Affordable Housing Act 2021 – key measures
How new affordable homeownership and cost rental housing options aim to improve housing availability in Ireland
GROWTH, DEVELOPMENT & REGENERATION
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John O’Connor
Former CEO, Housing Agency, and Chair-designate, Commission on Housing
The Affordable Housing Act 2021 represents the first standalone affordable housing legislation in Ireland and was signed into law on 21 July 2021. It introduces a range of measures to make affordable homeownership and cost rental homes available for many households.
The overall aim is to have housing available that is affordable for households across a wide range of income groups. There are two affordable purchase schemes provided for in the Act. These seek to address the affordability gap that exists for moderate-income households which are constrained from accessing sufficient finance to purchase homes at open market prices.
Primarily aimed at first-time buyers, the two new options can be summarised as follows:
Local Authority Affordable Purchase Scheme
The local authority affordable purchase scheme will operate in each local authority area around the country. Affordable homes will be developed by local authorities or in partnership with Approved Housing Bodies (housing associations), the Land Development Agency and housing developers. The discount from the open market value will be achieved by a combination of low-cost land and other specific state funding. The local authority will hold an equity share and the affordable homes will be offered for sale to eligible households.
The National Affordable Shared Equity Scheme
The National Affordable Shared Equity Scheme will be operated through participating banks. Eligible purchasers will be able to buy new homes for sale on the open market that are below the relevant location-based price caps. An equity share will be available to any purchaser where there is a shortfall between their mortgage capacity and the new home price. The equity share will be owned by a special purpose vehicle jointly funded and overseen by the participating banks and the state. The equity share can be bought out at any time and an annual charge will apply after year five to the equity share value.
Cost rental housing
Homeownership can often be the focus for affordable housing. However, a key element of achieving affordable housing in many countries is the development of a cost rental sector. Over time, this approach can provide a significant amount of housing that offers a more affordable option to many households. It is a more sustainable rental model where homes and rental income flows can be used to leverage further investment.
The Act contains provisions to facilitate delivery of cost rental housing which will be developed mainly by local authorities, housing associations and the Land Development Agency. The establishment of the cost rental model is intended to promote an increased supply of affordable rental homes in areas where there is a high demand for housing.
The overall aim is to have homes available for rent at levels that are substantially below market rent, while sufficient to meet the financing and on-going management and maintenance costs for the owner.
“A key element of achieving affordable housing in many countries is the development of a cost rental sector. Over time, this approach can provide a significant amount of housing that offers a more affordable option to many households.”
The Minister for Housing has approved Cost Rental Equity Loan (CREL) funding for initial cost rental homes to be delivered by housing associations over the next year. The Housing Agency is providing the CREL funding as a secondary loan for 30% of the capital cost. The Housing Agency is also facilitating the delivery of cost rental homes by two housing associations on public land, in partnership with Dún Laoghaire-Rathdown County Council. Homes must be designated as cost rental dwellings for a minimum period of 40 years with rents required to be a minimum of 25% below market rent at the outset.
Cost rental homes will be available for rent to households who meet specific income eligibility criteria and will be comparable to private rental homes in all other respects.
The new legislation now in place will drive the delivery of affordable homes for purchase and to rent.
