More than €8 million spent on 486 homes before government halted plans

A STALLED HOUSING project of almost 500 social homes twice passed government financial appraisals before it was eventually halted by the Department of Housing for the same concerns, The Journal has learned.

The Journal previously reported that the 486 houses had been delayed after Housing Minister James Browne pulled the plug over concerns about the costs involved for the multimillion euro projects.

The houses were planned for six sites in Dublin, Kildare, Wicklow and Sligo.

All 486 homes were due to be delivered by the Torc Consortium under a public private partnership (PPP) scheme. This type of scheme is essentially a long-term contract sometimes utilised to deliver infrastructure, where the private partner provides funding and operational management of the project as part of its delivery.

The consortium for the 486 homes is a partnership between London-based financier Equitix, Japanese developer Kajima, Galway-based developer JJ Rhatigan and housing body Túath Housing Association for all six sites.

Question marks have now arisen over the government’s strategy around future large-scale social housing projects. Four upcoming PPPs – each earmarked to contain hundreds of homes – have also been stalled as the Department of Housing has said it will carry out a review of each project.

The Construction Industry Federation (CIF) has criticised the government’s decision, saying that the cancellation of the PPP “further exacerbates uncertainty” in the construction sector and “undermines incentives for investment and expansion” within the Irish market for global investors.

The Journal can also reveal that:

• 244 of the homes that were planned for Dublin under the stalled PPP will now be delayed by at least a year;
• Upwards of €8 million had been spent on the six sites by the consortium before the plug was pulled;
• 1,400 employees had already been assigned to work on the homes for the next 18 months.

Earlier this month, Browne stopped the project over concerns about the costs involved for the multimillion euro projects. A statement from the Department of Housing confirmed that the decision was taken due to “value for money” concerns.

Three industry sources have told The Journal that some concerns were raised around the projected operation and maintenance cost of the homes after they were built.

However, figures in the construction industry have told The Journal that the decision was “unprecedented” given the project was only weeks from starting.

It is understood that upwards of €8 million had been spent by the developers between procurement, architectural design and readying the sites.

Following the PPP passing a second value for money assessment last October, the developer began working on the site and completed groundworks, in the process servicing each site and making them almost shovel-ready for building.

The CIF told The Journal that the government’s decision-making around the PPP may have a wider impact on future planning and future investment decisions domestically and from abroad.

“The consortium, along with its supply chain partners, has already invested significant resources in preparation for construction,” Justin Molloy, director of western, midland and northern Region for the CIF said.

“The cancellation impacts a large number of professionals – approximately 1,400 employees – including those in design, management, technical roles, and on-site positions, whose employers must now find alternative work for them.”

Contractors ‘reducing operations’

Molloy added that the setback comes amid a “national housing crisis in Ireland”, which has seen a major demand for construction workers.

However, Molloy said that several contractors are now “reducing their operations” in the country and “reallocating resources abroad due to the absence of a dependable project pipeline”.

A spokesperson for the Torc Consortium told The Journal in a brief email that it has sought an “urgent” meeting with the Government over the delays since it learned of the decision. No meeting has taken place so far.

It’s understood legal action is currently not being pursued over the cancellation of the project and the monies spent to date.

PPPs and value for money

The social housing PPPs have a complex structure, requiring up to five different partners to deliver each project. These include developers, a not-for-profit housing body to manage the homes, and a maintenance company to oversee their upkeep.

Last week, a meeting of Dublin City Council heard claims that the cost of construction as well as the maintenance and operating the homes over 25 years amounts to 1.2 times the average price for social housing.

Some defenders of the PPP model in the industry have pointed to the large projects having a fixed price, meaning there is less scope for developers to charge additional fees in case of delays. This contrasts with certain controversial projects, such as the National Children’s Hospital’s ballooning budget.

The CIF supported the use of PPPs, arguing that while the model “may initially appear more costly than traditional procurement methods, it offers greater value for money by covering a broader scope of services and ensuring cost certainty for the state throughout the contract term”.

It said these services and responsibilities encompassed design, utility connections, financing, legal expenses, maintenance and the risks for each site. Molloy added that the PPP also covers “eventual refurbishment at handover” to local councils for when the initial 25-year contract concludes.

Dublin councillors were told earlier this week that the homes planned for the city would now be delayed by at least a year.

Social Democrats housing spokesperson Rory Hearne described the late decision to pull the 486 homes as “illogical” and “bizarre” since they were nearing their commencement date.

The Department of Housing was contacted for comment on Tuesday and did not respond in time for publication.