Dr. Michelle Norris:

Mr. O'Leary said he would deal with the mortgages so I will deal with questions about the regulation and funding of housing associations. Deputy Cowen asked a question about the capacity for private sector investment in funding social housing via the housing association sector. Obviously, it is very difficult to assess that capacity before we go out and seek it. It is the case that in everywhere else in Europe, social housing is funded primarily by private sector borrowing. Until the 1980s, social housing in Ireland was funded by local authorities borrowing, so borrowing is the norm and borrowing from the private sector is the norm elsewhere in Europe. There is no doubt there is significant capacity to fund the sector. The issue is about the capacity of the sector to make use of that. As an aside, we have been approached by the European Investment Bank, so that offer of funding has been made to us. As I mentioned in my opening comments, relatively little of the available funding we have even before we go to the European Investment Bank has been drawn by housing associations.

The key issue is not necessarily the availability of funding if the structures are right. It is the capacity of the housing association sector to avail of it. The State has been funding the housing association sector since 1982 in a formal way with a formal grants scheme. Since then, the sector's output has grown substantially. Even when the State was providing full capital grant funding for the sector, the output reached a high of about 2,500 units per year, which is still significantly below the social housing needs at the moment based on the waiting list. In respect of the agency, our issue is that we would be very keen for more housing associations to come to us to apply for approved body status, borrow from us and build dwellings.

Certainly, to draw on finance from the private sector, international evidence indicates it is necessary to have a formal independent regulatory system and not a voluntary system as is being proposed now in order for housing associations to avail of that finance. We secure loans on assets we loan against, so in theory they are security, but in practice no security can be realised because these houses are occupied by families in need of housing. We cannot secure a loan in the way a commercial bank or anyone investing in social housing can. Regulation is necessary to ensure, for example, that an alternative manager could be brought in the case of the worst scenario or housing associations could be given help if there were concerns about their performance to protect the rent roll and, therefore, protect the investors' investment. That is why there is the need for private finance. My view is that there is much potential there but the key problem is the capacity of the housing association sector to take advantage of that potential, apply for loan finance and develop the housing that needs to be developed, including taking existing units from NAMA and building new developments.