Dr. Michelle Norris:

Senator Hayden asked about the type of regulation that is appropriate. In my view the type of regulation that is appropriate is a risk-based structure. That is viewed as the gold standard in the rest of Europe. That would involve regular reviews of finances, governance and also the standard of services provided to tenants. If the regulator believes there is a risk, there would be more in-depth analysis of what is going on in the organisation, maybe the provision of further support and as a final option what are called step-in powers.

In other words, it is the power to have an external organisation come in and take over the management of the dwellings. That is the situation in the various countries that make up the UK. On two occasions in recent years, the UK regulator has used its step-in powers to transfer stock to another organisation to manage. That means tenant services are protected and from the point of view of private investors, the rent roll is protected and therefore their investment is protected, which is their key issue in investment. The alternative, which has occurred in some European countries such as Germany and the Netherlands, is that housing associations go bust. In Germany, this happened to a very large housing association. This is the model I think is appropriate for the Irish situation.

I recognised that we are trying to implement these arrangements in the context of unprecedented change in the system of funding social housing and an unprecedented shortage of State finance. On the other hand, the State has been funding the sector since 1982. I did a quick calculation in the office this morning and figured out that around €3 billion in State capital has been paid over. In view of that, particularly for large organisations, I believe an external regulator is necessary now rather than a voluntary system.

One of the challenges for regulating the sector is that quite a large number of housing associations in Ireland provide housing and other services. Clúid Housing Association, to my knowledge, provides mainstream social housing, but there are many other organisations that provide housing services, addiction services and so on, especially organisations in the homeless sector. To avoid a situation where they are subject to multiple regulation, perhaps by the Department of the Environment, Community and Local Government, the Department of Health and any other Department that is funding them, discussions are taking place about setting up a charities regulator. Ideally, regulation of the housing association sector would come under that regulator, because that would avoid an excessive regulatory burden. For very small associations without paid staff that carry out a very valuable service at very little cost to the State, any regulatory arrangements must take into account the amount of regulation that is necessary and the amount they can bear, which obviously would be minimal.

The Senator raised the issue of lending to local authorities and to housing associations and where this lies on the national debt. The HFA's lending to both is considered part of the national debt. That was not the case in the past, but EUROSTAT changed its definition of national debt and that changed things, having a huge knock-on impact on the social housing sector. That is the current situation. Who we lend to is a matter for the Department and for Government policy. The other question raised by the Senator was about financing vehicles and real estate investment trusts. To my mind, there is no reason the real estate investment trust could not be used in the housing association sector in Ireland. It has some advantages, considering the structure of our sector and the large amount of smaller organisations. Generally with real estate investment trusts, there is a central body which offers investors an opportunity to invest in the trusts which buy dwellings and sub-let them by leasing them to housing associations. This could get around some of the capacity problems I have highlighted in the sector. It would also move finance off balance sheet. That is certainly something that could be explored.

The Senator also spoke about the possibility of large-scale voluntary transfers of local authority social housing units. This was done in the UK. It was driven by two factors in the UK. First, the Government there was not very keen on local authorities providing social housing. Second, there was a practical reason in that they needed to raise money to do major upgrading of local authority housing by loan finance off balance sheet. The second factor does not apply here at the moment, as most of the stock is well maintained and has been subject to much upgrading expenditure. I am not sure of the answer to the Senator's question as to whether it would actually improve the borrowing capacity of housing associations if they took on the stock.

In response to her question about the land banks, some of the local authorities have relatively large land banks, including some of the local authorities in the Dublin area. It is my view - separate to my role in the HFA I researched the housing sector - that there is currently a shortage of housing in Dublin, particularly a shortage of social housing. We have had practically no development since 2007. There is a big shortage of housing for low income people, as well as a big shortage of semi-sheltered type housing, which is housing with additional supports suitable for people coming out of homelessness. That shortage means we are spending a huge amount of money on homeless services, keeping people in hostels when they could be more appropriately housed for less money in social housing. In my view, there is definitely a need for new social housing development in the Dublin area, and maybe in some of the other cities where there is not an issue of oversupply any more. A transfer of local authority land banks, or looking at how those land banks could be developed by housing associations, is something well worth exploring. Arm's length bodies set up by local authorities would also be worth exploring in my view.