Stories
Shaw St is a narrow back street connecting Trinity College with the quays, off Pearse St in Dublin 2. It is lined with a mixture of old and new buildings hosting apartments, a creche and a solicitor’s office, two construction sites, and a few derelict lots. More building activity is on the way: in the past week, two planning notices were erected on sites next to the railway bridge. One is for 12 apartments to be built by the housing charity Peter McVerry Trust.
Outside the vacant warehouse and graffitied hoarding, I meet Francis Doherty, the organisation’s deputy director for housing and communications. He’s one of several managers overseeing both core and support functions at the charity – “to keep it lean”, he says.
The planned building on Shaw St is part of the growing number of new builds launched by the Peter McVerry Trust in the past two years, according to Doherty. It will be one of the few in Dublin designed to accommodate single people, which is where Doherty says homeless needs are the greatest. “If you take Dublin City Council, the waiting list is 62 per cent singles. But if you look at what is actually being delivered in the social sector and the private sector, there are very few one-beds”, Doherty says.
Those few one-bedroom apartments being built are in the private sector, often high-end, and too expensive to meet social needs, he adds, mentioning the Capitol Dock residence as an example. An online search shows that developer Kennedy Wilson advertises one-bed apartments in the serviced Grand Canal Dock complex for rent at €2,900 a month.
“What we’re trying to do is to get to a point where we’re delivering more homes than the number of people that are coming into homeless services.”
The Peter McVerry Trust now has 450 long-term units housing 650 people, which was its target for the end of 2020. Despite hitting this number early, Doherty says: “The challenge is that we have 1,000 people in our homeless services still, and the majority of those are in Dublin – some in Kildare, a small number in Meath.” This represents one in ten people in state-funded emergency accommodation nationwide.
“What we’re trying to do is to get to a point where we’re delivering more homes than the number of people that are coming into homeless services”, Doherty says. For the past six years, housing delivery has increased but the number of people presenting as homeless has grown even faster.
€13 million invested in property last year
Why would a charity provide long-term housing for people exiting the immediate emergency accommodation phase? Doherty explains that his organisation’s tenants need acute support. “Unlike a private developer or a general needs social housing provider, we have to operate on a much smaller scale. Because we can’t impact on a community and put in 100 complex cases with addiction or mental health needs, or a history of prison or state care, or just living in hostels or institutions for years and years.” The maximum number of people the Peter McVerry Trust houses in any long-term location is 20, but many of the 100 properties currently in Doherty’s pipeline are single houses or apartments.
His job is to scour the market to find these properties, buy or lease them and refurbish them for use by supported tenants. Accounts just filed by the organisation show that it generated a net income surplus of €10 million last year, and invested €13 million in property over the same period.
The Peter McVerry Trust uses its own capital resources to buy units on the open market, but Doherty says he increasingly deals directly with investors and property owners: “In the last two years, we’ve done a lot more of the off-market acquisitions, from investors, investor funds, and similarly we’re getting a lot more investors into long-term social leasing.”
“We’re getting the sense that more and more developers are worried that that market isn’t going to be there in 12 months.”
In a darkly ironic twist of history, some of the properties symbolic of the financial crisis are now coming back to organisations like the Peter McVerry Trust – the unfinished developments, the over-leveraged buy-to-lets snapped up by vulture funds in mass debt portfolio sell-offs and left vacant ever since. On the one hand, they fit the social housing bodies’ objective of providing new housing supply, rather than competing with investors or people in need of a home when buying turnkey properties on the open market.
On the other hand, Doherty says approved housing bodies have become attractive clients to some developers. “Stuff is being built that maybe was intended to go on the open market for private households. We’re getting the sense that more and more developers are worried that that market isn’t going to be there in 12 months. They’re coming to us now with a site and say: ‘We’ve got this site, this is what we’re looking for from the end units, can we lock you in now in an agreement to buy that.”
Those developers have planning and finance arranged, but Doherty says they are becoming squeezed between rising land and construction costs, and what households can afford under strict Central Bank borrowing rules. “There are people going through our door every day of the week offering potential sites and developments”, he says.
Another source of off-market acquisitions comes from vacant investment properties caught up in the burst credit bubble of the past decade. While the large-scale buyers of distressed debt, such as Cerberus or CarVal, don’t come to the Peter McVerry Trust directly, Doherty says that investors who have acquired chunks of their portfolios or repossessed units do.
Not all offers from developers or investors are suitable though, with houses or apartments sometimes offered to the organisation in rural villages without any homeless people – the Celtic Tiger ghost estates or development sites on the Leitrim-Roscommon border. “Most of the usable opportunities are actually in large provincial towns or commuter belt towns. We would get stuff in Drogheda, Navan, Ashbourne, right around to Kildare and Wicklow”, Doherty says.
