Oireachtas Joint and Select Committees
Tuesday, 14 July 2026
Joint Oireachtas Committee on Housing, Local Government and Heritage
Operations of the Circle Voluntary Housing Association: Discussion
2:00 am
Micheál Carrigy (Longford-Westmeath, Fine Gael)
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We have received apologies for Senator McCormack.
Circle Voluntary Housing Association is one of Ireland's leading approved housing bodies, providing social and affordable housing solutions to individuals and families across the country. The organisation works in partnership with local authorities, State agencies, developers and funding bodies to deliver, manage and maintain high-quality homes while supporting sustainable and inclusive communities. Recently, concerns have come to light with the standards assessment undertaken by the Approved Housing Bodies Regulatory Authority raising issues with governance, financial and property and asset management standards at Circle. Today I am pleased we have an opportunity to again consider this and other related matters with representatives of Circle Voluntary Housing Association. We are joined by Mr. John O’Connor, chairperson; Mr. John Hannigan, chief executive; and Ms Liz Clarke, director of governance and compliance.
Before we start, I wish to explain some limitations to parliamentary privilege and the practice of the Houses as regards reference witnesses may make to one another in evidence. Evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected pursuant to both the Constitution and Statute by absolute privilege. I remind witnesses of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity they will be directed to discontinue their remarks, and it is imperative that they comply with any such direction. The opening statement has been circulated to members. Is it agreed that we publish it on the committee website? Agreed.
I ask Mr. O’Connor to read his opening statement and to keep it to three minutes, if possible, in order to give members the opportunity to ask questions.
Mr. John O'Connor:
I thank the Cathaoirleach and members of the committee for the opportunity to have this discussion. It is a very important discussion regarding Circle Voluntary Housing Association. Circle Voluntary Housing Association has issues to address. We are addressing them and we must rectify them. We fully accept that.
We accept the Approved Housing Bodies Regulatory Authority’s assessment and finding and we thank it for that work. We fell short in matters relating to governance, financial oversight and capacity as the organisation grew. It is our responsibility to address those issues. It is important to note that throughout this period, Circle remains solvent and continues to provide services and supports to our tenants.
Their safety and well-being are our main priorities. We have an action implementation plan in place that we agreed with the Approved Housing Bodies Regulatory Authority, AHBRA. We are going about implementing that plan in terms of addressing the issues we need to fix. As part of that, we have a working group of the board that meets on a weekly basis to check that we are progressing against that action plan.
We have also made a number of changes to Circle Voluntary Housing Association. Three new board members have been recruited, including me. I commenced my term as chair on 1 June. We have started restructuring our arrangements in terms of how we assess our risk and how we carry out our audit. We will then be looking at the overall finances of the organisation. We implemented some initial measures to resolve any short-term liquidity issues. In that context, we undertook some refinancing to ensure that we are in a proper place now from a cash flow and liquidity point of view. We continue to work to ensure that we stabilise the organisation. Part of that was exiting out of some of the more difficult construction projects in which we are involved. There were two particular projects that caused us some significant issues. Our goal at this stage is not just to achieve compliance but to build a stronger organisation that is more resilient and has better capacity so that we can continue to deliver homes and deliver the services.
I thank the committee again for the invitation to address it. We are open to questions and will answer them as openly and constructively as possible.
Micheál Carrigy (Longford-Westmeath, Fine Gael)
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I thank Mr. O'Connor very much. I now invite members to ask questions. We just have two members at the moment. I do not know how many are going to come in. We only received apologies from one member. We have a half session, so we might limit it to five minutes and then go around again if we have the numbers. I ask the witnesses to keep their answers specific and short if possible. I call Deputy Ó Broin.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I thank the witnesses very much for attending. I acknowledge that it is very positive that they accepted the committee's invitation straight off. That is a welcome development. Equally, I acknowledge the fact that the challenges within Circle were identified by the approved housing bodies regulator and the Housing Finance Agency. They stepped in very quickly. From what I can see, there has been no resistance from Circle - the executive or the board - in the context of remedying those problems. That is very positive.
That said, the role of this committee is to try to understand as much of what actually went wrong as possible. It is not about pointing fingers or apportioning blame. It is to understand the challenges, particularly of a medium-sized AHB, in order that those challenges are not replicated in Circle or other organisations and that any other policy changes which may be required are identified and any necessary regulatory changes implemented. I say that because a great deal of pressure is being put on the medium-sized AHB sector to grow. I acknowledge that. The more frank the witnesses are with their answers, the better we will be able to understand the challenges involved in order to ensure that they are designed out of the system into the future.
In the short time available, I want to put my understanding of the challenges on the table. The witnesses might then confirm some of the details. It seems that Circle, in a desire to deliver more homes, overextended itself. It took on too much risk, particularly with two sites it had acquired to build its own developments. The assessment of the level of exposure relating to that risk was probably not sufficient, at either executive and or board level. As a consequence, and as Mr. O'Connor outlined, there were liquidity challenges. These did not just impact on the two vacant development sites to which I refer put also on turnkey developments. It was at the point at which the regulator spotted those that the plan of action Mr. O'Connor outlined was put in place. Perhaps he will indicate the scale of that exposure, the challenges with the two sites in question and why the four turnkey developments had to be transferred to other entities. Can he state the total number of units and their value, including in terms of the refinancing? We need to have a sense of the scale of what is involved.
Will Mr. Hannigan, in as honest a way as he can, tell us what went wrong? Clearly, things went wrong. The witnesses have accepted that. They are remediating the damage. If we can work out what went wrong here, we can make sure that it does not happen somewhere else. It is not just the reputation of Circle that is affected; it is also that of the approved housing body sector. As the witnesses know, I am a very strong advocate for and supporter of their sector. I do not want its reputation damaged. We have an opportunity to fix some of the challenges to which I refer at this session and at the session to follow
Mr. John O'Connor:
I thank the Deputy for that question. I will start by giving him an overview of the issues. Mr. Hannigan can then reply to the second question on the precise numbers and on where we are in relation to developments.
There were probably two primary issues that Circle faced. One was on the financial side, which was our capacity. As the Deputy said, in terms of our drive to deliver more housing, we did overextend ourselves and maybe did not fully take account of the capacity of Circle and the level of risk we were in a position to take on. There are two construction projects in particular. One is in Santry and the other is located on Marrowbone Lane in Dublin city. We acquired both of those sites in order to undertake developments. They have both taken longer than that we had expected and funding that preliminary work has run us into certain financial difficulties.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Can Mr. O'Connor tell us the value of those sites and the year they were acquired, just to give us an outline of the period we are talking about?
Mr. John Hannigan:
In respect of the Santry site, 33 apartments, primarily for older persons, are being built. The initial cost of the site was €2.7 million. In respect of Marrowbone Lane, 35 apartments are being constructed. That site cost about €2 million. There have been works undertaken in respect to the Marrowbone Lane site in order to make it developable. In the region of another €2 million has been spent in that regard.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Does either site have planning permission currently?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Did Mr. O'Connor say 14?
Mr. John Hannigan:
Recognising the position we are in, the difficulties we continue to experience and the assessment we have had from the regulator, which was timely in some respects, the board took a decision that we would pause our developments at this point in time. One of the things we have been seeking to do is ensure that any development that was ongoing or due for delivery was novated to another approved housing body for it to be delivered. Therefore, we have been working with our colleagues in respect of 14 other sites. There are a total of 355 homes, which have all gone to new AHBs to develop.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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If Mr. Hannigan does not mind me asking, of those 355 homes, are they all turnkey developments or are any of those Circle's developments where it owns the land?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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They would have been at various stages of development when the pause button was hit.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Between August and when?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Is there a notional total development cost for those 14 sites? We do not need the details for each one.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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The two in question are Marrowbone Lane and Santry. They are separate.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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In some senses, that is where the problem started. The other 14 have been kind of infected by that.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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On the refinancing, to acquire a site in 2019 or 2020, there was obviously a long lead-in time. I presume construction has by means of through a capital advance leasing facility, CALF, Housing Finance Agency funding or private funding?
Mr. John O'Connor:
In terms of how they are to be funded, in the first instance, the intention was to fund them by means of a payment-and-availability agreement coupled with a CALF loan. In relation to both sites, Circle Voluntary Housing Association received what is called an advance CALF to provide funding to acquire the site, engage consultants to prepare planning applications and progress the sites. That would then be coupled with private funding. In terms of funding the sites, there would be CALF funding and then there would be private finance from the Housing Finance Agency or an alternative funder. Does Mr. Hannigan want to add anything to that?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I am over time. I will pick that up on that in the next round.
Joe Cooney (Clare, Fine Gael)
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I thank the witnesses for their opening statement. I wish Mr. O'Connor well in his new role. I know he will be successful going forward. The focus now is on more than achieving compliance, it is on embedding stronger governance, better financial management, more effective asset management and better organisation leadership. Mr. O'Connor says he wants a stronger organisation going forward, which is good to hear. Can he elaborate on how he is going to achieve that?
