commencement of the new Cost Rental Equity Loan (CREL) scheme announced in Budget 2021, delivers on a commitment in the Programme for Government
€35 million in funding to be made available to Approved Housing Bodies to deliver c. 350 homes in 2021 at rates which are a minimum 25% below open market values
resulting homes will be used for Ireland’s first Cost Rental tenancies, a new sector of the rental market in which tenants pay rent that covers the costs of delivering, managing, and maintaining the homes only
The Minister for Housing, Local Government and Heritage, Darragh O’Brien TD, has today (Monday 14 December) issued a ‘Call for Proposals’ for his department’s new Cost Rental Equity Loan (CREL) scheme. This is another important step in the Minister’s drive to deliver new affordable housing options and marks the formal commencement of this new scheme.
The fund will support Approved Housing Bodies (AHBs) to deliver approximately 350 cost rental homes next year. Funding of €35 million has been made available for this scheme under Budget 2021. This forms part of a larger allocation of €468 million for all housing affordability measures.
The Programme for Government, Housing for All, commits the government to the development of a new cost rental housing sector in Ireland, in which the rents charged will be set to cover the costs of delivering, managing, and maintaining the homes.
The CREL scheme will accelerate the implementation of this new cost rental sector by AHBs, prior to the delivery of further homes by the Land Development Agency and directly by Local Authorities.
The scheme will see long-term loans on favourable terms made available to AHBs to cover up to 30% of the development or acquisition cost of new cost rental homes. This state assistance in securing financing will mean that AHB landlords can set lower cost-covering rents for cost rental tenants. It is expected that the remaining development or acquisition costs for the homes will be met by long-term commercial loans from the Housing Finance Agency, which has confirmed it will make a corresponding €100 million available next year.
Minister O’Brien said:
"In the Budget I announced the first new national funding model for cost rental homes. Approved Housing Bodies have consistently demonstrated their capacity and expertise in developing and managing homes for the social housing sector. This new scheme provides for an expanded role for the AHB sector, enabling it to support moderate-income households in need of quality, affordable homes."
Housing Finance Agency CEO Barry O’Leary said:
"The HFA is delighted to be in a position to make €100 million in long-term, fixed-rate finance available for this new initiative, which will increase the suite of lending products we provide for AHBs."
Cost rental aims to help households with moderate income access affordable, secure tenancies in accommodation suitable to their needs. The establishment of a cost rental model is intended to promote an increased supply of affordable homes in areas where there is a high demand for housing.
The Minister also confirmed his intention to place Ireland’s new cost rental sector on a statutory footing indicating that a new affordable housing Bill will be brought to Government in the coming weeks. While precise eligibility conditions and operational matters for cost rental are being finalised as part of this process, this legislation will be an important element in defining and regulating this new sector.
Whilst pointing to the need for immediate delivery, the Minister indicated that the collective experience in bringing on stream these first cost rental homes in the State will be used to inform the ongoing policy development process. This will support the emergence of the optimum approach for the wider roll out of the model across local authorities, the Land Development Agency and Approved Housing Bodies.
The Minister ended:
"Today’s announcement means that cost rental is now up and running for applications and will deliver the first ever cost rental homes in the State in 2021. This was my commitment, and I would like to pay tribute to the way in which officials across my own department, Approved Housing Bodies, the Housing Agency and the Housing Finance Agency have worked collaboratively and with the urgency I sought in bringing this programme to fruition."
It is intended that the Housing Agency will manage and administer the Scheme on behalf of the Department of Housing, Local Government and Heritage. The Housing Agency will oversee the administration of the loan arrangements including the drafting of the Agreement for the Cost Rental Equity Loan (“CREL”) and will manage the due diligence on each proposal up until the signing of the CREL Loan.
The closing date for submission of applications will be early January with assessment and successful projects confirmed by January end 2021.
CREL has been allocated €35 million of funding under Budget 2021, which it is expected will support the delivery of up to 350 new Cost Rental homes.
A further 50 Cost Rental homes are currently under construction in Enniskerry Road, South Dublin and will be ready for occupation in mid-2021.
Under the CREL scheme, loans will be made available to Approved Housing Bodies (AHBs) on favourable terms to cover up to 30% of capital costs for the construction or acquisition of homes for Cost Rental.
CREL loans will be long-term (40 years), low-interest, and will use simple rather than compound interest. Repayments will not be required until the end of the loan term. These favourable terms will help to reduce the financing costs of delivering new Cost Rental homes, allowing cost-covering rents to be set at lower, more affordable levels.
It is expected that the remaining 70% of capital costs for the new Cost Rental homes will be funded by long-term, low-interest, fixed-rate loans to AHBs from the Housing Finance Agency (HFA), which will make €100m available for AHB projects that are approved for CREL funding.
The Minister intends placing Ireland’s new Cost Rental sector on a statutory footing in the new Affordable Housing Bill, which he plans to bring to Government shortly.
The eligibility terms and other conditions for Cost Rental tenancies will be outlined in this legislation, the terms of which will apply to the new Cost Rental sector as a whole.