PPP Projects “No Longer Viable”

It seems to stand to reason that with so many high profile developers (and plenty of low profile developers dotted around the country too) going to the wall as the bubble collapsed and banks called in loans outstanding, the future of PPP projects in providing social housing would fall into question.

Well according to the CIF and a few others it is dead. The whole process of PPP procurement to build social housing units is not in the interests of builders – it is not profitable to them and takes too long to deal with councillors and go through European hoops.

While my heart bleeds there are two points that stand out, developers got around social housing commitments for years via development levies which amount to over E1 billion in the accounts of various county councils and sold off their projects as high end properties, secondly they are laying off people by the bucketload and failing to pay bills to sub-contractors.

The downturn in the housing market has been blamed for the collapse of the PPPs. The schemes worked by allowing developers to build private housing on State/local authority land on the condition that they also build social housing for the council to allocate to its tenants.

During the boom this seemed like an ideal way of providing social housing. However, according to director of contracts with the CIF Don O’Sullivan, PPPs are suitable for the development of roads or waste infrastructure, but don’t work for social housing.

“The problem with building housing is that it’s very time-dependent and very market-dependent. What’s a good deal today may not be a good deal tomorrow.”

In other words, when they would build any old thing anywhere with limitless backing from banks, it was all fair game. Now they dont need public land to build on as they can hardly shift two houses for the price of one.

I agree that the provision of social housing is a responsibility for the state, but our current condition means that state is in no position to build social housing at all – instead in the budget it veered toward the provision of sub-prime credit as a bung to builders. That trick will mean that hundreds or thousands of people due to move into their home under a PPP scheme will have to wait for longer.

We are missing the wider point – that keeping cash and jobs flowing are far more important now than the profitability or otherwise of a PPP. Developers don’t want to build on state land as they can hardly sell what they have already oversupplied – take empty stock off them in lieu of defaulting on the contract and use that. Or better still, take the unspent development levies (which will amount to around 800 million by 2009) and use that to put up social units.

NESC predicted we would need 73,000 units up to 2012 to cope with demand. We are nowhere near hitting that target. There are over 35,000 new build homes lying idle (a conservative estimate, many would say its 50,000 or even more). So the scope to do a deal is there and the time to do it is now, you get a good deal, you satisfy need and you potentially remove the enormous overhang of housing and pent up demand from those who can least afford to pay.

It doesn’t unwind toxic debt but it hits at a source of the ailment now infecting our entire economy. If the option is taken, cash given to builders must make its way to subcontractors who cannot afford to feed their families as well as the banks. PPP might be dead as a profit generator for builders but that doesnt mean those waiting on houses have to suffer – there are more than enough to go around.