Mr. Barry O'Leary:

I am pleased to be here today with my colleague, Mr Sean Cremen, head of treasury, to give a brief outline of what the Housing Finance Agency, HFA, does and our views on the upcoming legislation. I do not propose to read through all the opening statement we have submitted, but I will give some brief background information on the HFA. The HFA’s function is to advance loan finance to local authorities and approved housing bodies to be used by them for any purpose authorised by the Housing Acts. Our role is to supply appropriate funding for schemes and projects decided upon and established by the Government. Our total outstanding loan book on 31 December 2012 was €4.3 billion.

Most of the lending we do is to local authorities. I do not propose to speak about that but rather to concentrate on our lending to AHBs. We began this side of our business in 2011. Until then, Government largely grant funded housing bodies for social housing. Through tighter budgetary constraints, however, it has introduced a system of loan finance. The HFA has had to adapt its processes and has quickly become the largest provider of loan finance for the sector. Direct AHB lending creates a different level of risk for the HFA compared with lending to local authorities. We manage this risk through its credit assessment process.

To be considered for loan finance from the HFA, AHBs must first apply to us for certified body status using our standard three-page application form. The suitability criteria we use are similar to those used by other financial providers and broadly span three areas: past financial performance, current corporate governance structure, and future development and financial plans. To date, the HFA has received applications from 25 AHBs for so-called certified body status. Of these, 12 have been approved, 11 rejected, one withdrawn, and one is pending a decision by the HFA’s credit committee. In the event that an application is rejected, we have a process whereby we talk to the entity's representatives and explain to them the various steps required to attain certified body status. Several of the AHBs which have failed to get certified body status from the HFA have been approved on reapplication.

Once certified body status is attained, AHBs can apply to the HFA for finance for individual housing developments. To date, we have offered loan finance to 100% of loan applications received. We have about €500 million available for lending to AHBs. To date, finance for individual housing developments to the value of approximately €180 million has been approved. This will cover the acquisition or development of more than 1,600 homes and the energy upgrading of another 550 units. To date, about €60 million has been advanced, with the balance due to be advanced as the projects progress.

The HFA's credit assessment procedures have been vetted by the European Investment Bank, EIB, which subsequently approached us seeking to use us as a conduit into the sector. Last January, it provided us with €150 million in loan finance for the housing sector. This finance is valuable because it offers certainty of interest rates, in that we can provide 25-year fixed-rate loans to approved housing bodies, AHBs, at approximately 3.25%. The HFA is authorised to finance loans up to a total of €10 billion. Our current reserves amount to €128 million and we expect a surplus in our activities this year of €22 million.

Our main role is to supply suitable finance at the right time and price to fund the social housing strategy that is being operated by the Department of the Environment, Community and Local Government. We welcome the intent of the legislation. The establishment of an independent regulator is important and will lead to significant benefits for the sector and assist in building capacity therein, creating certainty and improving investor confidence in the creditworthiness of AHBs. Regulation will provide additional evidence to lenders that the sector is well governed and well managed and that its financially viable organisations are capable of dealing with loan finance. It will also deliver benefits to tenants, in that they will enjoy the security of having financially sound landlords with well managed and maintained properties. The development of sectoral standards on issues such as sinking fund provision, risk management and good corporate governance is an important element in the regulator's work.

I trust that I have briefly provided details on the HFA's background and interaction with AHBs and would welcome whatever questions members might have.