Mr. John O'Connor:
In terms of strengthening the governance, before I joined the board of Circle, it was decided that additional skills were needed on the board. The board engaged external advisers to identify those skills. Three new board members with specific experience in the housing sector were recruited, namely me and two others. I was appointed as chair at the start of June. The first part of the process involved strengthening the board. We will be carrying out a further assessment of the capacity and skills of the board and identifying additional board or committee members in order to make sure we that have people with the necessary skills. In terms of risk and appreciating risk, for example, we may need to get more skills in. Something that applies to Circle and that may also apply to other housing bodies is getting the balance right between the board, in the context of its role, and the executive. The board of directors is ultimately responsible for the organisation. It is about ensuring that we embed that at board level and that the decisions and responsibility stop at board level. We need to strengthen the board. In terms of the executive, we are carrying out an assessment of the skills and capacity that are there. We need to ensure in the first instance that we get the leadership and necessary skills that are required at board and executive level. That is position regarding the area of governance.
On the second area, in relation to financial management, if we are getting involved in, say, another construction project or other developments, there is a need to assess the impact on the organisation. Can we manage that if things do not go as smoothly as we would like? Have we got the capacity to take on the risk of those projects? I will ask Mr. Hannigan to speak about the financial side. It is about strengthening how we monitor our cash flow and the liquidity of the organisation, and strengthening reporting to the board so the board clearly understands the financial situation of the organisation at any stage.
Mr. John Hannigan:
One of the lessons we have learnt from this relates to earlier reporting that is more transparent and open in nature and that is more understandable for everybody on the board. There is also the need for those who may hold positions on the board to have financial skills. We also identified the need for quicker reporting. One of our difficulties has been reporting on time, every time. That is a concern which we have now rectified. It is also about understanding where the costs are across the organisation and ensuring that they are in the right place. The board has instigated changes, including a new finance and treasury committee. That is separate from what we had previously and is focusing specifically on the finances of the organisation. The committee meets monthly. We are receiving reports from the executive team on a weekly basis in respect of cash flow and cash balances.
Joe Cooney (Clare, Fine Gael)
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Mr. O'Connor used the word "balance". Does he feel that there is now a balance between all parties involved?
Mr. John O'Connor:
It is a work in progress. We have carried out some immediate actions to rectify getting a level of balance in terms of the board and the executive. However, it is going to take us probably nine months to actually work through everything. It is not a quick fix. We need to work through every area and totally embed proper governance in the organisation. We have to build up our financial strength as well and look at every part of the work that is carried out in terms of making efficiencies or seeing if there are things we need to rationalise. We have not fixed it yet. We are fixing things.
Joe Cooney (Clare, Fine Gael)
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Progress is being made. What is Mr. O'Connor's opinion of small local AHBs facing the same level of compliance as large ones like Circle?
Mr. John O'Connor:
In terms of smaller approved housing bodies, the level of oversight needed has to be proportionate to the size of the organisation. I would support smaller local organisations. It is important that they have a good board, good directors and a good executive in place. The level of oversight is about making sure that they have a budget in respect of the work they are carrying out and that they can deliver the services. Representatives from the Approved Housing Bodies Regulatory Authority are going to be before the committee later. It has to be proportionate in terms of oversight and the requirements involved. The same standards cannot be applied to smaller organisations. At the same time, it is important to ensure that small organisations are viable and can deliver the services.
Joe Cooney (Clare, Fine Gael)
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They must be viable, and they are important in rural areas.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I apologise for not being here at the beginning of the meeting but I have read the submission. To be honest I am not deeply acquainted with the background to this but I get the general thrust of it. Circle Voluntary Housing Association has been in existence since 2003. I am trying to understand this: why do the witnesses think Circle ended up being non-compliant? I have had a concern about the Government's policy of overrelying on the AHB sector to ramp up social housing. In fact, I am pretty sure I remember talking to AHBs a decade ago when they expressed concerns about their capacity to do what the Government was asking them to do. Maybe the witnesses do not want to say this because they would be putting up their hands up and saying they have some problems and the report is accurate in terms of non-compliance but is this the consequence of too big a burden being put on the AHBs? Am I anywhere even close to the truth?
Mr. John O'Connor:
It is important that local authorities and approved housing bodies are delivering social housing. We need more social housing. It is important to ensure we have an approved housing body sector that has the capacity and capability to deliver. This is in conjunction with local authorities and we have to get the balance right between AHBs and local authorities. The area of capacity and what an AHB can deliver has been getting a lot more attention in recent years and this is beneficial. In terms of setting up the approved housing body regulator, the sector looked for regulation. In fairness to the Department of housing it established the regulator and the regulator is now up and running. This is the second assessment of Circle undertaken by the regulator. Provided we resource the regulator properly it will assist in pushing the approved housing bodies to ensure they do not get into areas they should not.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Am I right in saying that what Mr. O'Connor is identifying is construction? Is it that approved housing bodies should not be constructing but buying? I noted a reference to moving from construction to acquisition.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Where are they? Is Mr. O'Connor allowed to say?
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Because Circle does not feel it has the capacity to do them.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Why is Circle's financial strength less than it needs to be? I want to understand this. Why is this the case?
Mr. John O'Connor:
As we were expanding in terms of delivering more housing, we did not ensure we had sufficient financial capacity to undertake it. There is a level of risk that any organisation can take and we did not have the capacity to undertake that risk. Purely coming down to Santry and Marrowbone Lane, in hindsight it would have been more prudent to have focused on one and completed it before we went onto a second project.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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It does seem to lend a little bit of weight to my concern, which is that there is too much of a burden being imposed. Mr. O'Connor is saying there needs to be a balance between the two. Certainly when I look at my area the vast majority of the new social housing being delivered in Dún Laoghaire is from AHBs. I ask why. I have no problem with AHBs being part of the mix but it seems they are being forced to do this or, for some reason, the Government policy seems to be to substitute AHBs for the local authorities. The balance should be the other way around. Those who should be delivering most of the projects, in my area and every area, should be the local authorities. Surely they are better equipped and have the capacity to take on the scale of what needs to be done, while the AHBs can play a part in it. Maybe Mr. O'Connor does not want to say that too much of a burden is being imposed on the AHBs.
Mr. John O'Connor:
I will ask Mr. Hannigan if he wants to add to this. In my view there has to be a balance between delivery by local authorities and delivery by approved housing bodies. Local authorities often have much more significant financial capacity. One of the advantages of approved housing bodies is that their business is in housing. They build up expertise in housing and they are important. I am not saying they do not have sufficient capacity but we need to get a balance between the amount delivered by approved housing bodies and by local authorities. If the capacity for a particular development is not there it should be undertaken by the local authority. Taking the Santry development, we are talking to another approved housing body and we are talking to Fingal County Council with regard to which is the most appropriate organisation to take on the project.
Mr. John Hannigan:
I agree with Mr. O'Connor that a balance is required. It has been recognised that the volume of social and affordable housing required for the State, if we can do affordable, is so significant that one sector cannot deliver it on its own. There should be balance between the two. The approved housing body strategy forum that reported recently demonstrates that the mix should include others, such as the LDA and the private sector in some respects. There is a mix required to get to the levels we need but Mr. O'Connor is right that it is about ensuring the capacity is built up in the right places at the right time to be able to deliver these things. Unfortunately, we did not get to the right position in order to be able to continue. We intend at some point to return to it but it will be at a point when we have built the capacity and reserve to be able to do so.
Aubrey McCarthy (Independent)
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I thank the witnesses for being here. When I read about Circle in the newspaper my heart went out to it. To disclose a conflict of interest, I am involved in an approved housing body. I know they try to solve all of the problems of the world. When they are given new opportunities they look really good so they expand, and the next minute they realise the potential is to overexpand. Wearing my own hat I have seen it first hand and thank God it has not happened and we have not overexpanded. On what date did Circle realise it had a problem with corporate governance?
Aubrey McCarthy (Independent)
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When did the amber light started flashing? Was it minuted? When was it first recorded?
Mr. John Hannigan:
I thank Senator McCarthy for the question. I recognise the great work he does with Tiglin and the other organisations he is involved in. The board has been dealing with, looking at and considering a number of issues over quite a period of time. Over the past couple of years we have been developing plans and processes to enable us to build greater capacity to deliver the homes we are looking at.
As one of the Deputies has already pointed out, the two construction projects go back quite a bit, to 2019 and 2020. However, it is only in the last couple of years that, because of the level of development we have been doing from a forward purchase perspective, we started to see the concerning growing reliance on an overdraft, which was one the critical things, although it was being cleared on a regular basis.
Aubrey McCarthy (Independent)
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The expansion was financially based on an overdraft.
Mr. John Hannigan:
Yes, it was in the short term. It went up and down. We would be waiting for funds to come in, which we would then use to pay off the overdraft. We got extended a little bit in that regard. The board has been looking at possible ways to deal with that issue over the last couple of years. About 18 months ago, we were in discussions with the Housing Finance Agency in respect of how we were dealing with that. That was being considered under a normal assessment process. These questions were also being discussed and looked at under our normal assessment process with the Approved Housing Body Regulatory Authority. It is in that period-----
Aubrey McCarthy (Independent)
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That was 18 months ago.
