Government's proposed tenant in-situ scheme

Mocame said:

Local authorities raise concerns that the tenant in situ scheme competes with first time buyers:

Government tenant-in-situ schemes competing with first-time buyers, local authorities warn

Tenant-in-situ schemes operated by city and county councils are competing with first-time buyers, local authorities will warn TDs and Senators.

www.independent.ie

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The State buying up existing houses is competing with first time buyers.

Folks

I have separated out the actual proposals from the long thread started by Hourican's comments.

I have also deleted lots of off-topic posts.

Can you please stay firmly on the tenant in-situ topic in this thread. And don't include off topic asides in on topic posts, as people respond to the asides.

If you post a long post about it and then add an aside, "only tax relief will work" your whole post will be deleted.

Brendan

Will the purchase price be based on a valuation of a tenant in-situ or current market valuation? Will the seller have a choice on which valuation they can accept. Will tenants still have to be given notice for this to take effect.

Silversurfer said:

Will the purchase price be based on a valuation of a tenant in-situ or current market valuation?

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If the object of the broader exercise is to keep landlords in the sector then it will have to be the latter.

I am working my way through the presentation on the tenant in-situ scheme to the Oireachtas Housing Committee


Here are some interesting bits.



Target: 10,000 new build a year

Original target: 200 acquisitions a year - priorities such as disability

January – government increased this to 1500

9,100 new builds will be delivered in 2023

[It’s important to understand the Department’s definition of new build]

CALF – Capital Advance Leasing Scheme

Leasing is additional

figures include tenant in situ acquisitions in 2023. Since Circular 16/2022 was issued in April

2022, the number of acquisitions across the sector for which sale has been agreed or completed with tenant in situ, totals 367 while a further 634 are in the pipeline and are being progressed through the process.



Senator Mary Fitzpatrick: I will ask another question. The challenges of tenant in situ were mentioned. Housing has so many challenges in every respect. Why would a landlord sell? If a landlord is selling already, why would he or she sell to the local authority? Why would landlords not just put it on the market and sell to the highest bidder?



Mr. Coilín O’Reilly: There are a couple of reasons for that. First, the landlord, obviously,

has a relationship with the tenants and may want to see the tenants stay in the property. They may be a tenant for ten or 15 years in some cases, so the landlord may have a wish to see the family that is living in the property continue to live there. The second reason is there is security of transaction with a local authority. Sometimes, if you are purchasing a property, you might be in a chain, waiting on somebody to sell and somebody further to sell. When you enter into en- gagement with a local authority and we get to the negotiation phase, you know that the money, want and will are there to acquire the property. Third, and most simply, it saves on the estate agent fees for the landlord. They can go straight to the local authority. There is a small financial reason as well. Those are generally the reasons.



3 to 4 months is the average time for a purchase to go through

Ms Áine Stapleton: The Minister has been very clear on the communication with local authorities, that these acquisitions are to be devoted to those who are in housing assistance pay- ment, HAP, or rental accommodation scheme, RAS, tenancies, who have received a notice of termination for reasons of sale. That messaging to local authorities has been really clear. The local authorities, of course, have responsibility for their allocation schemes. Part of the addi- tionality to stock I outlined is helpful in this context because it gives local authorities a wider range of stock within which to make allocation decisions. The tenants in situ scheme is one element of the suite of solutions, as Ms Farrelly said, that they will available to them.



A tenant must be on the housing list for 2 years. It used to be 5

I would like to ask Dublin City Council, given that it piloted this in 2018, how it works from

a long-term perspective if its tenants are in the home purchased for them, there is overcrowd- ing, they have outgrown it, they have another child or whatever the case may be. How does that work from a practical perspective? If some tenants leave that accommodation, is it easy to get other people to move in or is it a less attractive proposition than a new build? Perhaps the Department could start. I am afraid we only have four and a half minutes for everyone to contribute.

And a worrying bit. This does refer to the voluntary sale arrangements which are in place at present. But I would imagine that this is what is planned.

An CathaoirleachDeputy Steven Matthews: I thank Mr. Kelly. Mr. O’Reilly mentioned
a three- to four-month timeline for the sale of properties. That does not seem like an exces- sively long timeline to me for the sale of a property to go through, although we would like it to be quicker. However, I think that is quite a good timeline. From my experience, I know the sale of a house can often take much longer than that. That is not too bad. When the local authority is offered a house for sale and it requires work to be brought up to a certain standard, or additional work needs to be done on it, does the council have to take all of that into account?

