The European Commission has approved, under EU State Aid rules, the Irish Government’s proposed €450 million scheme to support the construction of apartments to be sold to owner-occupiers. The scheme, know as the Croí Cónaithe (Cities) Scheme, aims to bridge the current “viability gap” where the cost of building apartments is higher than its market sale price.
The scheme aims to support the delivery of up to 5,000 apartments via blocks of at least four storeys in the urban areas of Dublin, Cork, Galway, Limerick and Waterford.
How will the scheme operate?
The aid will take the form of a direct grant covering the difference between the actual price and the development cost of the apartment, up to a certain maximum amount depending on the city. The scheme will be open to developers of apartment blocks that hold an unactivated planning permission and demonstrate the existence of a viability gap.
To be eligible, apartment blocks must be
- located in Dublin, Cork, Galway, Limerick or Waterford cities;
- four storeys or higher and have a net density of at least 35 dwellings per hectare;
- close to public transport;
- for sale to owner-occupier households only; and
- be able to demonstrate a viability gap, where the cost of building the apartments is higher than the market sale price.
How much funding will be available?
The maximum funding anticipated for each apartment is €120,000. This may be exceeded by up to 20% in certain cases in regional cities where lower market prices mean that the viability gap is wider.
Who will manage the scheme?
The Croí Cónaithe (Cities) Scheme will be managed and administered by The Housing Agency on behalf of the Department of Housing, Local Government and Heritage. The Housing Agency will receive proposals for developments via e-tenders. It will assess eligibility and carry out detailed due diligence and an open book assessment on eligible proposals.
Beneficiaries will be ranked based on density, date of delivery, the quality of the development, the delivery cost per apartment and proximity to core services and amenities.
Open book accounting will be required for all developments to make sure that the funding support provided only targets the viability gap in question, resulting in a reduction of cost for home-buyers and increased supply into the market. Both delivery costs and market values will be assessed by independent quantity surveyors and valuers appointed by the Housing Agency.
For further information on this topic, please contact Aoife Smyth, Knowledge Lawyer, or any member of A&L Goodbody’s Real Estate team.