Aubrey McCarthy (Independent)
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Have there been any expansions in the six months? Have there been any expansions since the organisation realised it had a problem?
Aubrey McCarthy (Independent)
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How many were ceased?
Aubrey McCarthy (Independent)
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Has somebody taken up that flag?
Aubrey McCarthy (Independent)
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Has the delivery of those 350 new homes been delayed?
Aubrey McCarthy (Independent)
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Circle Voluntary Housing Association is in talks to transfer the projects at Santry and Marrowbone Lane to other AHBs. How many units are there at each site?
Aubrey McCarthy (Independent)
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I assume the units at Marrowbone Lane are apartments.
Aubrey McCarthy (Independent)
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How many agreed transactions has the organisation had to withdraw from?
Aubrey McCarthy (Independent)
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It looks like Circle not only overexpanded but that the overexpansion was fairly extreme. My heart goes out to Ms Clarke. That is why I am asking this question. We were doing an expansion recently. It was meant to be €1 million, which was not an issue, but it came in at €4.5 million. I asked myself where the heck it went wrong. We got architects and everybody else around a table but it was somehow lost in translation so we had to pull the project. I therefore know exactly what it is like. How does Circle stop this from happening again? If it goes over on one project, that is fine, but if you go over on 14, somebody was not keeping their eye on the ball. How do we make sure that does not happen again?
Ms Liz Clarke:
Stepping back from those 14 was a board decision. In response to AHBRA's assessment, we have developed an action and implementation plan. We have been consulting AHBRA in relation to that over the past number of months. That plan clearly sets out the key deliverables and what we need to do in relation to governance, finance, property and assessment management, and so on over the next nine months.
Aubrey McCarthy (Independent)
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Is Ms Clarke confident that they will all be delivered?
Ms Liz Clarke:
We are confident. It is overseen by an implementation group. We report directly to the board on that. We have ensured the capacity is there to deliver that plan. We are very confident that we will deliver over the next nine months. The plan is about ensuring something like this does not happen again. It is not just about the actions we are taking right now. It is also very much about how we do our work, our processes and embedding those changes throughout the organisation.
Aubrey McCarthy (Independent)
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I know people who live in housing provided by Circle. What it does is fantastic. How quickly the saviours can become the bad boys because of bad governance. It is a case of making sure every i is dotted and every t is crossed.
Micheál Carrigy (Longford-Westmeath, Fine Gael)
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I will come in myself and then let Deputy Séamus McGrath in. Mr. O'Connor comes with a lot of experience. We have met before through the Housing Commission and the Housing Agency. He has a lot experience coming into this role. Something has gone majorly wrong if 14 projects have had to be pulled back or sent to other AHBs. Where did it slip? How did that number of deals in different locations, involving a total of 300-odd houses, end up in trouble at the one time? What was the root cause? That is my first question. What was the root cause of so many projects being approved at the one time? It shows very poor diligence on behalf of the people who made the decisions.
Micheál Carrigy (Longford-Westmeath, Fine Gael)
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Somebody with financial experience should know what capacity is needed, however. Such a person should be able to plan ahead within certain gaps. That did not happen.
Mr. John O'Connor:
We did not do it adequately. We will be considering the lessons learned as we resolve issues but one of the big lessons has been that you need the financial capacity to undertake any project. Even if the project itself is totally viable, you need capacity to deal with legal fees associated with those projects and the initial costs of getting them up and running. Once they are up and running, they are viable, but you have to get them up and running. It is really very simple on the financial side. The use of an overdraft should have been a big indicator. We have resolved the overdraft situation. We have refinanced a number of the projects so that we have a significant buffer of over €2 million in our accounts. Our intention is now to maintain that financial capacity and pure cash in our accounts. When considering taking on anything, we are going to look at its implications for our cash flow before entering into it.
We did take action. The board and the executive took action, negotiating with other approved housing bodies to take on the projects. They also negotiated with the local authorities involved. It was important for the local authorities to support it. We also engaged with the Department of housing. We needed the Department's agreement to transfer payment and availability agreements under the capital advance leasing facility, CALF, to another approved housing body. It did work in that the Department, local authorities and other approved housing bodies assisted and supported us so that housing delivery could continue.
Mr. John Hannigan:
On a point of clarification that might be helpful, the board decided to stop and derisk rather than deciding that all of these projects were in trouble. Some of these projects were not to be delivered until 2027 or 2028. Rather than leaving uncertainty for the developer, we negotiated with the developer and other approved housing bodies to transfer the projects. There were not 14 projects in trouble. We took a prudent approach to avoid any further risk in the organisation until we had sorted out these plans and were delivering on them.
Micheál Carrigy (Longford-Westmeath, Fine Gael)
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I accept that. I compliment Circle on the fact that all of these projects are going ahead.
However, some of these decisions should have not been made in the first place putting the organisation at risk. That is what I am saying. Corporate financial governance was not there. Can Mr. O'Connor say to us that corporate governance is there now and the structures, from a corporate governance point of view, will be there going forward? Mr. O'Connor has probably answered that question. Will these decisions be put through a stronger stress test going forward?
Mr. John O'Connor:
Yes. We have made some immediate fixes on the governance side and on the financial side. However, everything is not fully resolved. We need to work over the next number of months to strengthen our systems to ensure this does not happen again. That will be applicable on the financial side before, exactly as the Cathaoirleach said, we enter into any commitment. It is a question of what the impact is on the organisation and whether we have got the capacity to do that. That is something we need to totally embed in the organisation.
Micheál Carrigy (Longford-Westmeath, Fine Gael)
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All right. I thank Mr. O'Connor.
Séamus McGrath (Cork South-Central, Fianna Fail)
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I thank the witnesses for being here. Apologies, I was late but I was speaking in the Chamber. I apologise if I repeat some of what has been said. Catching some of the discussion there, the question I would start of with is: when exactly would Mr. O'Connor identify that things started to take a turn for the worst in terms of Circle Voluntary Housing Association's regulatory compliance? How far back would that extend to?
Séamus McGrath (Cork South-Central, Fianna Fail)
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I refer not to when mistakes were discovered but to when mistakes in terms of its governance, management and oversight procedures began to be made.
Mr. John Hannigan:
I would suggest it goes back probably a couple of years. At the very beginning, the two construction sites mentioned were purchased in 2019 and 2020 but it was only from approximately 2024 that we started to realise that the cost and development requirements around those and the capacity to do that was being limited. We were using drafts for some of the short-term construction costs that were required on other sites to complete them but the board was aware that we were trying to work through that and it was working on a number of assumptions and options to improve the financial situation. It became exacerbated. A lot of them went on longer than anticipated. Then we started conversations with our funder, the Housing Finance Agency, HFA, but also with the regulator only in the last six months or so. With the HFA, it was through our normal assessment processes, in respect of those particular schemes but also where we were from a financial perspective.
Séamus McGrath (Cork South-Central, Fianna Fail)
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The regulatory body carried out an assessment in 2024. At that time, as I understand it, it found the Circle Voluntary Housing Association to be compliant with improvement. It was not so bad, in terms of a health check, at that point but things obviously took a turn for the worst as it began to investigate further and to realise there were unsustainable elements there. Realistically, it is only in the past two years or so we are talking about that things took a major turn for the worse.
Séamus McGrath (Cork South-Central, Fianna Fail)
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I am sure other members have asked this question but exactly how many housing units had commenced and were ultimately not followed through by Circle Voluntary Housing Association, as a voluntary body?
Mr. John Hannigan:
In respect of ourselves delivering the homes, at this point there are 14 projects delivering 355 homes plus two construction projects delivering 68. What we can say is that all of the 14 sites that were delivering the 355 homes have new places to go to. New approved housing bodies are taking them on. They will be delivered more or less on time. Some of them are not due until 2027 and 2028, so there is plenty of time in respect of those. They were forward purchase contracts, so there is no payment until then.
Séamus McGrath (Cork South-Central, Fianna Fail)
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That is 423 or so, is it?
Séamus McGrath (Cork South-Central, Fianna Fail)
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Obviously, there were delays in the delivery of those as a result of the issues that arose with Circle.
Séamus McGrath (Cork South-Central, Fianna Fail)
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So Circle was able to transfer those quite quickly.
Mr. John Hannigan:
Yes, absolutely. I have to compliment both our colleagues in the approved housing bodies but also in the Department of housing and the local authorities, in terms of the constructive and open dialogue that we have been having with them to enable that to occur quickly.
Some of the projects had not even started, as they were not due for delivery until 2027 and 2028, but the developers needed some level of security and certainty around what was happening. That is why the decision on some of those projects was taken to move them to other approved housing bodies.
Séamus McGrath (Cork South-Central, Fianna Fail)
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It sounds as though that was all done with extraordinary speed if it did not cost anything in terms of delay.
Séamus McGrath (Cork South-Central, Fianna Fail)
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I am just trying to understand. Circle Voluntary Housing Association, obviously, as a organisation, had involvement in those 14 projects and would have expended resources on them. Those resources are effectively written off, if you like. What is the value of the resources that Circle Voluntary Housing Association would have expended as an organisation on the projects that it ultimately had to transfer? I seek a ballpark figure.
