded a substantial return in rental income over the period of the lease. The local authority will lose a housing unit, may have a family to rehouse, and will miss out on any appreciation in the value of the property over the ten-year period. All the gain is to the owner who will have been cushioned through the recessionary period.
The amount returned in lease payment to the owner is intended to be 20% below the market value for the area. An objective assessment of local rent values would be very difficult to come by so any measurement against this condition will at best be "woolly". It is doubtful that if a lease is signed today and rental prices fall tomorrow that there will be a downward adjustment in lease payments. However, it can be expected that upward movement in rent prices will be reflected in lease payments.
It is my firm belief that the system works strongly to the benefit of the builder/developer and that a more considered system could be designed to the benefit of the taxpayer. Given the exclusion of second-hand houses from the scheme, it is hard to escape the conclusion that this system was developed more to bail out the builders than to provide address acute housing needs.
