Mr. Barry O'Leary:

I thank the Chairman for the invitation to speak to the committee. Mr. Cremen and I will, I hope, address some of the members' questions in the course of our presentation. I will skip some of the items in our written submission.

The HFA, was established in 1982 to advance loan finance to local authorities and, more recently, approved housing bodies. Our role is to facilitate and support the delivery of social housing. We have a statutory borrowing limit of €10 billion and an outstanding loan book of €3.7 billion. We raise the majority of our funding via the National Treasury Management Agency, local authorities, the European Investment Bank and the Council of Europe Development Bank. We still have available to us facilities of approximately €6.3 billion. The majority of the HFA's loan book is provided to local authorities for mortgage and non-mortgage lending. From late 2011, the HFA began lending to approved housing bodies. At this stage, we have 15 approved housing bodies through our certified body status, which means they can draw down funds from us.

There is information in our submission on net lending to local authorities and the loan approvals to approved housing bodies. We can deal with those as the afternoon proceeds. Last year, we made quite a few approvals in the approved housing body area. We made approvals for the development of 650 houses last year, which is a significant increase in comparison with the previous year.

The submission we have for the committee this afternoon focuses on our area of finance. There are obviously a number of areas in the general housing scene concerning planning and regulation, development cost structures, procurement and the availability of land. The committee will focus on these but our proposal concerns the provision of finance. Having in recent years considered and dealt with the approved housing bodies, with which we are in constant contact regarding their development plans, we believe that the 15 with which we are currently doing business have the ability to produce, over the next four or five years, approximately 4,500 or perhaps 5,000 houses.

They are doing very good work and have significantly improved on the delivery they achieved last year. Even if the estimate is out by 1,000 or 1,500, the likelihood is that there will be relatively few houses over 5,000 delivered. In terms of complementing the strategy of the Department of Housing, Planning and Local Government, which focuses on the provision of 35,000 units, we need to look at lending money to local authorities again for them to build social housing.

Our submission is that to get the scale, local authorities need to be involved. Within the period, they could produce twice the number of houses. We have suggested in our submission that would be 9,000 homes. The breakdown of the funding requirement is in our submission where we show that there would be gross lending involved of approximately €2 billion. The normal life of our existing loan book is such that there are repayments coming back in from mortgages and in a normal way our book is falling. Members will see within the submission that the red figures show the normal repayments of annuities. We are saying that capacity plus some additional new borrowing should allow for gross lending of €2 billion which would be split between local authority lending and AHB lending. There would be a net lending situation of €1.3 billion. That would allow the building of 13,500 units which would be roughly 40% of the total requirement under the Government strategy on 35,000 units which we spoke about earlier.

Why do we come to that conclusion? First, what is required at the moment is for homes to be built for people. We think the capacity of local authorities is such that they are best placed to do that building. Historically, the cost of finance is so low at the moment that it produces a unique opportunity. We are in a position to borrow money and the European Investment Bank is keen to give it to us. The bank will give us fixed rate money for 25 years at something below 2%. We can pass it on to local authorities cheaply. There are very few of us in the HFA and we do not need a lot of overheads. We can pass the money on at a very tight margin and enable the houses to be built.

The cost of funding is such that it is not going to be this low forever. Something is going to happen in the next year or two and rates will start drifting away. If one were to borrow €1 billion at the moment it means one could service the loan on an interest-only basis for approximately €17.5 million. One could pay principal and interest and cover the servicing of it for approximately €50 million a year. One sees reports all the time that the cost of emergency accommodation is such that we are probably spending that kind of money already. It is an opportunity that should be looked at. While it is very easy to say that, it would be silly not to also acknowledge that there are certain borrowing constraints on the Government. Our contention, however, is that there has to be a decision made to do this and build the houses. The opportunity is there and, temporary as it is, somebody must make a decision to facilitate the borrowing and get the homes built. At some point in the future, we can look at the local authorities either selling them or providing mortgages to people if they can service them without putting risk onto the books of local authorities. Alternatively, the units could be transferred to approved housing bodies.

The primary objective is to get the houses built. People need homes. The money can be provided relatively cheaply and that is the essence of the proposal. Our proposal targets the finance side of things. It allows those who can respond quickest to achieve the necessary scale of development. The current interest rate environment is such that we should do it. That in essence is the proposal we bring to the committee today.