International investment funds are "having a laugh" at the Government over its housing strategy and its social housing policy is a "shocking mismanagement of public funds", businessman Dermot Desmond has told the Government.
In private letters sent last December and February, Mr Desmond criticised Government policy on housing and the over-reliance on international institutions and the private rental sector for social housing at a time when the cost of borrowing to the State was so low.
The businessman told Fianna Fáil Minister for Housing Darragh O'Brien that the State's treasury agency was borrowing at an average of 0.02 per cent when the State is paying 5 per cent on average to international institutions to fund publicly owned housing.
“In such a low interest environment, the current policy of buying and leasing social housing from private developers and investment funds is a criminal waste of public money,” he told Mr O’Brien in a letter dated December 15th, 2020.
"The international funds are having a laugh at the Irish Government and making a lot of money in the process."
The Government was losing almost €250 million a year on an assumption that at least €5 billion of State money was being invested in new and government-led housing initiatives.
In a letter to Taoiseach Micheál Martin in February, Mr Desmond criticised social housing policy, describing the Part V legislation where developers provided at the time 10 per cent but since increased to 20 per cent of any project for social housing as “one of the worst pieces of legislation ever passed and clearly not fit for purpose”.
Price tags of between €600,000 and €960,000 for apartments for social housing was “by any standard a failure in policy and a criminal waste of public funds,” he said.
These arrangements along with leasing from the private sector and subsidising rents to private landlords was “not good policy and it is not in line with the social housing policy in most other countries,” Mr Desmond said.
He wrote that "this misguided strategy" has left housing in Ireland "prey to greedy developers and international investors".
“Allowing the private market to dictate the price of social housing is a shocking mismanagement of public funds – you might as well hand out blank cheques,” he wrote.
“It is astounding that Government cannot see this and persists in pursuing what is clearly a deeply flawed national housing model to the detriment of all.”
The letters were first published on Sunday by the Business Post which obtained them under the Freedom of Information Act.
In a follow-up meeting between Mr Desmond and Mr O’Brien on April 1st, the businessman repeated his arguments and told the minister that the Part V legislation was “unwieldy and complicated” and that foreign investors get the benefit of guaranteed lease returns when it would be preferable if the properties belonged to local authorities.
According to a minute of that meeting, Kevin Dillon, one of Mr O'Brien's advisers, "accepted the point that the State was losing out somewhat".
He explained that this had arisen “due to the requirement for off-balance sheet accounting, the temporary lifting of which was due to Covid”.
In his December 2020 letter to Mr O'Brien, Mr Desmond said that the State should be innovative in a world where the State's National Treasury Management Agency was "almost being paid to borrow money".
“You have the opportunity to make home ownership affordable and to make money for the State,” he said.
He was a strong advocate of home ownership, but “policy making is your purview, not mine,” he told the Minister.
“What I do understand is finance and what is happening at the moment from an Ireland Inc perspective is insane,” he wrote.