Mr. Coilín O’Reilly: Yes. The other point to make is that unlike in the private sale of a house, there is no negotiation. Our valuers set the value and that is final. Sometimes the land- lord will offer to sell the property to the council for €20,000 more. The council will say that the value is the value. There is no negotiation. That takes many of the steps out of the process. The value is set by a professional valuer and that is final.


Mr. Coilín O’Reilly: I have a response around the tenants. Two of the requirements would be an estate management check with regard to the tenant before we do the tenant in situ ac- quisition and a compliant rent history, as there has to be a clear rent account. There cannot be significant arrears on the account before the local authority takes it on.

Senator John Cummins: On the acquisition cost guidelines, I am all for giving flexibility
to the local authority sector and would like to see further flexibility given regarding the ceilings. It is true that the market price in a given local authority area may be above the ceiling. Should a local authority have to go back to the Department to get sanction in that regard? Is it not suf- ficient for the local authority to get the valuation, satisfy itself that the value is the market value and offer the figure accordingly? Why are we complicating the local authority process?

Ms Áine Stapleton: There is always a balance to be struck in delegating a significant amount of autonomy to local authorities regarding acquisitions. We have, within the cost guidelines, upper and higher thresholds. As I indicated earlier, the vast majority of acquisitions are com- ing within those thresholds. We are currently reviewing them. There may indeed be further bandwidth within them.

Senator John Cummins: When will they be ready?

Ms Áine Stapleton: Over the next few weeks. There are exceptions that will be above the thresholds. The Department will commit to turning them around really quickly when they come in to it.

Eoin O'Broin

Let me reflect on my own experience. I have a very good local authority whose staff work very hard and whose management manages it well. However, when I talk to landlords they tell me they are not called within a couple of weeks and that it can in fact take months. Landlords with a long-term relationship with tenants and who are keen to sell, sometimes at a discount, can be left waiting for four or five months before the council even indicates whether it is consid- ering the purchase. I have had two cases of families who ended up in emergency accommoda- tion because the local authority took such a long time even to initiate the process. The landlord, for very legitimate reasons, had to sell the property, and the potential tenants in situ were lost. We do not know whether the arrangement would have gone through.

I fully accept that a three- or four-bedroom property cannot be acquired for a single per- son. I understand the pressure to have one-bedroom properties. Where a young family is in a three-bedroom property – although, strictly speaking, they need only two bedrooms – the local authority should have flexibility to use its discretion as the family might grow and need three bedrooms. I am interested in hearing the representatives’ thoughts on that.

The same applies to the price, which concerns me a little. I fully accept that we have to stay
within the price caps, within reason. Many of the tenant in situ set-ups come well below the price caps, certainly out in the suburbs, where I live. However, if a landlord believes €10,000 or €20,000 extra can be got for the sale of a vacant property on the open market, this amount is a fraction of the financial cost, let alone the emotional cost, to someone spending a year or two in emergency accommodation. I am saying that because I understand that when the valuer does the evaluation, it is done with the tenant in situ as opposed to asking what the property would sell for on the open market if it were vacant. I would be interested in hearing a comment on that. What is the actual valuation mechanism? The various scenarios involve different finan- cial calculations. I want us to protect the taxpayers’ interests but if valuation is based on an occupied property rather than a vacant one on the open market, there is an issue. I have a real case in this regard. The Dublin City Council valuers did their job very well and the property in question was valued at €290,000, but the estate agent is telling the landlord that if it is put on the open market, given a little buoyancy, an extra €30,000 will be got for it. The landlord has gone back to the local authority. Again, I do not want to be encouraging landlords to inflate the prices, because they have to be contained, but there has to be some level of flexibility regarding the margin. Could the delegates comment on that?

There has been no Supplementary Estimate. Therefore, I am working on the assumption that, for the moment, any tenant in situ arrangement is coming from within the capital envelope that has been allocated. At what point does that change? At what point do the Department and Minister come back to the Oireachtas for a Supplementary Estimate? Could the delegates clarify that no additional resources have been provided above the capital envelopes agreed in the budget?

I am hearing from some local authorities that reasonable requests for refurbishment costs are not being agreed to. While we need to be reasonable and flexible about this, I would like some clarity. The most recent circular suggests that, in the main, refurbishment costs will not be considered, but some clarity on this would be helpful.

Ms Áine Stapleton: I will first deal with the valuation. It would be based on the vacant property rather than on having a tenant in situ. The landlord would get a valuation equivalent to what would be got if the property were put on the open market.

