500-home housing project that was culled by minister had seen costs 'effectively double'
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43 mins ago
COSTS FOR A multi-partner project containing almost 500 social homes that was suddenly halted last month had 'effectively doubled', according to internal warnings from housing officials weeks ahead of the cancellation.
In correspondence seen by
The Journal
, they warned that 'development costs and interest rates' had combined to see the price rise for the multimillion euro project, which was to deliver 486 homes across six sites in Dublin, Kildare, Wicklow and Sligo.
It was also revealed today that judicial review proceedings have been initiated by a construction company over the cancellation against the Department of Housing, following Minister James Browne's cost-related decision
to stop the project from going ahead last month
.
All 486 homes were due to be delivered under a public private partnership (PPP) scheme.
This model is essentially a long-term contract sometimes used to deliver infrastructure, where the private partner provides funding and operational management of the project as part of its delivery.
The model for the delivery of such largescale social housing projects has been thrown into doubt as a result of this cancellation.
New details at Oireachtas committee
Today's Oireachtas Housing Committee heard Browne say that judicial review proceedings had been initiated by one of the parties involved in the PPPP in recent days against the department because of the cancellation.
Court records show builder JJ Rhatigan has lodged papers against the minister and Dublin City Council.
Social Democrats housing spokesperson Rory Hearne said the situation was now an 'utter mess', telling the minister that the legal proceedings will likely further delay the delivery of the homes through alternative means.
Browne told the committee he could not discuss the cancelled PPP as it was now the subject of legal proceedings, but, speaking generally, he said the model of housing needs to be 'completely overhauled' to make it better for the taxpayer.
Four upcoming PPPs – set to contain several thousand homes – have been stalled with a review now being carried out into each project.
The Wexford Fianna Fáil TD also said he was not happy about the 'length of time' it took for the project to 'land on my desk for a final decision'.
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It's likely to raise further questions about management of the scheme, as the PPP had twice passed government financial appraisals – including last October.
Emails between officials
The Journal
can also now report that housing officials raised significant concerns around the costs involved in the project in late March, just weeks before cancelling the project.
The claim was made in emails – seen by
The Journal
– between the Department of Housing to their counterparts in the Department of Public Expenditure and Reform. The latter department has responsibility for the purse strings on projects backed by the State.
They repeatedly sought a meeting on the project, with housing officials later requesting discussions 'asap' as they were due to have a decision made on the future of the homes by May.
In one email, housing officials sought an urgent meeting with the Department of Public Expenditure and Reform about the project.
The project is known as Bundle 3 as it is the third of the social housing projects delivered under the model.
'The costs have risen significantly since the last bundle closed in 2019/2020 (effectively doubled),' the officials said in an email from 27 March.
'These costs include the whole lifecycle including development, funding, operations for 25 years etc.'
Housing officials added that they were working with the State-backed financial institution National Development Finance Agency (NDFA) and said it had reviewed different aspects of Bundle 3.
The official said that Bundle 3 had 'passed' its value for money tests – which were conducted last year – but raised concerns over the costs now presented.
'The cost of delivery of Bundle 3 has doubled when compared to Bundles 1 and 2, reflecting current development costs and interest rates,' the official told the Department of Public Expenditure and Reform.
The Housing official continued in the email, outlining that the NDFA have provided a report 'detailing the costs and the reasons for the increases over previous bundles'.
The NDFA's cost report was not released by the department due to commercial information contained within the report.
The homes were due to be
delivered by the Torc Consortium
, a partnership for all six sites between Galway-based developer JJ Rhatigan, London-based financier Equitix, Japanese developer Kajima and housing body Túath Housing Association.
Although no final contract had been awarded, it is understood that the second Value for Money check last October resulted in developers proceeding to work on the site,
leading the consortium's partners to spend upwards of €8 million on the six sites to get them shovel-ready
.
A total of 1,400 workers had been assigned to work on the homes for the next 18 months before the plug was pulled.
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