The Point end of Dublin’s Sheriff St is a massive building site. Some 1,000 build-to-rent apartments are coming out of the ground on two adjoining sites, one owned by US property fund Kennedy Wilson and French insurer Axa, the other part of Johnny Ronan’s mammoth Spencer Place project.

Just like many others in the Docklands area of the city and elsewhere, these homes will enter the portfolios of global institutional investors once they are filled with tenants.

Sandwiched between them in its own discreet office block, however, is a much larger Irish residential landlord, the approved housing body Clúid Housing. The non-profit organisation’s mission is to deliver social and affordable homes, but its director of new business, Fiona Cormican, does not see the investor-led developments of the type surrounding her office as competition or a threat.

“Build-to-rent is not a bad thing. It’s a good thing if it’s controlled and it’s managed very well,” she says as I meet her for a wide-ranging interview, available in full on The Currency’s podcast this week. “There are some very, very good build-to-rent companies delivering really good product out there. And yes, the rents are very high at the moment. I’d say the antidote to that is supply. And the way to get more supply into the system is by more collaborative working and less bureaucracy,”  she adds, with “everybody across all stakeholders focused on that – maybe with less focus on our own islands and a bit more focus on what we really need to do to improve the situation”.

Cormican’s own contribution to the motto of “supply, supply, supply” is the annual delivery of 1,000 new homes by Clúid nationwide both last year and this year. At this point, the charitable housing association established in 1994 owns a property portfolio valued at over €1.5 billion, with another €500 million worth of contracts signed.

“We have over 9,000 homes in management, that’s equivalent to about 24,000 tenants across the country. So we’re probably the biggest independent landlord in the country,” Cormican says. “We’ve 3,000 units committed to our business plan for the next three years. We also have about 6,000 units in total that we are currently working on across the country with developers.”

In fact, only the state’s most populous local authorities in Dublin and Cork own more residential properties than Clúid.

Cormican is clearly proud of what her organisation has achieved and ambitious for its role in solving Ireland’s housing shortage – but first, I ask her what led a her to a position with the unexpectedly commercial title of new business director at the heart of a busy non-profit.

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Although 54-year-old Cormican has spent half of her life working in housing, she says she initially “fell into it by accident”. “I was working in community development and we had an issue in Ballymun at the time where we had a lot of people who were in good jobs, but trapped in the market in the late 1990s, early 2000s, exactly the same situation we have now,” she recalls. “So I got together with some of the other women living and working in Ballymun and we set up a housing cooperative.”

Their Tógáil housing association went on to build over 200 homes, but did not survive the property crash. Yet Cormican was hooked – she joined Clúid and, since early 2016, has been overseeing its property development and acquisition programme. In the intervening six years, the organisation’s portfolio has nearly doubled in size and tripled in value.

Cormican says this has happened in three ways. First of all, Clúid is its own developer, with 22 sites currently active. “We’re very, very focused on new build because we really do believe that new supply is the answer to a lot of the issues we have at the moment with the market, and especially the affordability issue,” she says.

Clúid has its own in-house team of architects, engineers, lawyers, accountants and project managers, and Cormican says they go for higher standards in the organisation’s own interest: “The value we put into the design and build of our properties benefits us in the long term because we manage and maintain them in perpetuity. So obviously, there are cost savings to be made by having well-designed, high-quality homes early on.”

Cormican also acquires properties by working with medium-sized developers who come to Clúid with a site where they have obtained planning permission. The organisation funds their projects through stage payments, which she says ensures control over the quality and schedule of the development. In other cases, the state-owned lender Home Building Finance Ireland initially finances the development until Clúid takes over.

Sometimes Clúid acquires the entire property under such so-called developer design-and-build deals. In other cases, the housing association buys a section of the site, making it viable for the developer to complete the rest of the project independently, says Cormican.

“That is a really particularly successful model of delivery because we have long-term relationships with medium-sized developers who would have struggled in the last few years to deliver,” she says. “By us working with them, it also helps them finance their private projects, so allows more private supply to be delivered into the market in areas where it’s not really financially viable for, maybe, some of the bigger more commercial companies to come in and build. We’re talking about towns around Ireland like Killarney, Athlone, Tullamore, and so on.”

“If people have land that is of more value for them sit on, well, then they’re going to sit on it.”

Clúid’s third acquisition stream is from larger developers subject to Part V regulations reserving a number of units in each of their projects for social housing. “We will buy their Part V and possibly some additional units as well,” says Cormican.

“We also partner with some of the big religious organisations or other state agencies. We’re always open to partnership to develop out land and we have lots of conversations around the best use of land that’s sitting idle for a while. We’d love to be able to go out there and buy lots and lots of land that we can build on but we’re not prepared to pay the prices that are being commanded at the moment.”

For any new builds, however, Clúid first needs to get its hands on development land. I ask Cormican how the organisation secures this.

Fiona Cormican (FC): Acquisition of land is always a challenge. It’s a challenge for everybody. It’s a particular challenge for us because we’re not going to compete with the private market for land or pay the prices that are commanded in a lot of cases. The other thing is, when a lot of that land is bought, it’s flipped. It’s bought for profit – to sell on and to make a profit,  whereas when we look to buy land, we’re going to build on it and that land is then going to be in use for social and affordable housing in the long term. So we really aren’t in a position to compete.