Deputy Eoin Ó Broin: That is good to know. I thank Ms Stapleton.

Mr. Coilín O’Reilly: On the questions directed to me, if a family was in a three-bed and had a two-bed need, we would be flexible and have been in the past. As we said, we do everything to keep a family in a home and keep them from coming into homelessness. On the valuation, my understanding is that it would be open market value. I do not know what an estate agent may say to a landlord but from our perspective it is the open market value. We have to be care- ful about chasing and getting into negotiations. If someone can come back and say that the house down the road that is the exact same sold for €10,000 more then we are more than happy to look at that but we are not into getting into negotiations and we are not allowing landlords to use the fact that there is a tenant in situ as a negotiation tool.

Deputy Cian O’Callaghan: I will focus on the gap between what the Government is say-
ing about the tenant in situ scheme and how the practice is evolving on the ground. This is not
a criticism of anyone. We are just trying to figure out how to close the gap. Notwithstanding
the excellent work of the staff of the local authorities with whom I, as a public representative,
deal, I have been contacted by a number of landlords who are very frustrated. They need to sell and want to keep the tenants in place. They want to avail of the tenant in situ scheme but find that the process very frustrating. I have had more positive experiences. It appears to be a very resource-intensive process for local authorities and AHBs. By its nature, it would take a considerable amount of time given the length of time involved in home sales.

Focus Ireland has made 12 proposals about how to improve and strengthen the tenant in situ scheme. Could the witnesses from the Department tell me if these proposals have been looked at? Does the Department have a view on them? Focus Ireland argues that the requirement for the issuing of a notice of termination, which can be very traumatic for tenants, could be replaced by a formal statement by a landlord that he or she is going to sell the property, is willing to sell to the local authority and is hoping to avail of the tenant in situ scheme and that would be enough to start the process without having to issue an eviction notice. Do the witnesses from the Department and the CCMA have a view on this? Is it workable? Could those kinds of proposals be taken on board and implemented?


Ms Áine Stapleton: I thank the Deputy. Focus Ireland is a strong delivery partner and very much focused on the cohort we are discussing today, so we are happy to consider all the issues its representatives have raised. We are currently working through the recommendations the Deputy mentioned. On the specific one related to the requirement for notice of termination, one of the advantages is that it gives us clarity about the starting point and what is within the bounds, if you like, of this policy. We are reluctant to move away from that formal notice of termination. I understand where Focus Ireland is coming from in putting it forward, but from a departmental point of view, our preference is to have that clarity, so we are looking at a situation that falls within the parameters of the initiative we are discussing.

Deputy Thomas Gould: I thank our guests for coming in. I have been listening intently to their contributions and those of the Deputies and Senators. I have been in contact with a lady who has a child and received a notice to quit last July. The local authority never purchased the house. The landlord has sold the house on the private market and now this lady is facing evic- tion in two weeks’ time. On the opposite side to that, I have two landlords who want to sell their houses to the local authority. They contacted it in October and November last and they still have not heard a word. It turns out these landlords, who are decent, respectable and good people, never issued notices to quit because they did not want to put their tenants through undue duress and stress. They told the local authority they wanted to sell up while leaving the tenant in place and asked about the tenant in situ scheme.

I am hearing that local authorities do not have the staff to deal with the volume. It was ex- pressed a while ago that staff are needed for acquisition, engineering, reports, valuing and legal teams. I know of no local authority that can go from zero, which is where we were this time last year, to where we want to be, that is, delivering the tenant in situ scheme at the volume we are talking about. We are being unfair on local authorities and to the staff in procurement and allocations. It has been unfair to tenants that an expectation has been created that is not being delivered on.

A comment was made earlier about delivery within four months. I am thinking of two cases I am dealing with. In one, a woman rented her property to a family who are homeless. The fam- ily have young children and one of them is on the spectrum. They do not need a notice to quit, but as it turns out, the only way the local authority will even consider purchasing that property is if the family are at risk of eviction. How many additional staff will be required to deliver the tenant in situ scheme at the volume being proposed, in our guests’ opinion? The figure of 1,500 that has been proposed is a drop in the ocean if we are serious about stemming homelessness.

This is very interesting but does not address the issues in real life. My understanding is that eviction notices will proceed as before. The purchase of the home will only commence from the date of eviction. It is only for tenants who are on the housing list for at least 2 years. There is no refurbishment funds agreed. Who will maintain these homes? Is the rent going to include a maintenance provision? Similar to the cost rental scheme? Single or informal groups of tenants haven’t been mentioned.