Mr. John O'Connor:
The resources expended would have been internal staff resources. Other costs on contractual agreements, etc., would be taken on by the approved housing body that is taking on the project but we would have had a number of staff negotiating them. The costs would be staff costs in relation to them.
I should say there are a number of projects that Circle continues to deliver. Mr. Hannigan will correct me if I am wrong. Sixty-six homes have been delivered and some are completing at the moment, and there are another 19 to complete. These are projects that have funding through local authorities and funding from the Housing Finance Agency. We are completing projects. It was ones that we had not got full certainty on that we moved.
Séamus McGrath (Cork South-Central, Fianna Fail)
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Will Mr. O'Connor quantify the cost to the organisation?
Séamus McGrath (Cork South-Central, Fianna Fail)
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Is there any provision in Circle's accounts in terms of written-off values or anything like that?
Mr. John Hannigan:
The 2025 accounts have just been completed and we issued them as a submission to the committee. There were not any in that. In 2026, there may be once we get to the end of the process but we are still in the process. They are not all transferred. We have not got finalisation on everything, of course.
Séamus McGrath (Cork South-Central, Fianna Fail)
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It seems a bit extraordinary that there is not a quantifiable loss to the organisation as a result of the issues it faced.
Mr. John O'Connor:
In terms of the projects that have been transferred, there are development agreements where we were effectively acquiring developments so that we could transfer those in a more straightforward fashion. The two projects, which are Marrowbone Lane and Santry, would be the ones that have the greatest risk of potential costs to Circle. We would aim not to have those costs.
I am hesitant to give a figure but you could have a figure of €200,000 on a particular site loss if we do not get them properly transferred. I would rather be vague on that.
Séamus McGrath (Cork South-Central, Fianna Fail)
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I understand.
Séamus McGrath (Cork South-Central, Fianna Fail)
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Certain things are subject to discussion, etc.
Séamus McGrath (Cork South-Central, Fianna Fail)
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Finally, Mr. O'Connor mentioned contractual obligations. Are there any legal actions outstanding from any parties with Circle as a result of these issues?
Séamus McGrath (Cork South-Central, Fianna Fail)
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I thank Mr. O'Connor and Mr. Hannigan.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I have a copy of specific questions. Obviously, we have talked about governance. Obviously, this is an executive but Mr. Hannigan is the CEO and, therefore, the engine of this organisation. Does Mr. Hannigan accept responsibility for the scale of the high risk that Circle ended up with over the past number of years?
Does Mr. Hannigan regret the fact it has come to the situation where, following the intervention of the approved housing bodies regulator, all of these measures have had to be put in place? Does he accept and understand the potential reputational damage that, under his stewardship, both Circle and potentially the wider housing body sector has come under? I will come to Mr. O'Connor in a moment in terms of the other technical issues.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I accept that but this is an opportunity for us to clear the air, set the decks straight and fix all of the problems as the witnesses are saying. They are important questions and I am asking them from a genuine place. I am sure Mr. Hannigan appreciates that.
Micheál Carrigy (Longford-Westmeath, Fine Gael)
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It is a fair question from the Deputy to ask, so I ask Mr. Hannigan to answer.
Mr. John Hannigan:
First of all, yes, all of this has happened under my leadership of the organisation. I am the CEO. I do take full responsibility for where we are at, from the perspective of the regulatory outcomes but also the actions we are having to undertake. I also understand and accept that the potential damage this could do to the sector is something I would have wanted to avoid, given the fact I have been in the sector for quite a period of time and I promote the sector at every opportunity I can. Do I regret it? I do; 100%. Do I believe we have a plan in place that is now going to help the organisation grow stronger as a result of what we are doing? I do. I will bring all the experience and commitment I have always demonstrated to the sector to ensure that gets delivered for as long as I am with Circle. I would not for one second make any assumptions in respect of what the future looks like and how we might get there. However, my commitment to the sector and to Circle is unwavering, as it has been for the years I have been with the association.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I thank Mr. Hannigan for the answer. I have a couple of small but very important questions to give us some information for the next session. Of course, a follow-on question is: if there had not been an approved housing body regulator at what point would he have raised the alarm either with the Department or elsewhere that the level of risk that was being carried was too great? It is important. While I acknowledge there has been no resistance whatsoever from the board or the executive to fixing this, it is all on foot of an AHBRA inspection. If there had not been an approved housing body regulator in place, was there a plan in place for a point at which a hand would have been raised to ask for some external assistance?
Mr. John Hannigan:
I can confirm that the board had been working on plans to enable us to grow the strength of the organisation and to overcome some of the difficulties we were experiencing. Had those plans not come to fruition, then we would have definitely been putting our hands up to others to come to talk to us about what we could do to support the organisation going forward. I have to compliment the board, if I could at this point, in respect of its diligence in looking at some of these things over the past 18 months in particular, and trying to work through the plans of getting to a stronger place.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I have one final small technical question so we have a clear understanding of this. The issue is the association buys two sites, gets advanced CALF funding for the acquisition and for about €2 million worth of works. One assumes that involves the planning and site servicing or enabling works. At some point, it has to start dipping into the overdraft to cover those costs. That is essentially the cash flow problem we have. However, I can be corrected if I am wrong. If that is the case, and then I understand that more clearly, will the witnesses talk to me about the funding? Was there HFA or private finance for the development costs? Where was that at? Will they confirm to the committee that the association was also in the process of transferring those two development sites to other housing bodies to build out and can they share details of that? Does the association have any other undeveloped sites within its portfolio and what is the plan for those? This is obviously a very different scenario from that of the Peter McVerry Trust but one of the big challenges there was that it was using capital expenditure to fill current expenditure gaps. That is not the case here but I would like to give the witnesses the opportunity to confirm that Circle was not using current expenditure elsewhere in the organisation to fill that development gap. It was just the overdraft. That was where the cash flow problem was.
Micheál Carrigy (Longford-Westmeath, Fine Gael)
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I ask the witnesses to keep those answers tight if they could.
Mr. John O'Connor:
I will get Mr. Hannigan to answer most of those but to respond quickly, external finance was not in place for either Santry and Marrowbone Lane with the Housing Finance Agency or any other organisation. That is a flag in itself. I will ask Mr. Hannigan respond briefly with the detailed answers to those questions.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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This detail is also important for our questions for the next session. It is on the technical stuff.
Micheál Carrigy (Longford-Westmeath, Fine Gael)
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I know that but I ask the witnesses to give the shortened version rather than the longer version.
Mr. John Hannigan:
I think I can give relatively short answers to two of the questions. I will go with the last one if the Deputy does not mind because it is probably the most important one. I can confirm completely, and our financial statements also confirm completely, that we have not been dipping into our revenue income in order to pay for the capital stuff, or vice versa. They have been kept separate. Unfortunately, the overdraft was being utilised purely, in the majority of cases, on a short-term basis for capital projects that we were waiting for income to come through or had agreements for. One of the things we can say definitely is that there was no revenue support through the capital process. That is the first thing. In respect of the other question, do we have any other undeveloped sites within our portfolio? No, we do not. Will the Deputy give me a brief on the first part of that question?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Yes, and it relates to Mr. Hannigan's answer there. Obviously, the association has an overdraft. It is drawing down on that for some projects. How much of that overdraft was specifically related to the two development sites in Marrowbone Lane and Santry? It seems from what Mr. O'Connor was saying that the association's cash flow problem was that it was dipping into its overdraft for two development sites for which it did actually have development funding. It had the purchasing funding through advanced CALF. Is that correct?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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How much was the overdraft at the point of the AHBRA review?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Was all of that on those two sites or was some of it on-----
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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However, a large portion of it was on the two.
Séamus McGrath (Cork South-Central, Fianna Fail)
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I know we are caught for time. I will make one point. We have seen issues with some of the approved housing bodies obviously but what strikes me is that we are in a buoyant and rising market where sites and properties are increasing in value. We are not in a recession. This is not a property crash. It makes me wonder where we would be in terms of the approved housing bodies if there was one. The point I am making is that Circle ran into difficulties at a time when it owned assets that were increasing in value in terms of sites and so on. The macroeconomic picture was positive in terms of the activity the association was undertaking with the sites and so on. Do the witnesses understand the point I am making? The context was positive. Circle had assets. They were increasing in value. It was the complete opposite of what we saw in 2008 but, yet, as an organisation, it fell into significant difficulty. I will give the witnesses an opportunity to respond to that point.
Mr. John O'Connor:
The Deputy is correct. Going back to those two specific sites in Santry and Marrowbone Lane, where we had acquired them, if we were in a negative market we would have a more serious issue in terms of the values of those two sites. The Deputy is correct in that regard. The other area was we were expending finance in getting the infrastructure on those sites and working towards planning permission. If those sites were not viable now because of changed economic circumstances they could have a significant impact on the organisation. It highlights again that where we are taking on a risk situation and expending money we have to ensure we have the capacity because if there was a downturn in values we would be-----
Séamus McGrath (Cork South-Central, Fianna Fail)
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That is the key point I am making. The stress testing of any project has to take into account economic context. The economic context was arguably positive in this case, yet, as an organisation, Circle ran into significant difficulties.