That’s why the developer design-and-build product works very well, because the developers come to us with the land, with the planning permission on it. We also work closely with the local authorities, and we secure land from the local authorities. They tend to put out an expression of interest asking approved housing bodies to come up with a plan for a particular piece of land and to work closely with them and we’ve secured quite a bit of land in that way.

Thomas Hubert (TH): Has this changed with the pandemic? There was this whole conversation of maybe changes of use in some areas, not so many offices being built anymore – or what about all these hotels going up? You’re not seeing a change of sites being suddenly offered for housing in areas that were previously commercial?

FC: No, definitely not. And I say after 25 years in housing, I have seen this cycle over and over again. Until we crack how we manage land better in this country, we are going to have a continuous problem of the under-utilisation of land, our land not being developed in line with our needs for housing. So we really need to deal with that issue.

TH: And how would you crack it?

FC: Well, there are lots of ways to crack a nut as it were. But one of the main things would be to identify certain areas of land that are only for use for housing, or that the breakdown between private housing and social housing is a bit more balanced in certain areas. It’s also dealing with the affordability issue and ensuring the land is utilised. It’s very, very important that we’re using the land, there’s a lot of land sitting vacant around the country that really needs to be utilised

TH: So, a combination of zoning, taxation, regulation?

FC: And encouragement. Encouragement to use the land, incentives to use the land. At the end of the day, if people have land that is of more value for them sit on, well, then they’re going to sit on it. So we need to incentivise people to actually make use of the land and to look at our land overall and the best use of land overall.

Clúid’s last published accounts to the end of 2020, although out of date in terms of the size of its portfolio, show clear trends in its funding mix. Of €1 billion in long-term liabilities on its balance sheet one year ago, 60 per cent were secured loans, mostly from the Housing Finance Agency (HFA), the sector’s state-owned specialist bank. The HFA was charging Clúid’s rates between 1.75 and 4.85 per cent over 30 years. The remaining 40 per cent were government grants.

The housing association’s debt grew by a quarter that year, while its stock of grants, which are released to income over the lifetime of each project, was declining slowly. Since then, new backers have appeared on Clúi balance sheet – private investors.

This interview turns to the fuel the organisation needs to run its housing engine: finance.

Cormican says that approved housing bodies such as Clúid were entirely grant-funded until 2011. This ended with the financial crisis and national policy evolved to replace this with debt finance, which she adds forced approved housing bodies to change very quickly. “we were now looking at debt, the risk was now sitting with the approved housing bodies. It shifted a lot of things and it was very good for us. It’s allowed us to grow and give us the opportunity to become more commercially minded,” Cormican says. As for grants, “it’s about 1 per cent of what we’re doing at the moment”.

Government support now takes the form of “soft loans,” which cover up to 30 per cent of a project’s cost and must be repaid with interest after 30 years. “The rest of it we raise either through the Housing Finance Agency, which is a commercial bank in its own right – it might be state-sponsored but it is a commercially operating bank. We either operate through them or we go to third-party private investors,” says Cormican.

With low interest rates across the board, HFA funding is not necessarily cheaper than it would be from any other bank on the market, but “it’s their understanding of the sector and how they’ve promoted and supported the sector that makes them stand out from the private sector lenders,” she says. This relationship developed over the past ten to 15 years when the HFA’s flexibility and support for approved housing bodies who were learning how to work with debt proved most valuable, she adds.

Then last year, Clúid raised €54 million from Legal & General, a London-listed leading provider of pensions and life insurance in the UK with £1 trillion in assets under management. Cormican says the debt finance arrangement is very similar to her existing ones with the HFA, adding that Legal & General had to match the value and flexibility available from the state’s housing bank, and share Clúid’s long-term view rather than pursue a quick profit. 

“Our focus was more about trying to encourage investment into the country and social housing,” Cormican says, “because with the reality of the amount of social and affordable housing that needs to be built over the next 10 years, we really need that private investment. An organisation like ours is perfectly placed to be able to encourage that investment, and other approved housing bodies have also encouraged that investment into the country, which I think is critical for us to be able to deliver on the supply challenges we have.”

With private investment in Irish housing sometimes labelled “cuckoo fund” activity, I ask Cormican what she thinks of the view that such financial investors act as a competitors to domestic players in the market. “Well, I think there’s only so much taxpayers’ money to go around. We have health systems to support, we have education systems to support,” she replies. “If there are private investors willing to invest in social housing, and you’re able to get the rates and the agreements in place – it obviously depends, there are all different kinds of types of investment – so, if we focus on investment companies with a long history of sustainable product and a long history of working with the non-profit sector, and have a history of good corporate sector responsibility, then why wouldn’t you use that money to support the challenges we have at the moment and to support us to be able to deliver more social housing? For me, it makes it makes no sense not to.”

“We’re in a situation where supply is far below the level of demand. This is impacting your average person’s life. It’s impacting the economy.”

