Revised social housing guidelines have "transformative potential" to deal with the housing and homeless crisis through the leasing of properties to local authorities and housing associations, according to chartered town planner Aidan Culhane, who was a special adviser to former ministers of state for housing and planning Jan O'Sullivan and Willie Penrose.

Part V obligations under the Urban Regeneration and Housing Act have reduced the requirement that developers must set aside 20 per cent of all dwellings for social and affordable housing to 10 per cent. Builders, too, can no longer offer cash or sites elsewhere to local authorities in lieu of this obligation, so social housing in every new development of 10 or more dwellings is guaranteed.

But developers do not have to sell part V property to the local authority and can offer long-term leasing on the homes instead. This has drawn fire from those on the left who claim it allows developers to make "vast profits out of leasing social housing to councils" instead of transferring those houses into council ownership. However, the Construction Industry Federation maintains that part V obligations impose an "inequitable" obligation on new house buyers to contribute to social housing.

Meanwhile, the Government has signalled that it will make provision for the upfront funding of social housing units under part V. Draft guidance on the new Act mandates local authorities to deal expeditiously with developers seeking to make part V agreements. This should obviate the delays in the administrative system that beleaguered its operation in the past and could lead to a long-awaited and much-needed rise in the stock of public housing.

Social housing

Mr Culhane, who is now a consultant at WK Nowlan, maintains that, with State capital so scarce, it makes sense for more social housing units to be leased rather than sold. “Remember part V is not ‘free’ land or housing,” he says, “as it entitles the local authority to 10 per cent of the land at existing use value. Thus, the difference between the existing use and development value of the land can be taken out of the price of new units. It makes much more sense to apply this to leasing than to purchasing housing when there is so little public capital available.”

This is particularly true in Dublin and other major cities, Culhane says, given that scarce public capital “will be absorbed very quickly” on elevated land and building costs in these areas.

Leasing social housing units to the State, given the long-term and secure income stream concerned, could also ease the funding and viability of housing developments.

“While many developers will prefer to sell units, the leasing option offers potential for a decent income stream for an investor,” says Culhane. “A sensible developer will partner-up early with a housing association and make an approach to the local authority at pre-planning or even before. A common sense local authority will make a speedy assessment and negotiate a fair deal.

Local authority

“The key to the successful operation of part V is for developers to engage early with the local authority. Leaving it until late in the process is unwise, especially as commencement of projects could be delayed, and tighter timeframes reduce the scope for negotiation. Forming relationships with housing association partners is important. Though the local authority is the decision-maker, working with a good voluntary sector partner can greatly ease the part V process. Lastly, taking good advice on part V in terms of valuations, costings and structuring of deals makes eminent sense for all parties.”

While there is much to be welcomed in the new draft guidance on part V, Culhane believes it places a “heavy emphasis on acquiring units rather than leasing” suggesting that “the approach will be less flexible than it needs to be to optimise the potential of part V”.

“The legislation retains the term ‘affordable’, even though there are no such schemes in operation,” says Culhane. “Part V applies to social housing only. The direction of policy is against the type of subsidised purchase schemes that previously constituted ‘affordable’ and the term is more likely to refer to a reduced-rental intermediate tenure between the private market and social housing in the future.”