It was positive in this caseyet, as an organisation, Circle VHA ran into significant difficulties. In any future projects - this goes for any organisation - it has to take the economic context into account in terms of whether it is a regressive economy versus one that is growing. It is a point that needs to be made.
Mr. John O'Connor:
Yes. That is correct. That is one of the most immediate things that we have put in place in terms of any project we are considering now, namely, what are the financial implications of it, but we also stress test every project. We are stress testing nearly all aspects of our finances in terms of our cash flow into the future. That is something we have specifically put in place.
Séamus McGrath (Cork South-Central, Fianna Fail)
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I thank Mr. O'Connor.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I have a question when the Chair is done if he has a moment.
Micheál Carrigy (Longford-Westmeath, Fine Gael)
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Deputy Ó Broin can come in first and then I will finish.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Again, just to finish where I started, we have a number of what I would call medium-size approved housing bodies. A lot is being asked of the sector. I know there is a desire to deliver. Mr. Hannigan can respond first and then Mr. O'Connor. What are the learnings that we need to apply from this experience to the medium AHB sector to ensure that no other organisation, whether unintentionally or intentionally, ends up with the same level of risk burden? We are at a very important moment and if we learn from this then all of the medium-sized players will be much better placed to rise to that challenge. Given that Mr. Hannigan has dealt with this from the inside, what are the key learnings? Mr. O'Connor has come in from the outside but he has huge experience, focusing specifically on the medium-size AHBs – there are between four and seven or eight depending on how we calculate it – and if this session is to have any value it is to ensure that not only Circle VHA but other players are better supported and better equipped not to fall into these difficulties.
Mr. John Hannigan:
There are a number of critical lessons that we are learning from this process. One is that the financial capacity of the organisation probably needs to be even bigger than we had anticipated it would need to be. Our internal financial assessment processes needed to be stronger, particularly in respect of development projects. That is something that we need to bolster in terms of what we have been doing.
One of the things we can say has come out of all of this is that we can demonstrate clearly that there is an opportunity for the growth to occur but it does need to be controlled in a particular way. The funding streams are generous and should work for organisations but getting to the initial capacity level to enable that to happen is really important. That is a critical lesson.
One of the things that we have learnt and one of the things that we have done is we have ensured that our day-to-day business as usual is protected from any potential difficulty. One of the things we can demonstrate very clearly is that our services to our tenants continues to be at the highest level of quality that it can be and should be. That has not been impacted. That is because of the segregation of how we have done things, but it is important that it is maintained into the future if organisations are to continue to develop.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I thank Mr. Hannigan.
Mr. John O'Connor:
I will say maybe two things I have learned from Circle. One is on the governance side and is true for any organisation but if we take medium-size approved housing bodies, all problems stem from governance issues. We must get the balance right between the board - the directors - and the executive. The directors must understand their responsibilities for the organisation. It is their responsibility to properly oversee the organisation. They are accountable at the end of the day. That needs to be fully understood. We do not want the executive to be too strong relative to the board. The board has to make the critical decisions.
The second one, as Mr. Hannigan, mentioned, is the organisation's financial capacity and strength, not just for construction projects but for any development agreements it is entering into. Any project can go wrong. What if there is an impact on the organisation and does it have the capacity to deal with it? Those are the two things, starting with governance. Governance must be got right.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I thank Mr. O'Connor.
Micheál Carrigy (Longford-Westmeath, Fine Gael)
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I will ask a couple of questions before we finish. What has been the outlay so far on the two sites the organisation is potentially transferring?
In response to Deputy Ó Broin's question it was refreshing to hear Mr. O'Connor come out and say it as it is. Sometimes when people are in a committee meeting they try to hide behind things but he said it straight out.
In terms of timelines, had the board been looking at this issue and documenting it in its minutes ahead of AHBRA coming in? Was this issue being discussed prior to AHBRA coming in?
Micheál Carrigy (Longford-Westmeath, Fine Gael)
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Was this being discussed by the board? Is it documented within the minutes of the board that this issue was being discussed ahead of AHBRA coming in?
Mr. John Hannigan:
Yes, I can say that on different occasions it has been part of the board's discussions around plans in order to be able to improve our liquidity perspective and to see how we could look at these two sites in terms of their involvement and what options were available to us. So, yes, there would have been - ahead of the AHBRA. In fairness, it was prompted by people like those in the HFA, which we were in discussions with as well. That went back probably 18 months or so. From that perspective there was some work but not to a point where we had definitive solutions.
Mr. John O'Connor:
I will make just one clarification. In terms of AHBRA, one of its issues was always demonstrating that we had the evidence and that we could demonstrate it. One of the things AHBRA would encourage us to do was to document in board meetings and demonstrate that there is a challenge. That is an issue that AHBRA has raised in terms of the assessment of Circle.
Micheál Carrigy (Longford-Westmeath, Fine Gael)
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All right. I thank the witnesses. We have now reached the conclusion of allocated time for our discussions. I thank the witnesses for coming in here. I am conscious that one other Deputy has come in.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I took Deputy Gould's spot for him.
Micheál Carrigy (Longford-Westmeath, Fine Gael)
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That is okay. I propose we briefly suspend. Is that agreed? Agreed. We will resume with witnesses from the Department of Housing, Local Government and Heritage, the Approved Housing Bodies Regulatory Authority and the Housing Finance Agency.
Micheál Carrigy (Longford-Westmeath, Fine Gael)
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We will now resume our discussion of Circle Voluntary Housing Association. I welcome representatives of the Department of Housing, Local Government and Heritage, the Approved Housing Bodies Regulatory Authority, AHBRA, and the Housing Finance Agency. From the Department, we are joined by Ms Caroline Timmons, assistant secretary; Mr. Roger Harrington, principal officer; and Mr. Vincent Colgan, principal officer. From the AHBRA, we are joined by Mr. Fergal O'Leary, chief executive, and Ms Leona McMahon, head of legal. From the Housing Finance Agency, we are joined by Ms Deirdre Collier, CEO; Mr. Andrew Keaveney, head of lending; and Dr. Heiko Krakowitzer, head of risk and compliance.
Before we start, I will explain some limitations to parliamentary privilege and the practice of the Houses as regards references witnesses may make to other persons in their evidence. The evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected pursuant to both the Constitution and statute by absolute privilege. Witnesses are again reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity, by name or in such a way as to make him, her or it identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction.
The opening statements have been circulated to members. Is it agreed that we publish them? Agreed. I am not going to take the introductory statements because we are tight on time and I want to give more time to members for questions. I will now invite members to ask questions. As per the previous session, we will have five-minute slots. Depending on which members come in, there will be a chance for follow-up questions.
Séamus McGrath (Cork South-Central, Fianna Fail)
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I thank the witnesses for being here. I will start with the AHBRA, if I may. The opening statement states that the AHBRA carried out a standards assessment in 2024 and at that point made a determination that Circle was compliant, with improvements. At what point did it move beyond that status to non-compliant? When did that occur?
Mr. Fergal O'Leary:
I thank the Deputy. Our first assessment report was published in My 2024. It was compliant, with improvements. However, we did identify areas requiring improvement, specifically around governance, oversight of growth, risk management and monthly cashflow reporting to the board. Circle did a lot of things very well and that was why it got the compliant, with improvements, recommendation.
What we do after that is through our annual monitoring form, which 455 approved housing bodies, AHBs, get, we analyse the information that is coming back from AHBs. For large AHBs, quite a bit of financial information is required to be submitted to us. We analysed it over the early months of 2025 and started to ask questions of Circle in May of that year. We got answers back and felt at that stage that we would not wait another year before assessing it again. We started that assessment last August and over the course of the next number of months, we carefully tested its governance arrangements, financial resilience, ability to grow the organisation through turnkey and development, attitude to risk and stress testing, and ultimately found that it was falling short in those areas. We published a draft assessment and Circle then provided us with a detailed plan for how it would address the deficiencies that were found. I will not go into those for now. The committee heard a lot about that from the previous speakers.
What we are doing now is to oversee the implementation of that plan. We have very regular meetings with the representatives of Circle. Over the next several months, they will verify that the improvements are not just in place but that the organisation is living those improvements, which include improved governance, reporting and capacity.
Séamus McGrath (Cork South-Central, Fianna Fail)
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May I clarify? In May 2024, the AHBRA determination was compliant, with improvements.
Séamus McGrath (Cork South-Central, Fianna Fail)
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When would it have come to the view that it was non-compliant?
Séamus McGrath (Cork South-Central, Fianna Fail)
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That was in April 2026. Should that have happened sooner?
Séamus McGrath (Cork South-Central, Fianna Fail)
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Give us a sense of that. Are we talking about monthly or weekly?
Mr. Fergal O'Leary:
It was more frequent than monthly. We asked questions. There is an escalation that we can follow. If we found there were immediate issues affecting tenants or the financial stability of the organisation, in particular, was under immediate threat, we could have escalated that process and published an assessment outcome more quickly. However, we did not feel the need to do that. We followed the process and looked at Circle's response. That was where we landed with the non-compliant assessment. That is a serious finding, but Circle is working towards compliance.
