Struggling councils renegotiate €263m land loans
LOCAL authorities have been forced to renegotiate loans totalling €263m because they cannot afford to repay them.
City and county councils have been forced to seek extensions on loans falling due for final payment this year and next, and the move will result in them paying millions of euro in extra interest payments.
The loans were drawn down in the last five years to purchase land earmarked for social housing.
But with the collapse of the property market and a move by the Government to lease instead of building homes for the least well-off, it means that much of the land is unlikely ever to be developed.
Last night, the Housing Finance Agency (HFA) -- which borrows money on behalf of local authorities -- confirmed that loans totalling €263m had been renegotiated.
"Loans with renegotiated terms are loans. . . where the agency has made concessions that it would not otherwise consider," it said in its annual report.
"During the year (2009) the agency has reached an agreement with the local authorities to extend the terms of loans that were due to mature in 2009 and 2010 to 2011."
HFA chief executive Ian d'Alton said it was the first time in the history of the agency that local authorities had sought loan terms to be extended.
The councils are not being identified.
Local authorities currently own some 2,000 hectares of land, on which loans of €650m are due.
Much of the land is likely to be taken over by a new agency under the auspices of the Department of the Environment, called the Housing and Sustainable Communities Agency.
It will work with NAMA in an effort to get some return on the land.
A number of local authorities including Dublin City and Wicklow Town Council have asked the new agency to take control of part of their land banks and repay the loans on their behalf.
But many other councils face the prospect of seeking permission from the HFA to extend their loans because they are being forced to meet hefty mortgage payments on land which, in many cases, was bought at the height of the boom, and which is lying idle.
The HFA borrows money at the inter-bank rate, which on Friday was at 1.75pc.
On the €263m so far extended, this means extra interest payments will amount to some €6m per year.