The European Commission has given the green light for the State to provide subsidies to developers to build thousands of apartments.
Minister for Housing Darragh O'Brien announced the €450million Craoí Cónaithe (Cities) Scheme in the Budget in September 2021. However, it required approval from the commission before it could proceed, with question marks over whether it complied with state aid rules.
The scheme intends to pay developers to build apartments that otherwise would not proceed due to issues around viability.
The Government has said the scheme will deliver 5,000 apartments by 2026.
Developers have claimed that building apartments is no longer viable due to inflationary construction sector costs.
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Under the scheme, subsidies of between €25,000 and €144,000 per unit can be paid to developers, but crucially the apartments must be sold to owner-occupiers and not investment funds. Speaking at Christmas, Taoiseach Leo Varadkar said that the Government would require proof that a development is not viable before funds are handed over.
"A lot of builders will say to us that they're not able to proceed with apartment developments in particular that they have permission for because it's not financially viable. I'm not just going to take that as the truth, you know, we need to examine that and make sure that that is the truth. But if it is the truth then Government needs to step in," he said.
The State is actively seeking to ensure 80,000 active planning permissions for new homes are built on and not allowed to lapse.
The Craoí Cónaithe (Cities) Scheme was subject to a review by the European Commission into whether it breached its state aid rules. The Department of Housing announced yesterday that the commission had given clearance for the scheme to proceed, saying that it was "compatible" with the internal market. The Housing Agency, a government body that assists with housing supply, sought expressions of interest from developers with planning permission to build apartments in Dublin, Cork, Limerick, Galway and Waterford.
The department said that 26 proposals were submitted by 16 different entities, with the potential for 2,100 apartments. It is expected that the Housing Agency will conclude its first set of development agreements shortly.
Mr O'Brien said he welcomed the decision, which enables progress of the first agreements for the delivery of apartments.
"Increasing supply is key to improving the housing market and this scheme will increase the supply of apartments for people to buy and live in within cities. It's about giving people who wish to buy a home and live in cities greater choice and, in turn, ensuring our cities have vibrant and strong communities," he said.
The Taoiseach has, as recently as the end of last year, not ruled out tax breaks for developers, saying that "there's no option that's off the table".
It was reported that officials in the Department of Finance advised against reducing VAT on construction materials for residential properties in a pre- Budget note to then Minister for Finance Paschal Donohoe.
Housing targets are due to be revised this year, in light of the higher population figures in the latest census, as well as the influx of tens of thousands of refugees the country has taken in, who will now require long-term housing solutions. Under the Government's Housing for All Plan, the annual targets were based around an annual housing need of 33,000 new homes per year.
Last year 29,851 new homes were built. Estimates on the actual level of need range from 42,000 to 62,000 new homes annually.