Séamus McGrath (Cork South-Central, Fianna Fail)
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I appreciate the need to follow due process. Were there lessons to be learned from a regulatory point of view for the AHBRA as we look back over the past two years?
Mr. Fergal O'Leary:
There are lessons to be learned from every situation. In this instance, I think the AHBRA was on top of the issues that were happening within the organisation and was taking appropriate steps to ensure they were addressed. Even with hindsight, I would not say that we could have got there quicker on this assessment. From the information we were getting, if things were getting worse more quickly, we would have intervened more quickly. That did not need to happen in this case.
Séamus McGrath (Cork South-Central, Fianna Fail)
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I am caught for time so I will move on to the Housing Finance Agency, if I may. As I understand it, the agency is not in a position to speak to much relating directly to Circle. Is that correct?
Séamus McGrath (Cork South-Central, Fianna Fail)
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The opening statement outlined the role of the Housing Finance Agency, the scale of the lending it carries out and so on. What level of loan default, in general and not specific to this case, does the organisation face?
Ms Deirdre Collier:
As an organisation that has been in operation for over 40 years, we have had no loan defaults to date. Our financial statements for 2025 have been recently signed and there is no provision for loan losses. We make that assessment at least annually for our financial statements. There is no expectation of losses on our current loan book. We also assess individual borrowers each time that we carry out annual reviews.
Séamus McGrath (Cork South-Central, Fianna Fail)
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Not to turn it around, but if the agency has absolutely no defaults, the charge could be put that it is too cautious. What would Ms Collier say to that?
Ms Deirdre Collier:
I would not say we are too cautious. I think we are appropriately prudent on the basis that we do fund the vast majority of projects that come to us for approval.
We give guidance to our customers about what our appetite is. We assess each borrower individually and we would have a view as to what is appropriate for them in terms of the quantum or type of lending, whether that is a tenure type we would be willing to support and whether we feel it is appropriate for them to be supported with forward funding. Those are the kind of decisions we take every year.
Séamus McGrath (Cork South-Central, Fianna Fail)
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I thank Ms Collier. I am caught for time. I might get another chance.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I thank everybody for their presentations and presence here today. I want to start by acknowledging that there is a positive story in the session we are having here today. It shows our systems are kind of working, and that has to be acknowledged, notwithstanding the financial size of the challenges Circle got itself into. With the co-operation of Circle, the problems were identified and a plan has been put in place. We still do not know the timeline for the two development sites but the other 14 turnkeys will happen within the original timeframe. This is a positive. What this committee can usefully bring to this conversation is questions about what we can learn from this to further reduce the risk, particularly in the medium-size AHB sector, of getting into the same difficulty. That is the conversation my questions are directed towards.
Notwithstanding the fact it is the regulator's job to regulate and it has a very specific statutory function we were all supportive of when the legislation went through, there is a very long history to the two development sites in Cork in 2019 and 2020. There was advanced CALF funding for the acquisitions and for the planning. There was no development finance in place at all, neither from the Housing Finance Agency, HFA, nor from private finance, as per Circle's evidence. Was the Department concerned at any stage prior to the verdict of the Approved Housing Bodies Regulatory Authority, AHBRA? While the Department is obviously not the regulatory authority, it has visibility at an earlier stage and often has quite a detailed level of visibility. Could the Department have spotted some of these problems earlier? Could it have pushed Circle to come forward at an earlier stage? This is not a criticism of the Department. AHBRA should be the last flagging station, but could there have been red flags earlier?
Ms Caroline Timmons:
I agree with the Deputy that there are lessons to be learned here, but it is evidence that the regulatory system is working. We might be able to make improvements as a result of this but I absolutely concur that there is something valuable to be got from this. I am very happy to note that the houses that are going to be delivered on time will go forward. In terms of what we learned and when we learned it, the Department did know earlier than the AHBRA pronouncements in April. We knew at the end of 2025 because Circle told us. There are relationships separate to any regulatory relationships. The Department has a legislative policy and funding relationship with AHBs and through that relationship we get information about various projects as we go along.
In fairness to Circle, it has been transparent with us. It has come forward and given us the information. It has provided documentation to us at all times and come in to meet the Department at all levels in the Department. I am quite satisfied that it was open in sharing the information, so we were aware quite early in the process. I will hand over to my colleague Mr. Harrington, who is from the CALF section, to talk about the two specific development sites.
Mr. Roger Harrington:
We have regular meetings with all of the larger AHBs about their delivery pipelines and to flag the issues they are dealing with in relation to that. There are two other points I would like to make about our particular unit responding to the nature of delivery in the AHB sector.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I am going to stop Mr. Harrington because I am short of time and I want to stick to some specifics, but we can come back to that in the second round. Going to the regulator, obviously Circle have been very co-operative from the point at which the problems were identified and, as Ms Timmons has outlined, from an early point it has co-operated with the Department. If Circle had not been so co-operative, to what extent would the regulator's powers have allowed it to impose on Circle the agreement we are all very thankful has been agreed voluntarily? Are there certain powers we need to look at to ensure that if there was a more reluctant partner, they could not simply stonewall or get in the way?
Mr. Fergal O'Leary:
If we did not have the level of engagement that we did get and, more importantly, the level of assurance that engagement gave us, we could have found Circle to require a non-compliant statutory action, which would mean they would have to implement a compliance plan with us over a period of time, and it is an offence under the Act not to implement a compliance plan. We certainly had that. As the Deputy knows, we have also taken investigations in the past where we have had a lack of clarity over what is happening within an AHB. We had those options available to us.
It is outlined in the Department's statement that our legislation is being reviewed. AHBRA has made a submission to that review for the Department's consideration. We would like to be able to operate faster and more efficiently. As the Deputy said, in an area where we have a concern but the AHB is not co-operating with us, our processes at the moment can be quite lengthy. We could be a bit faster.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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What about appointing changes to the board where the organisation is not willing to do that?
Mr. Fergal O'Leary:
We do have that power to go to the High Court at the moment and to change directors. As the Deputy can imagine, that is a slow process. Housing regulators in other jurisdictions have the power to put in a manager, somebody who could go in quite quickly, so that there is not a total deterioration of the issue. Those are the types of things we would be interested in pursuing subject to all regulatory and policy considerations.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I have a question for both Ms Timmons and the regulator. The witnesses may have heard the discussion earlier when watching the meeting from another room. We have a medium-sized AHB sector. We are asking a lot from them and I am not objecting to that, as I think it is important. Clearly, however, capacity and governance were two challenges. What do the Department, the regulator and, in a general sense, the funder, although I acknowledge the co-operation between the Housing Finance Agency and the regulator, need to do differently to ensure another medium-sized AHB does not get into similar difficulties? How can we make sure we detect this stuff, resolve it or mitigate it earlier? I am asking specifically about that medium-sized sector because they are the ones from whom we are asking for an enormous amount of additional growth, and that is clearly where the risks are greater.
Ms Caroline Timmons:
There are a few things we can do. Part of that is going to be addressed in the review in terms of regulatory powers that will be in the legislation. There are also practical operational things the regulator and the Department can look at. The regulator can look at more targeting as we build the bank of information about AHBs every year. Obviously, the regulator is fairly new. As that goes forward, there will be more information that will lead us to where we need to look the most. For the Department, in terms of our funding units and our regulatory and governance procedures in how we monitor and engage across both the regulator, the HFA, the Housing Agency and local authorities, we can look at how we collectively monitor and improve governance. We can also work with the larger and medium-sized AHBs to show them what good governance looks like. The regulator has a role in that regard and we have a role in that regard, both to enforce what we want to see before they ever get the funding but also to continuously monitor whether they are reaching those standards.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Would that extend to consideration of what appropriate financial capacity is? Governance is very clearly a regulatory issue. Obviously, a lender is looking at that financial capacity. With a view to setting some kind of standards or thresholds, which might be too strong a word, how do we make sure at a departmental level that the organisation actually has the financial capacity to deal with the level of risk we are asking it to take on?
Ms Caroline Timmons:
I think the Deputy is right. There is a financial standard. We have four standards and one of the standards is financial because it is one of the key, obvious parts that we do need the AHBs to be compliant with. That is definitely one of the areas. Maybe it is about reviewing that standard and seeing whether there is something else we need to look at and also educating them about what that looks like and what is good financial governance in an organisation. It is also about making sure that when they are assessing the level of risk appetite they have on their boards, the boards are correctly assessing the information before them and coming to the right conclusion. Before they get into large construction projects, which are obviously very complicated, they should make sure they have the right resources in place at the operational levels of their organisation and the right review at board level when making investment decisions. There is a lot there.
Mr. Harrington wishes to come in.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I am over time but I will try to come back to it in the second round.
Séamus McGrath (Cork South-Central, Fianna Fail)
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I am sure Deputy Ó Broin will get back in again.
