Rent to buy scheme – dublin

Item No: 5

To the Chairperson and Members of the
North West Area Committee

Meeting: 15th July 2011

Tony Flynn
Senior Executive Officer
15th July 2011

Introduction

Dublin City Council made a submission to the Department of Environment Heritage & Local Government for a pilot “Rent to Buy” scheme to increase options for affordable purchasers who were having difficulty
in securing finance to purchase an affordable home. Approval for the
pilot was granted to the City Council and the scheme was launched on 20th July 2010.

1. General

The Rent to Buy scheme is designed to assist eligible applicants for affordable housing towards purchase of their home. Under the scheme, the affordable home can be rented immediately for a period of up to three years. The applicant has the option to purchase that home at any time during this term at an agreed affordable purchase price. A percentage of the rent paid can be used towards the purchase of the affordable home.

2. Eligibility

The scheme is available to applicants who meet the criteria of affordable housing. Priority should be given to those applicants on the affordable housing list. An assessment of the applicant’s ability to meet the commitments of a mortgage for the rented property should be performed before granting a lease under the scheme. A minimum earning of €25,000 (p.a.) per applicant should apply.

3. Purchase price

The purchase price will be the affordable price, agreed and fixed prior to the granting of the lease (the agreed purchase price). The applicant has the option to buy the affordable home at any stage during the rental period at this agreed purchase price. Where purchased at a discount to the market price, a charging order will be made in favour of Dublin City Council for the value of the discount received (the clawback).

The applicant may be given the option of purchasing at the prevailing market price if greater than the agreed purchase price to avoid a clawback charge on the property.

4. Rent payable

The rent will be fixed for an initial three year term. The rent amount payable will be related to the market rent and should be set between a minimum of 75% and up to 100% of full market rent depending on local circumstances. The payment of rent should be payable monthly by automatic bank transfer.

5. Security Deposit

A deposit will be payable on signing of the letting agreement. It is recommended that a deposit amount equivalent to two month’s rent is collected by Dublin City Council. A percentage of the deposit, to be agreed by Dublin City Council, will be refundable subject to:
• The property being maintained and returned to Dublin City Council in
its original condition and subject to one month’s notice from the applicant of intention to quit the affordable home where the applicant elects not to purchase; or
• The applicant purchasing the affordable home. In this instance the
deposit will be offset against the purchase price.

6. Lease arrangements and term

The applicant will sign a letting agreement for a term up to three years. The terms and conditions of rental will mirror that of a similar property on the private rental market and the applicant will be required to adhere to all provisions within the letting agreement, including property repairs and maintenance, rent payment and occupancy restrictions.

7. Option to buy

The applicant will have the option to buy the affordable home at any stage during the lease term at the agreed purchase price. Rent will continue to be payable up to closing of sale to the applicant. A proportion of the rent paid can be used as part of the purchase of the affordable home.
Where the applicant continues to rent the affordable home beyond this term, the rent payable will be set at full market rent, at the discretion of Dublin City Council.

Where the applicant ceases to rent the affordable home at the end of the rental period and does not elect to purchase, rent paid is non-refundable.

Rent to Buy Scheme – Dublin City Council

The “Rent to Buy” Scheme enables potential purchasers, who are not in the position to purchase at present, to pay an affordable rent while living in their potential future home.

Herberton, Rialto, Dublin 8
Herberton is within easy walking distance St. James Hospital and the City Centre. Dublin City Council has a mixture of two & three bed spacious apartments available in this stylish development

Herberton – 16 Units

§ Moved in – 16

Parkview, Poppintree, Dublin 11
Poppintree Park is a private, gated development located off the Jamestown Road, Dublin 11. The Development consists of spacious apartments and duplexes, within walking distance of local amenities and close to a number of excellent transport routes. Dublin City Council has a mix of two bed apartments and three bedroom duplexes for sale in this development.

Parkview – 13 Units

§ Moved in – 7
§ At contract stage – 1
§ Available for offer – 1
§ Unavailable for offer (snagging issues) – 4

Prospect Hill, Finglas, Dublin 11
Dublin City Council has a range of one and two bedroom apartments available for sale in this development. Prospect Hill is conveniently located 3km away from the City Centre and within close proximity to the M50

Prospect Hill – 44 Units
§ Moved in – 23
§ Transferred to social leasing – 21

Advantages of the Scheme

• An affordable Rent which is below current market rent will apply to
these properties.
• A high percentage of rent paid will be offset against the sale price
if the option to purchase is taken up.
• The rental term is a maximum of 3 years and the property can be
purchased at any time during the 3 year rental term.
• The property will be furnished to a high standard at no extra cost
• Any service charges for the rental term will be included in the rent.
• If option to purchase the unit after the rental term is not taken up
a percentage of the deposit may be returned*
• The process of the scheme for a potential purchaser couldn’t be
easier. All they need to do is:
• Meet with one of the sales team where their financial details can be
checked to ensure they will be able to afford to buy the property before the end of the 3 years.
• Select a furnished apartment
• Agree a fixed competitive sale price and move in date
• Pay a security deposit of 2 months rent
• Engage a solicitor
• Sign contracts and letting agreement

To qualify for the scheme potential purchasers need to be on the Affordable Housing Panel and the same eligibility criteria apply
• First time buyer (certain exceptions apply)
• Earn under €55,000 as a single applicant or €75,000 as joint applicants
• Have a right to live and work permanently in Ireland

Summary

A Rent to Buy Scheme provided an additional option to would be purchasers and gave an opportunity to use rent as a deposit over time, thus reducing the purchasing price of the affordable home at year 3.
It gave purchasers an option to experience living in a home that they could purchase after 3 years and set down roots in that community. It is hard to put a figure on how many of the Rent to Buy tenants will go on to purchase their properties by the end of the three year rental period. From discussions with tenants as they went through the process and move in we would estimate that 75% – 80% are definitely aiming to buy the property during/at the end of the rental period.

____________________
Tony Flynn
Senior Executive Officer