Dublin is an entirely different market, buoyed by international private demand. Here, the Peter McVerry Trust relies on local authorities to provide infill sites or buildings for redevelopment, such as the one on Shaw St. Around the corner on Townsend St, Doherty says the organisation will start renovating a block of 17 City Council-owned bedsits in the new year at a cost of €4 million.
Social leasing on the rise
Another option growing in popularity with investors is 25-year leases underpinned by state or local authority land ownership or guarantees. Doherty says these arrangements offer public bodies as a middle ground between outright ownership and doling out expensive Housing Assistance Payments to help people pay market rents. “The owner isn’t getting market rent: they’re getting 80 to 85 per cent. The state is saving. The tenants have 25-year security. The investor has the security of effectively state-guaranteed rental income for 25 years regardless whether there’s somebody in the building or not.
“If it’s Peter McVerry Trust or another approved housing body, we’re actually managing the tenants and the maintenance of the building over the course of the lease, so it’s a very hands-off deal for the investor. They’re just responsible for their structure and that’s it.” Doherty is confident the Peter McVerry Trust can arrange around 100 such long-term social leases in the coming year. “We met somebody this week that has spent €140 million on property and land in the last three years and is now looking to go down the social leasing route, on a nationwide basis from Dublin to Cork.”
At the other end of the investor scale, he says more and more financial advisors are becoming aware of this option and recommending it to their clients, either for their existing properties or as a new investment: “That’s something that probably wasn’t there 18 months ago. We’re seeing financial advisors and people active in the financial sector creating products for small-scale Irish investors to invest anything between €20,000 and a €100,000.” The assembled fund is then used to invest in an apartment block that is leased to a social housing body. Doherty says the Peter McVerry Trust is working with two such funds, one in Drogheda and one in Limerick.
In Limerick, the project is based on the Living City Initiative, a tax incentive to renovate vacant Georgian buildings and bring them back into use. An investment firm has brought together the individual owners of apartments in three buildings – typically six in each Georgian townhouse. “This single entity leases the block to us under social leasing under Living City. They’re getting their tax incentive, then they’re getting their 25-year lease.” The Peter McVerry Trust has an option to buy the buildings at a set price at the end of the lease. Renovation works are now under way, Doherty says.
“We choose to go through the public planning application process because we want communities and neighbours to see what our plans are.”
The charity’s construction or renovation projects could, in many cases where local authorities are involved, benefit from so-called Part 8 planning exemptions and go ahead with an executive order. “We choose not to do that”, says Doherty. “We choose to go through the public planning application process because we want communities and neighbours to see what our plans are, give their observations, give their views, object if they want to.”
While he says many objections relate to the people the Peter McVerry Trust is planning to accommodate, he attributes this to the “fear of the unknown.” His job is to engage with local residents and explain the mix of tenants who will become their neighbours and give them 24/7 contact details to address any issues.
“In particular, if you’re going into an old local authority building or local authority derelict site and they are surrounded by local authority tenants, there is a very real, palpable sense of communities that have been abandoned by the local authority, by the state, by the system if you want to put it that way”, Doherty says. “When we go in, do a town hall meeting or meet the local residents’ association, the first couple of meetings or hours of those meetings are for people to vent their frustrations. Maybe 2 or 3 per cent of those frustrations have to do with what we’re doing. That’s because you’re making yourself available, you’re on site.”
In the end, the Peter McVerry Trust has not yet seen any of its planning applications appealed to An Bord Pleanála. Within six months of a project opening, he adds there are rarely any complaints.
Doherty on Government housing initiatives
- The Repair and Leasing Scheme: “It is a great idea, but the challenge is – particularly in Dublin – what can you do to a house for €40,000 when 13 per cent Vat is included in that? It’s usually unreasonable to think you can take a long-term vacant building and re-use it for €40,000. What we’ve done in a lot of cases now is to make a business case on behalf of the owner to get more money. But what we would like for the Department [of Finance] to adopt is that they would set a figure of, say, €75,000. Even though that is more beneficial to the owner, the state is also getting a better deal because it’s cheaper for somebody to be in housing for the state than it is to pay for them being in emergency accommodation.”