Joe Cooney (Clare, Fine Gael)
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I thank all the witnesses for coming in and for their opening statements. I will direct my questions to the Department of housing. Many small, voluntary-led approved housing bodies in rural counties like my county of Clare provide fantastic standards of housing for the communities in which they are rooted. They are concerned about losing that local connection, which none of us want to see happen if at all possible. How does the Department foresee small and local AHBs operating in the future? Is it Department policy to merge them with larger organisations like Circle? Is that the only viable and sustainable pathway for these small AHBs?
Ms Caroline Timmons:
Last November, we published an AHB sectoral forum report, which details our engagement with the sector across all levels. The report involved large, medium and small AHBs and focused on what the future looks like for them. The Department has recognised that small, local AHBs have huge value and provide an incredible service for their communities. They are doing a great job and we want them to continue to do so, particularly in the care and support area for older people and those living with a disability. They are crucial in that regard. However, we need them to be on a sustainable footing.
There is no doubt that AHBs are handling much more money than was the case previously. We need to ensure the governance is correct for their current size as well as the size they aspire to be. If they want to grow, we want them to grow in the right way. If they want to stay the same size, that is fine too. They will make their own choices in that regard. We want to enable all levels to grow if they wish to do so because we want more social housing, particularly for the care and support sector. We want this sector to thrive.
In that report, we outline that some AHBs may need to look at merging if that is the thing that keeps them sustainable. Some may not need to merge because they may not have any desire to grow. As long as they are being governed properly, we have no difficulty with that. If an AHB wishes to grow, however, it may be one of the avenues it needs to look at.
We are carrying out some projects in the Department to look at all of the measures that we recommended in that report, and one of those will focus on how we foster mergers where they are the appropriate method to keep an AHB alive. For example, an AHB may work with another AHB in the same sector or merge with a bigger one that will act as a parent AHB and help with governance compliance arrangements. I agree that governance compliance has become more complicated over the years, but that is out of necessity in order that the Government can be sure that money is being spent responsibly. I will bring in my colleague Mr. Colgan, who is working on one of those projects.
Mr. Vincent Colgan:
We heard loud and clear from the AHB sector that size is not the most important thing. There are small AHBs that are strong and vibrant. There is a future for those organisations as independent, autonomous AHBs. However, there are many small AHBs where the energy and local volunteerism that characterised their start-up are starting to wane. They are looking to transition their stock and staff safely, similar to the boards of credit unions and local community organisations. Where that energy has waned and AHBs are looking for a transition in an orderly way, we need to help them.
We do not envisage that the restructuring of the sector will result in a small number of very large AHBs. There is a place for healthy, vibrant, energetic and local AHBs. There are many structures available to support such AHBs. For example, there is a voluntary housing shared service, VHSS, model in Limerick, where 25 small AHBs have pooled resources to keep going as autonomous entities. There are many models we are looking at to support those entities to keep going.
Joe Cooney (Clare, Fine Gael)
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We know they are vital, particularly in rural areas.
Joe Cooney (Clare, Fine Gael)
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Given the level of compliance that is now required for small, local AHBs, of which we are all well aware, what are the witnesses’ thoughts about a county-wide shared services organisation? The independence of these local organisations would be retained, but the compliance work would be centralised. That would be important. What are the witnesses’ views in that regard?
Mr. Vincent Colgan:
We have backed the VHSS pilot scheme in Limerick for a number of years. Twenty-six AHBs avail of those services. They are thriving. Their compliance needs are looked after. We have supported that organisation with increased funding under the national housing plan funding model. As we are looking at a restructuring model for the whole sector, how we can take that model and replicate it across other areas of the country will be taken into consideration. The shared services model is working well and we can see it working beyond the Limerick area.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Is there any suggestion of wrongdoing by any individual in Circle?
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Is it that Circle overstretched itself? I am struggling to understand why this has happened. My gut feeling is that it is because some AHBs are being asked to do things that they just do not have the capacity to do. Therefore, they overstretch themselves. They end up in trouble because they are ambitious in the delivery of social housing. Is that a fair assessment of what is happening here? I am struggling to understand the lessons from all of this. No individual has done anything terribly wrong. Rather, the AHB simply overstretch themselves. Is that the case?
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Those are the projects in Marrowbone and Santry.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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It purchased sites that it was then unable to deliver. That is basically what happened.
Mr. Roger Harrington:
Yes, that is pretty much it. We introduced an AHB protocol in 2025 for new AHBs coming into the Department for capital assistance leasing funding, CALF. The protocol looks at their planning, leadership and governance. We meet their boards. We try to get an assessment of their organisational and technical capacity and determine whether the technical capacity is commensurate with the types of projects they are taking on. The particular issues that arose in Circle will not arise in future with the AHBs coming in looking for CALF.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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That is a brave statement. It is a welcome one, but it is brave.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Will the witnesses remind me of the number of AHBs? They number in the hundreds.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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There are 425 different organisations delivering social housing.
Ms Caroline Timmons:
There are only nine large AHBs. They deliver over 70% of all the housing. While the figure of 425 AHBs sounds like a lot, when it comes to the day-to-day operation of the Department, the regulatory authority and the HFA, only a relatively small number receive funding from the Department. It might be just over 20.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Has there been a shift in the balance? I am trying to understand the burden the AHB sector is trying to take on when we are having to dramatically ramp up – absolutely rightly - the delivery of social housing. There are 67,000 social housing units under AHBs and approximately 150,000 under the local authorities. AHBs are delivering about one third of social housing.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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They are delivering one half.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Sorry, yes. Has the amount they are being required to deliver proportionally increased over the past, say, ten years?
Ms Caroline Timmons:
It is not about the proportion but, rather, the overall number. The whole number we are expecting to deliver has risen dramatically over the last few years as the Government has increased its ambition to deliver more social and affordable housing. Last year, we delivered the most social housing ever in the State, with 9,000 social houses. Approximately one half of those homes were delivered by approved housing bodies. That is why they are a crucial part of the Government’s delivery plans. They are one of the four delivery partners we need in place in order to deliver on the ambition to get to-----
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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However, they then get in trouble because they are being overly ambitious in trying to deliver two sites.
Ms Caroline Timmons:
One of the things that we have found is that there is no level of ambition without some risk attached to it.
What we have done is try to put an architecture around that which protects us to the greatest degree possible. This is done by putting in a regulator, putting proper protocols around funding in place and managing and mitigating risk appropriately.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I cannot help feeling that there are all these organisations and replication of roles, with the Department trying to make sure they have this, that and the other in place rather than having a more streamlined system involving the local authorities taking on far more. I am not saying we should get rid of all the AHBs. I realise they do good work but I just wonder whether they are capable of dealing with the sort of burden being imposed on them. Is the Circle situation evidence of that?
Ms Caroline Timmons:
No, that is taking it too far. What this is evidence of is that we need to ensure our regulation meets the risk that exists. The AHBs have delivered for us over the past few years. They have been excellent in terms of the level of delivery and are a crucial part of the delivery plan going forward. In the main, for each one of the Circle issues we have had, we have had countless examples of excellent delivery by AHBs. The Deputy is not necessarily seeing these examples because the associated AHBs are not in trouble, but we see every day that they are delivering very well for us, with very high levels of governance and very good compliance with the regulatory standards. We need that level of compliance to grow over time as the risk associated with the funding-----
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Dare I say it, but that remains to be seen. Much of the housing is coming on stream only now. It has been delivered in the past few years. I have seen problems. Much of the social housing in my area is being delivered by AHBs. In fact, a lot more seems to have been delivered by AHBs than by local authorities, and I wonder about that balance. Maybe this is a question for the Department. How exactly is the balance decided? Who decides on it?
Ms Caroline Timmons:
After we published the housing plan in November, we asked the local authorities to prepare housing delivery action plans in collaboration with the AHBs and the LDA. What that does is provide a process to decide who is going to deliver which sites. Some sites will be appropriate for local authorities to deliver – indeed, we ask a lot of local authorities and are hugely ambitious for them – while others may be more appropriate for delivery by AHBs. The local authorities are putting this into the housing delivery action plans, which will be published by the end of the year. Therefore, the Deputy will be able to see exactly who is going to deliver what through the plans, which are being made at local authority level.
Mr. Roger Harrington:
May I come in here in respect of the Deputy's urban constituency? What we have seen in the past number of years from a social housing delivery perspective is the development of expertise by certain AHBs in the delivery of apartments, particularly in urban areas. The mix might be different in other local authority areas where there is no need in this regard. It can certainly vary from one local authority area to another, depending on what the needs are.
Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I thank the witnesses.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Maybe I will focus on the challenge and then ask questions. On the one hand, AHBs typically deliver 50% of the new-build social homes in a given year, exactly as Caroline said, and they are delivering the majority of the cost-rental homes compared with the LDA or local authorities. It is important for us to acknowledge that last year, for example, on the social housing side, only 25% of the new-build social homes were what I call direct-delivery homes, whereby the local authority or the AHB owns the site and carries out the development. Everything else is Part V or turnkey. The real challenge here is that developing your own site carries much greater risks. We are asking a set of AHBs that have not done a lot of this before to do more of it. I am not against that, and I also want the local authorities to do more, but the question is whether the AHBs are adequately equipped and supported to do that.
