Council’s €12m debt for unsold housing

Debt totalling €12 million is owed by Galway City Council for the purchase of homes in an affordable housing scheme that could not be sold a decade ago when the property market crashed.

At a meeting this week, Director of Services for Housing, Dermot Mahon, confirmed to Cllr Collette Connolly (Ind) that the value of the legacy debt associated with the purchase of 74 ‘affordable’ homes that could not be sold on was now about €12 million.

Mr Mahon said he did not know offhand the most up-to-date figure for the cost to the City Council annually to service the debt.

The matter was raised during a discussion on the Local Government Audit Report.

The report discussed on Monday from Council Chief Executive Brendan McGrath related to the 2019 audit, which said that the amount of debt outstanding for 72 of the affordable homes was around €13 million in that year.  This suggests that some €1 million was paid off the debt in 2020.

The houses were bought over a decade ago by the local authority using money from its capital account and from borrowings. When the property market crashed the Council could not sell the houses.

The unsold affordable houses are now being leased to approved house bodies (AHBs), but the debt associated with buying them remains on the Council’s books.

The Audit report said: “Included in the capital account balance is an €8m debit balance relating to unsold affordable housing units. In addition to this debit balance, the Council continue to have loans amounting to €5m due in relation to unsold affordable housing units.”

In response, Mr McGrath said: “Engagement continues with the Department to agree a mechanism for local authorities to recoup outstanding legacy loans and clear debit balances relating to unsold affordable housing units.

“The Department conducted a survey of each local authority to establish the extent of liability and the current status of each property. All properties categorised as unsold affordable units are leased to AHBs. The Department initially agreed to this process for a five-year period which was subsequently extended for a further five year period to the end of 2019.

“Galway City Council awaits the agreed process and mechanism whereby these properties can be sold and loans and balances reduced accordingly.”

In an update, Mr McGrath said that the lease agreements with the housing bodies have been renewed.

The audit report noted that the interest costs on the loans amounted to €63,000 in 2019, and were “fully recoupable” from the Department of Housing.

The City Council is planning to proceed with another affordable scheme later this year.