Mr. Cathal Callan:

The initial question asked by the Senator was about the lead-in time for the regulator. The simple answer is that I would like to have a regulator now. We have been talking about regulation for a number of years now. We are tasked with funds to supply general needs housing. A regulator in place will make that cheaper in respect of interest rates and makes the access to it easier. I said earlier that I thought commercial lending for this sector would be limited in the medium term. The world may possibly change in the long term and it may revolve back, but in the short term, commercial lending will be limited in the sector. Why do we need a regulator if we have access to the HFA? I think there is a need for the sector to move on from the HFA. The HFA has a key part to play in this initial stage and in the future, as there is a long-term relationship in respect of 30 year loan facilities. The key advantage of a regulator is that it builds confidence in the sector.

We can then look at alternative forms of funding.

We investigated the potential for real estate investment trusts, REITs, but we have not formed an opinion as to whether we wish to enter into such arrangements. We have also consider the potential for arrangements around the private sector leasing, PSL, model or a variant thereof. A capacity issue arises for the sector overall, however. If one removed all of our limitations in regard to unencumbering assets and appointing a regulator with whom lenders would be comfortable, we would still face limits to the amounts that we could borrow. Even the larger housing associations in the UK are now starting to hit limits in their ability to borrow. If housing associations are going to be the main supplier of social housing, a different methodology will need to be developed. PSL would mean we do not take the amounts on to our balance sheet. The funding requirements would be similar. Long-term issues arise in that one does not own the asset but one gets access to large amounts of stock. That is something we have been exploring and may develop further.

In regard to the regulator, I agree with Dr. Norris that a regulator would need to have a stick and be able to intervene if the basis of assessment for performance in terms of capacity to borrow into the future, planning and financial governance is not up to standard. The intervention could take many forms, such as direct intervention to replace the board and management team, but other jurisdictions have tended not to intervene in such a draconian manner. There have been cases where regulators stepped in to force mergers but others have consisted of a quiet intervention in which the regulator facilitated the relationship with lending elements by giving security to the position and allowing time for the issue arising to be regularised and the entity to return to independence. In order to get to the point where the regulator has powers to intervene I would like provision to be made now. I am realistic in recognising that we are a minimum of two years away from having anything that is credible. We need to work towards that.

Stock transfers have a value to housing associations. They improve our capacity to borrow because they give us a critical mass of units and stock. We heard about some of the models that have worked in the UK, where stock has been transferred from local authorities into their own housing associations, at a recent conference in Wexford organised by the ICSH. These models should be investigated further. It is feasible to develop large housing associations through transfers from local authorities. The result would be a large housing association with critical mass and capacity to borrow. This should run in tandem with the voluntary sector as it currently stands. A large number of issues would have to be addressed but it is a possible option.