There are two main schemes contemplated by Part 2 of the Affordable Housing Act 2021:

  • Direct sales agreements; and
  • Equity share scheme.

This post will consider how each scheme is intended to operate.

Direct sales agreements

Housing authorities can enter into arrangements with an entity to provide dwellings for affordable housing such that that entity can sell units directly to eligible applicants nominated by the housing authority (removing the need for them to take the asset onto their books first).

The entities with whom the housing authority can enter into such arrangements are:

  • Those with whom the housing authority has a contract for the provision of dwellings for the purposes of affordable housing;
  • Approved Housing Bodies;
  • The Land Development Agency;
  • Public private partnerships with whom the authority has entered into an arrangement; and
  • Those with whom the authority has entered into a Part V agreement

(collectively referred to in the Act as direct sales developers).

The terms of such arrangements will include:

  • A requirement that the dwellings specified in the agreement be sold directly to eligible applicants nominated by the housing authority in accordance with a scheme of priority;
  • The terms and conditions (including as to price) on which the dwellings are to be sold;
  • A requirement that the direct sale will not be completed until the eligible applicant has entered into an affordable dwelling purchase arrangement with the housing authority;
  • Terms relating to arrangements for the completion of sales, notification of sales to the housing authority etc..

Where the total amount due to the direct sales developer is less than the amount due to them under the arrangement that they have with the housing authority, the shortfall is to be made up by the housing authority. The inverse also applies, with the developer to transfer to the housing authority any profit that it makes from the direct sale over and above the amount due to the developer under its arrangements with the housing authority.

Equity share scheme

Housing authorities can also enter into arrangements with the ultimate purchaser whereby the authority makes a contribution to the acquisition of the unit (a discount from market value in the case of the sale of a dwelling provided by the housing authority, including through a Part V agreement, or a financial sum in the case of the purchase of an open market dwelling) and is then entitled to an equity share in the dwelling – this being the so-called “equity share”.

The share will be the proportion that the affordable dwelling contribution bears to the market value of the affordable dwelling on the date on which an enforceable agreement is made for its purchase by the eligible applicant. The market value for the purposes of this section will be as determined by the housing authority.

General provisions

Before making dwellings available under an affordable dwelling purchase arrangement or by way of the equity share scheme, the housing authority must notify the public of its intention to do so.

Where an applicant is married, in a civil partnership or in a relationship with someone with whom they intend to reside in the affordable dwelling, they have to apply together and not as individuals.

Applicants will only be eligible if:

  • their combined financial means are within the parameters to be set down by ministerial regulation;
  • they are first-time buyers; and
  • they are entitled to reside in the State.

The requirement to be a first-time buyer is qualified such that it will not apply where an individual:

  • previously bought with a previous partner and that relationship has now ended and they are now applying to purchase on their own or with a new partner;
  • lost their prior home as a result of an insolvency or bankruptcy process; or
  • previously owned a home which, due to its size, is no longer suited to the applicant’s current accommodation needs.

Housing authorities will establish schemes of priority to determine the order of priority to be applied to eligible applicants where a scheme is oversubscribed.

Equity share mechanics

A housing authority can facilitate the purchase of affordable dwellings by means of a contribution (the affordable dwelling contribution) which:

  • In the case of (i) affordable dwellings made available by a housing authority for the purpose of sale to eligible applicants under affordable purchase arrangements and (ii) dwellings to which a Part V agreement applies that are being made available for sale, will be the difference between the market value of the affordable dwelling and the price paid by the by the applicant; and
  • In the case of open market dwellings (i.e. dwellings for which the housing authority is providing financial assistance to eligible applicants to purchase), will be the amount of the financial assistance provided by the housing authority towards the price paid by the applicant.

Government can make regulations providing for the price to be paid by the applicant for an affordable dwelling and the amount of the contribution to be paid by the housing authority.

The housing authority will be entitled to a beneficial interest in the property (the affordable dwelling equity) which is to be the proportion that the affordable dwelling contribution bears to the market value of the property.

Terms of the arrangement

The housing authority and applicant will enter into an affordable dwelling purchase agreement which will contain certain specified details e.g. record both the affordable dwelling contribution and the affordable dwelling equity, make provision for redemption payments, set the date after which the affordable dwelling equity can be realised by the housing authority, contain covenants around maintenance of the property etc..

The owner will be prohibited from selling or charging the property without the prior written consent of the housing authority, not to be unreasonably withheld.

The affordable dwelling purchase arrangement must be registered as a burden on the title.

The housing authority can enter into priority arrangements with lenders lending to the homeowner, but only where the authority considers that such an arrangement will (a) enable the applicant to obtain a loan for the purposes of purchasing the dwelling or (b) to refinance or obtain further advances on an existing loan.

Redemption of equity share

Redemption and release of the affordable dwelling equity can take place by way of:

  • The making of redemption payments by the homeowner;
  • Payment by the homeowner following a sale of the dwelling (which requires the housing authority’s consent);
  • Realisation of the equity following a “realisation event” e.g. default by the homeowner, bankruptcy of the homeowner, destruction of the property etc..

For further information on this topic, please contact Aoife Smyth, Knowledge Lawyer or any member of A&L Goodbody’s Real Estate team.