The Land Development Agency (LDA) is preparing to buy land and houses from cash-strapped developers who do not have the funds to follow through on planning permissions.
The agency, which was set up in 2018 to develop state land for housing, is now getting involved in the private sector to “unlock” sites left idle by their owners due to lack of financing.
Under Project Tosaigh, the LDA will become a backstop buyer of up to 5,000 new homes on sites where delivery of housing has stalled.
LDA chief executive John Coleman said the agency will “initiate” the development process by either acquiring land outright and building on it or, more controversially, making “forward purchase agreements” with developers to buy out their entire stock on completion.
Having the certainty of a guaranteed buyer will allow the landowners to access the loans they need to build much-needed housing and provide them with an exit from unproductive ownership, Mr Coleman told the Irish Independent.
However, by buying speculators out, the LDA is opening itself to criticism that it is offering a back door state bailout to developers who over-extended themselves on plans they could not complete independently.
“We have no interest in being a rescue mechanism for developers that made bad decisions,” said Mr Coleman.
“We’d be seeking value here and looking for scale to achieve that.”
He added that financing was often a problem for developers as the pillar banks were very cautious about funding housing development, especially at smaller scales, and the cost of private equity funding cut too far into margins.
“By committing to take ownership of the homes on completion, the LDA can provide underwriting to developers that enables them to get funding,” he said.
Under the plan, the LDA will take full ownership of the homes and either rent them at cost or sell them on to households that qualify for affordable purchase arrangements.
The agency is seeking to deliver 5,000 homes this way through 2026 and will be opening a process to identify appropriate sites before the end of this year.
There is currently “consented” land with planning permission for 80,000 houses that is not being built on, but Mr Coleman said the LDA would not mop all of it up.
“We have to ensure we get value. We don’t want to perpetuate a speculative market,” he said.
The 5,000 Project Tosaigh homes are among the up to 26,000 homes the LDA is being asked to deliver as part of the Government’s Housing For All plan.
The agency already has a land bank of 12 sites on state property capable of supporting 6,000 new units, half of which it expects to build through contractors in the next five years.
That would mean the delivery of 8,000 affordable homes by 2026.
It is also assembling further state land banks to bring as many as 15,000 more units to market after 2026.
To that end, the Government has expanded the LDA’s funding capacity by €1bn to €3.5bn.
Mr Coleman said the level of funding would allow the agency to execute its strategy for four to five years before needing additional finance, although by then the LDA should be collecting money through rents.
He said the LDA was planning a run rate of 2,000 new homes a year after 2026, or about twice the number that Cairn Homes, Ireland’s biggest house-builder, is putting on the market annually.
For now, the LDA is working with external contractors to develop sites, but that could change as the agency takes more architects, engineers and construction staff in-house, Mr Coleman said.