How Social Housing is Financed, Delivered and Managed in Ireland
Ireland’s housing shortage is compounded by a major undersupply of social housing. Looking to our past and European neighbours though could point to better models, superior ways of financing public housing and above all else more sustainable and affordable schemes, as UCD’s Head of School of Social Policy, Social Work and Social Justice, Professor Michelle Norris has investigated.
The published author and senior lecturer in social policy recently received a University accolade for her research into the sector, work which is now influencing government thinking on how overhauling public housing building might just help solve the crisis.
Professor Norris’ research primarily looks at how social housing is financed, delivered and managed. In recent years, she has completed several pieces of research around this. Last year she completed a study for the Housing Finance Agency, which she chairs, on how social housing is funded in Denmark, Austria and Ireland. Her work won her the inaugural UCD Research Impact Case Study competition, where she was declared overall winner. A key question Professor Norris explored was how the other two nations successfully finance and manage larger social housing sectors than us.
She explains a key finding is that their schemes are not based on larger amounts of state funding. State funding for public housing in Austria and Denmark is significantly lower than Ireland. Sectors there are financed instead mainly from private sources, including from banks and bonds. Austria also runs a state-backed special savings scheme, which helps finance social housing construction.
In those countries, tenants also pay rents according to the cost of providing the homes and they pay down loans over a very long time. The Austrian state therefor pays a small subsidy towards all of this, which is a loan covering 20% of costs. The opposite is the case here, as Professor Norris explains: “In Ireland, the state funds 100% of the provision costs. So the model used in other countries is much more affordable for governments. You spread the cost over a longer period and tenants make a bigger contribution over maybe 30 or 40 years. So the system is basically self-financing.”
Her work also looked at the financial crash here and how social housing funding was cut by 82%.
For banks in Denmark and Austria, social housing was also considered a safe haven investment for lending. While it is not per se government guaranteed, it is robustly regulated.
But the question is what could we do here in Ireland to make social housing more sustainable?
Having led over 20 research projects on housing and produced 50 publications on results, Professor Norris’ research also saw her publish a book last year. Property, Family and the Irish Welfare State looks at the history of how the state has provided social housing since the 1880s. This strangely revealed how Ireland in the past had used social housing models similar to Denmark and Austria.
She explained: “We raised local authority borrowed loans or sometimes they raised bonds and the rents tenants paid were linked to the cost of provision. And local property taxes, i.e. residential rates, played a big role in refunding the payment of the loans. The sector was much more self-funding than it is now.
“People ask how did we manage to build all the council housing in the 1950s when we were broke? Dublin and Cork city councils would have raised municipal bonds. If they felt that social housing was a priority in their area, they raised taxes or rates. Tenants rents were historically linked to the cost of provision.”
Professor Norris points out that this is the standard European model. Furthermore, if tenants can’t afford the rent, they get a subsidy, like rent supplement. All these factors spread out repayments. In Ireland, this model worked quite well, she says, until the 1970s. However, the abolition of rates caused enormous problems.
Firstly we need to stop selling off council housing. Currently the discount is 60% of market value. So now the government pays 100% of the costs and if it is sold off, the profits are privatised.
Rents were then linked to tenant incomes and therefore were low and unpredictable. Moreover, Ireland began selling those houses built at a knock-down price.
So what do we need to do now? Professor Norris explains: “Firstly we need to stop selling off council housing. Currently the discount is 60% of market value. So now the government pays 100% of the costs and if it is sold off, the profits are privatised.”
Furthermore, the overall level of social housing is too low.
In 2015, the output for social housing was around 1,500 units. She maintains that Ireland needs to provide 5,000 units a year, particularly where needed in urban areas, in Dublin, Cork and Galway.
She also believes local authorities should keep more of their local property tax, similar to the past. “Because the homeless problem is so acute in Dublin, this should happen,” she explains.
Solving the housing crisis will not be easy. But there are avenues Ireland can follow, especially when it comes to social housing supply. Prof Norris explained: “We can also look to our past as well as abroad for what we need to do.”
Professor Michelle Norris was in conversation with Juno McEnroe, Journalist with the Irish Examiner.