Social Housing PPPs almost six times more expensive than standard social housing
Sinn Féin housing spokesperson Eoin Ó Broin has described the cost of the first tranche of public private partnership social housing as ‘exorbitant’ and an ‘obscene use of tax payers money’.
The statement was made on foot of figures released to the Deputy that show the cost of managing and maintaining the social housing units over 25 years is almost six times higher than standard social housing.
Deputy Ó Broin said;
“Rebuilding Ireland commits to the delivery of 1,500 social houses through public private partnerships. The contracts for the first tranche of 534 units was announced with much fanfare last month. The houses will be delivered in Dublin City, South Dublin, Wicklow, Kildare and Louth.
“The successful private consortium, Comhar Housing, in owned by MacQuarie Capital and involves Sisk, Choice Housing facilities management and Oaklee Housing association. Funding has been sourced from the European Investment Bank, Bank of Ireland and the Korean Development Bank.
‘’Figures provided to me from the Department of Housing confirm that the total value of the contract is €301million excluding vat. This will be paid to Comhar in monthly instalments over 25 years after which the properties transfer to the ownership of the local authorities.
“The Department also confirmed that the capital costs for the contract were approximately €120 million including site works which makes the cost per unit around €225,000. This figure is broadly in line with the costs of social housing delivered by Local Authorities or Approved Housing Bodies.
“However the figures also reveal that Comhar Housing are charging €181 million for the management and maintenance of the properties for the duration of the 25 years. This equates to €338,951 per unit over the lifetime of the contract or €13,558 per unit per year.
“According to separate figures provided to me by the Department of Housing this week the average annual cost of management and maintenance of similar units in the Approved Housing Body sector last year was just €2,375.
“This means that the PPP management and maintenance cost is almost six times greater than that of the voluntary sector.
“The 534 PPP social housing units are costing the taxpayer €149 million more than standard social housing delivered by Councils and AHBs. If these costs are replicated for all 1,500 PPP social houses the additional cost will be a staggering €419 million.
“To put this in perspective €419 million would provide up to 2,000 additional social housing units via the standard Council or AHB build and acquisition programme. This would provide housing for all of the 1,707 families recorded as homeless by the Department of Housing in February of this year.
“This level of overpayment to the private sector is exorbitant. It is an obscene use of taxpayers money.
“Once again Fine Gael’s over reliance on the private sector to meet social housing need is costing both the taxpayer and families in housing need dearly.
“I am calling for an immediate review of the costs of this project before any further social housing public private partnership is entered into. I will also be writing to the Public Accounts Committee and the Comptroller and Auditor General asking them to investigate the excessive and unjustifiable cost of the contract signed last month.”
PQ on PPPs
Wednesday, 27 March 2019 Questions (286)
Deputy Eoin Ó Broin asked the Minister for Housing, Planning and Local Government the full cost of the first tranche of PPP social housing units the contract for which was signed with Comhairle in March 2019; the full cost of the contract over the lifetime of the PPP; the cost of the monthly availability agreement paid to Comhairle; the cost per unit of accommodation provided; and the way in which these costs compare to the public sector benchmarking exercise carried out by DCC, the NDF and his Department in advance of the tendering process. [14335/19]
Eoghan Murphy Minister for Housing, Planning and Local Government
The Social Housing PPP Programme involves an investment with a capital value of €300 million. It is to deliver 1,500 social housing units in total, via three bundles. The first bundle, which comprises six PPP sites, will provide 534 units in the Greater Dublin Area. Two of the sites are located in the Dublin City Council area with one each in the County Council areas of South Dublin, Kildare, Wicklow and Louth.
The Social Housing PPP Programme is being delivered through the ‘availability’-based PPP model. Under this type of contract, the PPP project company, as the private partner, designs, builds, finances and maintains public buildings on sites provided by the State, in this case through the local authority. Payment is made by the State only once construction of the buildings is complete and the units are ready to house tenants. The payment comprises a monthly ‘availability’ and performance-based payment (or unitary charge) made over the term of the 25-year contract.
Land provided by the local authority is made available by way of a licence. Ownership of State land is not transferred to the private partner PPP company. Tenants allocated to PPP units will be nominated by the local authority, in the normal manner, from the local authority social housing waiting list, in accordance with that local authority’s allocation scheme. Each respective local authority therefore retains tenant nomination rights, and is to be the contractual landlord, with the same differential rent arrangements applying.
The contract for the first bundle of the Social Housing PPP programme was awarded to Comhar Housing Consortium on 19 March 2019.
The total capital construction cost for Bundle 1 is approximately €120 million in nominal terms. This includes the construction of the 534 homes, the associated site works such as roads and play areas, and community facilities at the Ayrfield site. This equates to approximately €225,000 per unit, inclusive of ancillary works. The total cost is in line with the programme estimates, which aims to deliver 1,500 units under a €300m investment programme.
The full value of the contract, the duration of which includes the construction period plus a 25-year operating period, is estimated in nominal terms at €301 million (exclusive of VAT and including a forecast of inflation). Over the lifetime of the contract, this equates to an average of approximately €1m per month, (exclusive of VAT and inclusive of an allowance for inflation), or approximately €1,900 per unit per month. This cost includes all maintenance, operating, lifecycle, tenancy management and financing costs. Service provision that is included in the contract includes building and asset management, waste management, security, void management, tenant helpdesk services, and the provision of community development services. At the end of this period the units are handed over to the relevant local authority.
The estimated full value of the contract, as outlined above, is due to be published as part of the Contract Award Notice in the Official Journal of the European Union, as is standard practice under European procurement procedures. In addition to the full value of the contract, the State will be liable for payment of VAT on the capital construction costs, as well as utility connection charges for each unit.
No unitary charge payments are required to be made until the homes are constructed and available to house tenants, at which point the 25-year operating period commences. As with all availability-based PPPs, the monthly unitary charge is subject to both the availability of the homes and the performance of Comhar in the provision of services.
In accordance with the Department of Finance Guidance “Value for Money and the Public Private Partnership Process”, value for money testing was carried out at different stages of the procurement process for the project. This included a comparison of the winning tenderer’s bid with the Public Sector Benchmark and I can confirm that in this case that the winning tenderer’s bid was lower than the Public Sector Benchmark. However, as the Deputy will be aware, given the commercially sensitive nature of the detailed information and financial calculations included in the PSB, it is not possible to reveal the specifics of this at this time.