The European Commission recently launched a public consultation on the revision of the State aid rules to help Member States with affordable housing. This revision of the services of general economic interest (SGEI) rules will address challenges related to housing affordability that go beyond social housing. The goal is to allow EU countries to support affordable housing in a faster and simpler way, by revising SGEI Decision 2012/21/EU before the end of 2025.
What is being proposed?
Under the current SGEI Decision, social housing qualifies as an SGEI only if it is provided to disadvantaged households who cannot access market housing. Aid outside these strict parameters must be notified to the Commission and assessed under general State aid rules.
The Commission now proposes to exempt a new category for affordable housing, which is defined in the proposed SGEI Decision as: "Housing for households, who are not able, due to market outcomes and notably market failures, to access housing at affordable conditions." This goes beyond traditional social housing, covering households who cannot afford market rents or purchase prices.
If adopted, this exemption would allow EU Member States to support affordable housing without notifying each scheme, provided certain conditions and safeguards were met.
Safeguards
The conditions and safeguards stipulated in the proposed SGEI Decision include:
- Entrustment act: An undertaking (e.g., an Approved Housing Body (AHB) or local authority) must be formally entrusted by a public authority with the provision of the affordable-housing service.
- Compensation rules: Compensation must be strictly limited to what is necessary to cover the net cost of providing the affordable housing, plus a reasonable profit.
- Duration and affordability commitment: The housing provided under the scheme must remain affordable for a defined minimum period.
- Quality and performance standards: Housing funded under an SGEI scheme must meet normal standards of quality, safety and energy performance.
- Renovation and existing stock: The proposed SGEI Decision allows public support for the renovation and upgrading of existing social or affordable stock.
- Monitoring and transparency: Authorities must publish key information about the entrusted schemes, including the amounts of compensation paid. They must also maintain regular reporting to the Commission.
- Avoidance of market distortion: Aid must be limited to what is strictly necessary to correct the identified market failure and must not crowd out private developers who could otherwise deliver comparable housing without subsidy.
Implications of the proposed revision for Ireland
In the recent past, Ireland has successfully applied to the European Commission for specific State aid approval of an affordable housing scheme, namely the Croí Cónaithe (Cities) Scheme (SA. 102927) (supporting the development of apartment blocks for sale to owner occupiers in Dublin, Cork, Galway, Limerick and Waterford in line with the objectives of the National Planning Framework (NPF)). (No cost rental schemes, such as the Secure Tenancy Affordable Rental (STAR) scheme, which was announced in July 2023, have to our knowledge been formally notified to the Commission to date (presumably on the basis that the cost rental scheme fits within the existing SGEI definition).
By introducing a specific exemption for affordable housing, the proposed SGEI Decision should allow Irish authorities to support affordable housing without notifying each affordable housing scheme provided the relevant conditions and safeguards (outlined in part, above) are met. It ought also provide greater legal certainty that cost rental schemes will not be required to be notified to the Commission for State aid approval provided they satisfy the relevant conditions and safeguards.
Looking forward
The Commission’s proposal to revise the SGEI Decision marks a significant shift in EU State aid policy for affordable housing. For Ireland, the new exemption promises to reduce bureaucratic hurdles and support households who are currently underserved by existing rules. Developers, AHBs and public authorities are encouraged to monitor the consultation closely, prepare to leverage new opportunities, and continue to ensure that public support is used effectively to deliver affordable homes.
For more information, please contact our Head of EU, Competition & State Aid, John Gaffney, or your usual contact in Beauchamps LLP.