TH: We are entering a policy area of discussion. There is quite a lot happening at government level, the Housing for All plan, and a lot of criticism over the past decades’ lack of delivery of social housing. Do you see momentum building? Do you approve of the measures that are now on the table or is there more that you would expect to see from the government?

FC: One of the biggest asks we had of government for a long time, throughout our history, has been long-term planning. We need more long-term planning and Rebuilding Ireland, the previous plan, was the beginning of that. It was a plan, it was a long-term plan, it was a multi-annual plan. And it really, really helped strengthen the sector because we could look to the future. 

Housing for All has developed on that significantly. It is a very ambitious plan but the situation calls for ambition – working very, very fast to get through the various objectives that it aims for. I think it takes a brave government to step out and do something like introduce cost rental. And we’ll talk about cost rental later. But it’s very important that we take a step somewhere along the line and it starts.

I think the Commission for Housing is going to be very, very important and it will help deal with the situation of so many different stakeholders involved in the whole industry. And  I mean the construction industry and the property industry, not just the social housing – that collaboration approach and that multi-faceted approach of everybody working together is the only way forward.

TH: That’s not happening naturally. You needed the government to organise everybody around the table like this.

FC: I think it’s fairly obvious it’s not happening that naturally in the last 10 years. And yes, the government needed to take that step to start bringing the various different stakeholders together and to ensure that. We have a plan now, we need to all work together to follow that plan. 

We’re in a situation where supply is far below the level of demand. This is impacting your average person’s life. It’s impacting the economy. It’s impacting our future ability to do business. It really is. I hate to use the word crisis situation, but it’s a very, very critical situation. It needs that level of government intervention to bring people together to look at how best to increase supply – and it is about increasing supply. What are the blockers and what’s stopping supply from being delivered?

The Vienna model: Cost rental to the rescue

Last August, Clúid completed 25 new houses in Balbriggan, Co Dublin. They were the first in the country to become homes to tenants under cost-rental leases. Their monthly rent was between €935 for a two-bedroom house and €1,150 for a four-bed, which was half the market rate at the time.

When they became available, more than 2,000 families applied. Clúid has since launched a second cost-rental scheme in Leixlip, Co Kildare with 56 homes and other housing associations have been developing similar offerings. 

Clúid had been one of the organisations pushing for this model and Cormican says the organisation’s former head of policy, the late housing campaigner Simon Brooke, was among those advocating for cost rental for many years.

She adds that the concept of charging rent based on the cost of delivering homes is common in Europe, where it is sometimes known as the Vienna model because the Austrian capital pioneered it over 100 years ago to cover a segment of the housing market and balance it as a whole.

“Cost rental has the potential to do the same here,” Cormican says – though she immediately tempers expectations in the short term. “Now, the first thing that that will raise is, at the moment the cost of delivering homes is very challenging! So therefore it’s very challenging to deliver rents that are actually at the level of affordability they need to be at.”

The second caveat is that a stock of cost-rental units needs to build up and pay for itself before it can have a more significant impact. “As loans are paid down, obviously rents can come down,” says Cormican. “You’re going to be able to tackle affordability on a much greater level, but we have to start somewhere.”

Nearly all of the 9,000 homes in Clúid’s portfolio have been allocated to its tenants according to local authorities’ social housing lists, with a few exceptions for private tenants such as those that were already in place where it acquired an apartment block from a Bain Capital joint venture in Cork, as previously reported. 

With cost rental, Clúid and other housing associations are taking on a new responsibility to select tenants themselves. The rules of the new scheme targets households earning less than €53,000 after tax, but more than the social housing income limit (for example, between €35,000 and €42,000 depending on family size in Ireland’s main urban centres and commuting belts).

“There’s a whole cohort of people there, on that kind of middle-income bracket, that really couldn’t afford the rents that are out there at the moment because of the supply issue,” says Cormican. “And they’re the people that we’re focused on. They are the people who are fixing your car, who are emptying your bins, who are working in the hospitals as caterers, or cleaners or nurses or junior doctors, working in the supermarkets, in the hospitality sector. I’m really happy to say that actually the tenants who ended up in the 25 houses in Taylor’s Hill, and the 56 houses that we leave and delivered Leixlip there in November, are those people.”

Approved housing bodies must deliver rents at least 25 per cent below the market rate to qualify for the cost-rental label, and in return are eligible to the same 30 per cent soft loan funding they receive from the state for social housing. Cormican says Clúid initially aimed to charge between 25 and 30 per cent below the market in Balbriggan, but ended up 50 per cent below at the time of delivery because private rents had gone up so fast in the area during development. 

Ultimately, Cormican is confident cost-rental will become another weapon in the arsenal to deliver much-needed housing supply.

“It takes a brave government to take that step and put forward a new model and it is a challenge to make it work,” she says. “I hear criticism of delivery and of the levels of rent being achieved. It’s the first step. We’ll never get to that mature model stage that is so successful in other countries until we take those first steps. The fact that we’re taking those first steps in the middle of a pandemic and supply chain issue is very challenging, but we have to take those first steps.”

Further reading

An inconvenient truth: Costs, completions, and the real data behind the cracks in the Irish housing market

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