The timing of environment minister Dick Roche’s investment in affordable housing raises questions about value for money as prices fall, writes Kathleen Barrington.

Six weeks before last May’s general election, environment minister Dick Roche announced on his website that he was offering discounted houses to eligible citizens in his Co Wicklow constituency.

A total of 46 affordable homes were being provided in Arklow, as part of an initiative to increase the supply of affordable housing in the Greater Dublin Area.

‘‘Determined to make significant progress on ramping up the delivery of affordable housing to meet the ambitious targets we have set, we asked the Affordable Homes Partnership (AHP) in late 2006 to source 500 homes in the market in the Greater Dublin Area. As part of that exercise, 46 high quality homes are now being provided at discounted prices in Arklow,’ read the website.

Roche also announced that ‘‘an intensive advertising campaign will commence next week, starting with radio adverts on East Coast FM and advertisements in the Wicklow papers. These ads will be supplemented by a leaflet drop in Arklow and Wicklow.”

While the existence of the scheme was well flagged ahead of the general election, details about cost and the operation of the scheme were very sketchy.

However, documents obtained by The Sunday Business Post under the Freedom of Information Act have helped shed light on precisely how much taxpayers’ money was spent and where.

The documents reveal that, in a letter dated March 16, 2007,Roche’s department confirmed its earlier request that the AHP spend €50 million helping eligible buyers to acquire homes from builders in the Greater Dublin Area. A document attached to the letter suggested that the AHP should make significant purchases in Fingal and south Dublin and suggested possible purchases in Kildare, Meath and Wicklow.

As it turned out, the AHP spent about €4.6 million helping buyers to acquire homes in Roche’s own constituency. The partnership helped buyers acquire 17 homes from Wicklow builders Harry Kavanagh and 29 homes from Dublin-based Noonan Construction, a significant builder in the southeast.

At a time when many first-time buyers were complaining that new homes were unaffordable, the scheme helped those on lower incomes to buy their own homes at prices significantly less than their then market value.

It worked like this. The AHP agreed to buy the homes from developers at a discount to the market price. The discount available to the AHP amounted to an average of about €8,000 per home.

The AHP then made grants available to eligible purchasers to help them complete the purchase of the homes. The grants were generally €100,000 per home.

For example, figures supplied by the AHP show it agreed to buy a three-bed semi-detached house at Cluain Ard, Sea Road, Arklow, from builders Harry Kavanagh. The house had a floor area of 87 square metres. The market price last spring was €338,000.

However, the ultimate buyer under the scheme paid just €231,000 - or €107,000 less than the market price.

Assuming the grant was the usual €100,000, the discount was about €7,000 - equivalent to a discount of about 2 per cent on the open market price. While developers offer properties at a reduced rate, they are guaranteed a buyer from the AHP.

There are certain protections for the taxpayer in the scheme. For instance, the affordable home owners have to give the government a clawback if they sell their homes within ten years.

The state also has the benefit of the AHP’s housing expertise, which resulted in it acquiring only the better quality homes, having ruled out some which were poorly built, poorly laid-out or poorly located.

However, given that property prices nationally fell by over 7 per cent on average last year, the timing of the purchases appears questionable from the taxpayers’ point of view.

In recent weeks, this newspaper posed as a potential first-time buyer of a three-bed room semi-detached house at Cluain Ard.

The sales agent said prices had fallen by between 5 and 7 per cent for new homes in the scheme compared with last year, while there was a secondhand home in the scheme available at 10 per cent less than last year’s market price.

Even the Institute of Auctioneers and Valuers in Ireland now concedes that prices are set to fall by another 3 or 4 per cent this year, raising the question of whether the taxpayer has got value for money from Roche’s investment in the affordable housing scheme.

The AHP spent the balance of the €50 million acquiring homes in Fingal, north Dublin; Adamstown and Tallaght, south Dublin; Kildare and Meath.

Many of the companies to benefit from the taxpayer’s generosity were already extremely profitable. For instance, Barina Construction, owned by Michael and Niall Langan, had pre-tax profits of €19 million in 2006; Maplewood, owned by wealthy developer Michael Whelan, had profits of €17 million in 2004; while Menolly, which is owned by multimillionaire developer Seamus Ross, was also a beneficiary of the scheme.

Other developers who benefited from the taxpayer subsidy were Gannon Homes, Killoe, Pierse, Granbrind, Lydonbarry, Lynam, P Elliots, Keelagh Homes, One Tree, Slane Development Company, Walker Carpentry, Aranbel and Devondale, according to information supplied by the AHP.