While the scheme has proved attractive to accidental landlords, in situations such as inheritance, Doherty says active investors have stayed away from it. He cites the example of a vacant building on Dublin’s Dorset St, which has been transferred between offshore owners multiple times. “We research the owners of vacant buildings, in Dublin in particular, and we write to them. Some of them will write back and go, ‘Thanks very much, I’m going to leave it empty for now. It’s my building’.” - The Vacant Site levy: Once owners have been made aware of schemes to bring vacant properties back in use and still decide to keep them empty, Doherty says they should face the ultimate threat of a local authority compulsory purchase order. “What we would like to see on empty residential properties is an obligation under the Local Property Tax for the owner to declare it’s vacant for more than 12 months. If it’s not put to use in a period of maybe two years, the Local Property Tax doubles, then trebles, and then gets to a point that after five years an automatic CPO notice is served by the local authority.” While some properties have been vacant since 2011, Doherty says there has never been a better time for investors to lease them or cash in on the asset value – so no excuse.
- The Housing Assistance Payment (HAP): “Whether you like it or not, it’s been a lifeline to get and keep people out of homelessness. But is it financially sustainable for the state and the Exchequer? If you look at the last financial crisis that we’ve gone through, Rent Supplement, which was the main housing subsidy available to people, was cut substantially through the recession. The cut to Rent Supplement is in correlation to rising homelessness. If we have another economic issue in the state, the likelihood is that the rate of the HAP payment is going to come down. That puts 2,000 households at risk of homelessness. The other thing around HAP is that there are probably too many ways for property owners of exiting the agreement. We’ve had incidents where people are only in a HAP tenancy three or four months and they’re getting a notice to quit because the owner has decided to sell. What transpires is that they put it up for sale for a few weeks, and then it is back on the [rental] market. It is not sustainable, it is not good value for money, and it’s still a lot of insecurity for the tenant and for the landlord: if the tenant stops paying their proportion of the HAP payment each month, the local authority just turns off their payment to the landlord and it’s up to you to fix it.”
- The Housing Agency: Doherty says the state body set up in 2010 has been “hugely supportive.” “We can go into the Housing Agency and say, ok, we’re having a real challenge in Kildare, we cannot get access to property on the market, it’s just to hot a market. This is what we need in Naas, in Maynooth. They will then go back and use all their contacts in the funds to be able to say: is there anything that matches our needs? It might come in ones and twos. They will initially acquire the property, so if there are any issues with messy titles, the Housing Agency really tidy that up. They’re giving us the security. We then buy it from them when we have arranged our finance, usually after three or four months. They have a €70 million revolving fund to buy vacant stock and we would be one of the biggest beneficiaries of that.” The Housing Agency has been the only channel for the Peter McVerry Trust to access sites in high-demand areas of Dublin and it should have more money, Doherty said.
As most people renting their home are doing so from small-scale landlords with fewer than six properties, Doherty warns of another looming housing risk linked to the demographic profile of those property owners. He fears many of their tenants, especially those supported by HAP or the old Residential Accommodation Scheme (RAS), would face homelessness if landlords decide to sell into retirement.
A survey by the Residential Tenancies Board (RTB) of landlord demographics and their intentions as they get older would help plan for their tenants’ future. “If we get to a point when this piece of analysis says we’re approaching a cliff edge and a lot of these guys are saying ‘I’m out of the market, I’m cashing in, I’m a pensioner, I need to wind down’, where are these social tenancies going to go when they start getting eviction notices?” Doherty asks. “All we’re hearing from the Landlord’s Association is that landlords are exiting in droves – it’s chaos.”
CGT incentive
The Peter McVerry Trust has lobbied Minister for Finance Paschal Donohoe to cut the capital gains tax for small-scale landlords who sell a property occupied by a tenant in the HAP or RAS scheme to a local authority or a housing charity. “That means the person doesn’t become homeless, the landlord exits in a managed way, you transfer what is private stock to social stock in a managed process. It requires probably a few hundred million increase in capital spending each year in acquiring these properties, depending on that piece of information from the RTB demographics, but the only way we can tackle homelessness is to turn off the tap of people coming in.”
While Doherty thinks long-term solutions to homelessness reside in deep reforms reaching into the education and justice systems, he says that the immediate focus should shift to preventing homelessness before people lose their home and present for emergency accommodation:
“If you want to reduce homelessness annually, you need to look at how to stop people losing their private rented accommodation. That’s why we talked about tax incentives. Up to 50 per cent of all new cases of homelessness are because of landlords who sell. Based on government figures, there are 17 cases of homelessness recorded every day. You take away eight of those in the morning, you have a much more manageable figure. We would be housing 12 people every day at the other end. Then we get into a place where we’re reducing the rise of homeless emergency accommodation and we see a gradual sustained decline.”
Then the Peter McVerry Trust could go back to what its founder started doing: help those facing homelessness not because of a dysfunctional market, but as a result of difficult personal situations – addiction, prison or growing out of a troubled childhood. “What we want to do is shut down our hostels, and where we own those hostels, convert them into apartment blocks”, Doherty says.
