Mr. Sean O'Connor:

It is all different. It would depend on the scope and level of activity. What we all have in common is the current funding scheme is predicated on 100% debt financing. We and the Irish Council for Social Housing, which is the umbrella organisation for all associations, believe that is not sustainable. It is a unique position in Europe and there was probably some good meaning in its design in that, at the time, it may have been considered helpful in maintaining our off-balance sheet status. That is water under the bridge now and we are on the balance sheet. There will be a fair bit to be done to get us off the balance sheet. Most of the money we borrow comes through the Housing Finance Agency, HFA, as a conduit for European Investment Bank money. Once we borrow off the HFA, it is on the balance sheet anyway, so it is scoring against public expenditure. We also borrow off Bank of Ireland, Ulster Bank, Nord etc. There are other borrowings. Our potential for off-balance wins but not in the current system. The ratio is moving up so the higher the gearing, the worse it is financially considered.

We have a very good funding system that underpins our borrowing and we are all risk-averse creatures, so we will all fix our money now for as long as we can get - 25 years. There is a back-to-back agreement with the local authority that fixes the payments to serve the interest cover. We are very robust in that but, nonetheless, the regulatory system we have in place had thresholds that have now been softened or blurred. One of the thresholds was a 60% gearing level, above which four of our members are currently. Why does this matter? It matters because when we go to banks to borrow money, it is something in which they are interested. It is not their primary interest and they are more interested in whether we can pay the debts and who underwrites them. They are more interested in debt service cover ratio and interest cover. We all have very healthy arrangements in that regard and we can pay our debts.

The system of 100% debt funding is unique in a bad way in Europe. We went from 100% grant funding to 100% debt funding overnight. We went from one system to another, and that has been very detrimental to smaller associations that have not been able to get to grips with the new funding regime and the robust nature of regulation and governance around that. Do we think it is sustainable in the long term? We probably do not. It is also starting to creak and show problematic symptoms, particularly in areas where the process does not work. It is underpinned by rents in a region, so if the rents are not high enough to service the debt and borrowings, the process starts not to work.