EU bank to fund social housing - but questions remain on '30-year lease'
The European Investment Bank (EIB) is to fund development of social housing, which will be leased to local authorities for up to 30 years.
The bank will lend to private companies - including pension funds looking for a steady income stream - that will build homes under what is effectively a public-private partnership (PPP) model.
But it is not clear if tenants of these units will be forced to pay market rates in 30 years, or face the prospect of eviction when the PPP arrangement ends and the properties revert to the ownership of the private companies that built the homes.
There are also questions over whether it could be cheaper for the State to fund construction of the units from its own resources, and retain the houses and apartments in public ownership.
Two housing projects have been identified, one in Dublin and a second in Cork, EIB vice-president Andrew McDowell said.
He added that additional projects would be assessed on a case-by-case basis, with the loans repaid over time through the rental income generated.
"It's an innovative way of delivering infrastructure sometimes a little bit more rapidly, and obviously at least expense to the State," he said, adding this would be the bank's first social housing PPP project in Europe.
"We're excited about that transaction and we hope it's going to lead to further EIB support for social housing in the coming years."
It is not clear if the EIB's announcement yesterday is 'new' money, or whether it is part of a €160m funding package announced last June where the bank committed to funding social homes.
There are also concerns that PPPs can be an expensive form of finance, but the State is keen to use this model to provide a proportion of new social units. In Budget 2015, it published plans to build almost 1,500 units under the PPP model, but none has yet been built.
Experts suggest while there is a need to provide homes to address council waiting lists, there is also the question of delivering affordable units.
These are aimed at those on incomes above the threshold allowing them to avail of State housing support, but not sufficient to buy or rent a property on the open market.
With property prices approaching boom-time levels, high prices are driving key workers out of the cities in search of cheaper accommodation. One source suggested that not-for-profit Approved Housing Bodies would be in a position to ramp-up delivery of affordable homes which could be offered for rent at below-market rates.
The loans would be repaid using the rent roll from tenants, with a margin remaining to maintain the properties. Approved Housing Bodies manage more than 18,000 units across the State, but it is not clear if they will be allowed to avail of the EIB funding.
Among the barriers is the fact that its borrowings are counted on the State's balance sheet, unlike a PPP arrangement, meaning it would reduce the amount of leeway for Government in terms of discretionary spending.
Separately yesterday, the Government announced that legislation to establish a new body called Home Building Finance Ireland has come into force. The agency is designed to make finance available for housing projects.
Housing Minister Eoghan Murphy said the lack of funding had been identified as a "considerable obstacle" for SME builders, and that the new agency would help boost residential construction.