Funding Social Housing

In the absence of the government increasing the supply of social housing, local authorities turn to the private sector to source longterm leases. This supply isn’t just confined to build-to-rent investors from overseas. It also suits individuals with self-administered pension funds who don’t wish to take on the hassle of being a landlord.

Housing Together was established in 2018 by Enda Luddy, who was formerly managing director of CBRE Ireland. His idea is to make private investor funds available to increase the supply of social housing in Ireland, through the provision of houses and apartments. These properties are then leased to the local authority under the Long-Term Lease Scheme, providing secure income and stable long-term returns to Housing Together’s clients.

Housing Together says it has placed over €20m of private capital into properties leased to councils. The local authority is the lessee, and is responsible for internal maintenance of the property. Rent reviews every three years are linked to HICP inflation, and rent is paid to the investor’s pension fund directly by the local authority.

The service offered by Luddy and his team is comprehensive. Housing Together identifies properties for clients that are suitable for social housing leasing. The company also takes care of property acquisition, and at the sale agreed stage, brings in independent surveyors to ensure the property complies with rented houses regulations. Any required remediation is paid for by the property purchaser, as are furnishing and refurbishment costs.

Housing Together then progresses the lease agreement with the local authority. Lease terms can be for 10, 20 or 25 years, and the council will pay 80% of the open-market rent. Where a management fee is payable by the property owner, the local authority will pay 85% of the open-market rent.

The owner of the property has responsibility for structural maintenance, insurance and repair. The property can be sold by the property owner during the term, but only on the condition that the lease agreement is transferred to the new owner. The council has to be notified in advance and be in agreement.

Housing Together charges a fee for its service. Stamp duty is 1% of purchase price, and the legal fee is 0.95% plus VAT. Other costs amount to c.€2,500.

Davy is Ireland’s leading provider of self-directed pensions. These are pensions where the beneficial owner of the pension can direct the investment of their pension assets. Paula Finlay, Director of Pensions, says that most of the firm’s pension clients largely opt for discretionary managed pension portfolios, where the assets of the pension are invested by the Davy investment team, in line with an agreed investment mandate.

For clients who choose this way,

Finlay cites several reasons:

Time constraints – clients don’t have the time to manage their own funds on a day-to-day basis.

Expertise – why do it yourself when you have a team of experts available to you who can probably do it better?

Economies of scale – “Our clients benefit from the scale of the assets that we manage, which allows us to negotiate favourable terms with the underlying managers,” says Finlay.

Broader access – not all investment

llllopportunities can be accessed directly by individuals.

Appetite for risk – “Our discretionary managed portfolios are invested in a range of multi-asset funds that are spread across different asset classes and geographic locations,” says Finlay. “These portfolios also have different risk ranges, to ensure that you can easily match your investment time horizon and risk tolerance to the most appropriate investment vehicle for your pension assets.”

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