Financing the delivery of social housing

Housing Finance Agency’s Chief Executive, Barry O’Leary, discusses the growing momentum in new housing development in the Approved Housing Body sector, the need for increased involvement by local authorities, and the challenges for all of those involved in the wider ‘Housing Group’.

The Housing Finance Agency (HFA) has been directly involved in supporting approved housing bodies (AHBs) with their financing needs since 2012. I am very happy to report that, following a challenging start, momentum picked up significantly in 2015, where we recorded a five-fold increase in the level of loan approvals in 2015. This has continued into 2016 where loan applications totalling €72 million were approved in the first quarter, to build or acquire almost 500 homes for social housing tenants, most of which will be located in the greater Dublin area where the need is highest.

This growth in activity is supported by the HFA’s wide suite of products, specifically tailored to meet the needs of the AHBs. In particular, there has been significant demand for long term finance supported by the European Investment Bank (EIB) and fixed for 25 years at 3.25 per cent. Following the successful applications of St. John of God and North & East Housing Associations in Quarter 1 for Certified Body status (i.e. approved to borrow money from the HFA), the total number of Certified Bodies now stands at fourteen. To date, eleven AHBs have had specific project loan applications approved, totalling €256 million, for the provision of 2,150 new social housing units and 550 energy upgrades.

Over the past two years the HFA has worked very hard to expand and improve its range of products, quality of service, internal information systems and processes and delivery channels.

Specifically we have:

•   improved our long-term fixed rate offering by reducing the ten year fixed rate product to 3.85 per cent, and accessing very cost-effective 25 year finance from the EIB;

•   introduced products to support New Build and Mortgage-to-Rent projects;

•   simplified our legal documentation following feedback obtained from the sector;

•   introduced a new Category 2 lending product, to allow mid-sized Tier 2 AHBs to access finance;

•   commissioned the use of bespoke finance and development software to support AHBs in their development

   and management of long-term plans and projections;

•   upgraded our IT systems to enable customers to access information directly, and to improve the quality of information available;

•   conducted detailed reviews of our internal processes in order to better match customer needs and streamline our project application process.

Local authority development

Pillar 1 of government’s Social Housing Strategy 2020 (SHS 2020) sets out ambitious targets to provide 35,000 new social housing homes through a range of delivery mechanisms by 2020.

While the AHB Sector will hold a central role in delivery, SHS 2020 recognises that “local authorities will continue to have a vital role in the provision of new social housing. They have a wealth of operational experience in managing social housing construction projects and meeting the needs of a large proportion of the total number of households receiving housing supports” and “local authorities are positioned in the short term to quickly ramp up their social housing programme.”

In recent years, there has been little new social housing development undertaken by local authorities, due to the budgetary constraints on the Government’s Balance Sheet. However, the ESRI in its Quarterly Economic Commentary in December argued that: “One possible way of achieving a significant increase in social housing provision is for the State to provide this through local authority schemes.” The HFA strongly endorses this view, and has sufficient long-term cost-effective finance available to support this activity.

Interest rates are currently at historically low levels and, based on the views of most analysts, will probably remain low for the coming year or so. Access to low cost fixed rate finance at today’s rates represents a unique opportunity for local authorities in the provision of social housing – the servicing costs for €1 billion of 25-year fixed rate finance at 1.75 per cent is only €17.5 million per annum. Clearly, while recognizing the current budgetary constraints, this is an opportunity which has a limited life span and one which should not be missed.


Collaboration and focus

The current housing situation is such that the demand for social housing continues to exceed the level of supply. This poses challenges for all of those involved in the wider “Housing Group”, i.e. government departments and agencies, local authorities, approved housing bodies and other parties active in the Sector.

The HFA is committed to collaborating effectively with all members of the wider housing group to meet the challenging targets set out in government’s social housing strategy. We are active participants in the finance work stream and the project leadership team, with the aim of helping the delivery of the strategy.

We are happy to constructively engage with any members of the housing group on a bilateral or group basis to strive to shorten the time to delivery of much needed housing. This can only be achieved through collaboration with all players in the sector. For all members of the group the focus needs to be on delivery of the 35,000 homes as set out in SHS 2020. 

In conclusion

The HFA’s primary focus for 2016 will be to encourage substantial development by local authorities; continue the upward trend in AHB loan applications and, ultimately, ensure homes are provided for those who most need accommodation.

Finance is available to local authorities and approved housing bodies for all social housing related needs, including meeting the infrastructure requirements to prepare sites for development and new build, acquisition and retrofit projects.

The HFA is also focused on helping local authorities and AHBs to de-risk their businesses, by expanding the range and duration of our fixed rate offering, while ensuring that our pricing remains the most competitive available in the marketplace. As such, we are meeting the increasing demands of our customers with an on-going programme of innovation which tailors our products to their needs and we will continue our efforts at improving customer service by streamlining our core processes and reducing the burden on customers accessing our services.

For further information please contact:

Maria O’Reilly

Senior Lending Officer AHBs

Tel: +353 1 872 5722

Email: directlending@hfa.ie

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