The first question I will put, to Mr. O'Leary, focuses on the middle tier because we really have only two large AHBs, or maybe two and a bit. We then have a cluster of general and specialist medium-sized players that typically have not done a lot of high-risk direct development, as I call it. Given the cultural and organisational change we need to see, how far along the road are we and how much further do we have to go? I am asking for a general observation. I am not asking Mr. O'Leary to pick out individual organisations.
I have a follow-up question, for Ms Collier. Again, it is a very general one. Given that she is assessing the risk profile, risk appetite and financial capacity, how well equipped does she believe the medium-tier sector is to take on a significant amount of direct delivery, as opposed to development agreements where those concerned are essentially acquiring turnkeys? Maybe we will deal with those two questions first.
Mr. Fergal O'Leary:
I agree with the Deputy's characterisation of the risk. It is our regulatory focus for the rest of 2026, in particular, to consider the AHBs that are growing quickly, and growing quickly through development for the first time.
We are working down through the list of AHBs as fast as we can, and we now have fairly perfect information from our annual monitoring to see exactly who is doing what and when. We are either assessing the organisations, if we feel they need an assessment, or carrying out lighter-touch regulatory engagement with them. That is our focus.
To get to the nub of the Deputy's question, we are trying, whenever we can, to impress a couple of things on those AHBs that are growing through development for the first time. First, governance must keep pace with growth. The ambition is terrific, but it has to be matched by the capability and capacity in the organisation. This relates to what happened with Circle. Second, the recommendations the regulator makes are important. Sometimes AHBs see them as suggestions. They are not; they are recommendations that we will come back to. Third, financial resilience is important. Across approximately 50 or 60 AHBs now, we consider cash flow, liquidity and stress testing. What I would like to see more of is the large AHBs showing their peers what good looks like. I am talking to the Housing Alliance in particular about that. We see what everybody is doing regarding their financials and stress testing. Some of it really is quite impressive, but others are a little bit further behind.
The final point, from a regulatory perspective, is that early engagement matters. For every week earlier that an AHB comes to us with a problem, it will save that AHB a week and save us a week trying to identify a problem from a list of 425. Problems do not have to be big problems.
Again, going back to what the AHBs are doing, if they are growing through development, they have a different type of risk that they need to understand. Also, their regulatory engagement needs to be better. Things go wrong with development, as we have seen with Circle. These things do not have to be the end of the world. Early understanding of the problems and engagement with us and the funders really helps.
Those are the types of messages I am trying to get out to that group in particular for the rest of this year and into next year.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Does Ms Collier have similar messages for the group? I appreciate that her position is a very different one.
Ms Deirdre Collier:
Absolutely, yes. I agree with everything Mr. O'Leary has said on capability and the importance of developing that.
On the question on who engages in the activity, we have three very large borrowers. The Deputy said two and a half, but we have three that we call very large. We also have another four borrowers to which we provide funding for development. Therefore, just seven borrowers out of our total of 29 are ones we believe have the capability.
I might let Mr. Keaveney talk about some of what we include in our assessments when looking at those particular AHBs, particularly with reference to forward funding. We call it "forward funding", but it is exactly as the Deputy said: funding of development.
Mr. Andrew Keaveney:
Yes. Before we lend to an AHB for development finance or forward funding, we carry out a whole-of-organisation review. We have a number of different credit-assessment frameworks for our borrowers. The vast majority of our borrowers are certified bodies. I refer to AHBs seeking to borrow in excess of €5 million but also to AHBs that might be seeking to access development finance or, indeed, cost-rental finance through us.
That whole-of-organisation assessment by us covers off their governance structure and their board structure. We look at their senior management team in terms of their capability, expertise and experience in the sector. We also look at their financial strength and financial resilience. In particular, we look there at their liquidity and their available cash to be able to withstand any unforeseen problems that might arise on a construction or a development project, which can and do happen from time to time. We also look then at their business operation model, income streams and portfolio mix. We do a separate assessment, aside from the actual application for finance, as to who the borrower is and what their capabilities and strengths are. That is not just a one-off review. It is an initial assessment to attain certified body status, but that then comes with an annual review whereby every year we do that whole-of-organisation review again. That annual review informs our appetite for that particular borrower in terms of the type of funding we provide for them and our credit appetite for the coming 12 months. It is something we keep under regular review, as well as our interactions throughout the year with the borrower and updates we get from their various projects. Keeping that close contact informs our decisions.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I have just one final question, with your indulgence, a Chathaoirligh, for Mr. Harrington. He said that since 2025 the Department has that new process in. That is obviously very welcome because it seems maybe one of the challenges here - and this is not a criticism - is that the advanced CALF approvals for the two sites, in the absence of the kinds of assessments that the Department is now doing and others are doing, is part of the learning. Let us not call it the problem. I would like to think that if a similar-sized AHB with a similar limited financial capacity came looking for advanced CALF funding for acquisition and planning and development costs today, there would be a more rigorous assessment because it has been six years for Marrowbone Lane and five years for the Santry site since that advanced CALF approval. Am I right in saying there would be a tougher assessment before such advanced CALF would be provided? That does seem to be one of the challenges in the chain. It is not the cause of the problem, but if the witnesses have a different view, they might let me know.
Mr. Roger Harrington:
No, I agree with the Deputy. There is a more rigorous whole-of-organisation interrogation of an AHB that comes forward looking for accelerated CALF at this particular point. It goes further than that, though. In late 2024 and early 2025, we commenced a CALF financial analysis project, and during 2025 we brought Indecon on board to look at the CALF financial model because that model is now being asked to do different things.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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For sure.
Mr. Roger Harrington:
As the Deputy is aware, the CALF financial model grew out of the post-2008 crash, leading into 2011. At that stage AHBs were, in the main, being supported in funding for social housing turnkeys. That is now changed and different so we need to re-examine the model to see if it is fit for purpose in terms of the type of development we are doing. There are three separate pieces of work under way in the Department. First, we are looking at CALF, along with Indecon, and there have been a series of meetings with AHBs. Second, we are looking at and updating CAS. Third, we are looking at the demarcation between CAS and CALF and revisiting that particular space in light-----
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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As regards that investigation of CALF, there is CALF for turnkey, CALF for fixed-price design and build and then the riskiest one, the one we are talking about, which is for actual development. I presume, depending on where in the chain that is, the level of risk assessment has to be greater for the third because that is where the risks are greater. Is that being actively looked at? It is very different fixing an agreed price for a turnkey and just buying at the end. Does the Department take in the risk with that advanced funding?
Séamus McGrath (Cork South-Central, Fianna Fail)
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If you could just answer that one, Mr. Harrington, we will wrap up this slot.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I apologise, Chair.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Surely if the Department is approving the initial funding, there has to be a risk assessment as to whether, in its view, if it is going to approve the funding, this AHB has the capacity on that project to deliver that level of risk or carry that level of risk.
Paula Butterly (Louth, Fine Gael)
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I apologise if my question is repetitive. I have heard snippets about governance and the risk assessment, but - and maybe the witnesses have covered this - as regards managing risk and corporate governance, particularly in relation to the medium-sized AHBs, is there also a piece in there whereby we can encourage them to embrace a little risk in order to accelerate their growth? We are going to want to accelerate our housing and reach housing targets. Is there a piece there to explore?
Ms Caroline Timmons:
Yes, there definitely is. It is something the Department is very interested in. All the organisations here would say maybe we have a hand or part in how we do that. As regards accelerating growth, first it has to be voluntary. The AHB has to want to be involved in that. Some of the medium-sized and smaller sized ones are happy where they are. Those that want to grow because of the ambition, in particular the ambition to provide more social housing, are involved in looking at what type they want to do. Then we consider what type they want to do and we work with them to make sure they are enabled to do that.
There is then a more structured forum. We produced the AHB sector forum report in November last year, in which we outlined how we talk to the sector about how it might grow and how we might do this together. We reached a vision for how the sector would grow together, and that vision then was underpinned by eight recommendations. The Department has a working group working on those recommendations. In the round, they look at how to safely scale up delivery, which is one of the recommendations, and how to sustainably see a future for the AHB sector in housing delivery in Ireland for the key sector it provides for, both at the medium and large levels and then where the smaller ones are involved, with the care and support specifically as well. That report was published and that work will be ongoing over a number of years. That is very much something we want to take forward. All the organisations the Deputy sees here are in some way involved in that work.
Aubrey McCarthy (Independent)
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I thank the witnesses for being here. I am sorry it is a busy day, which means members are running between different things. We had Circle in here just a while ago. I am involved in an approved housing body and I know that when you are trying to solve all the problems of the world and you have the opportunities, you are scared to say "No", but you can see when people take on too much. One thing that shocked me a bit was that Circle was over-extended on 14 projects. I did not realise that. Basically, Circle said that its governance failed to keep pace with the growth and it was working really well until somebody said, "Oh, we are over-extended here." When did AHBRA first become aware that there was an issue here?
Mr. Fergal O'Leary:
We assessed Circle and published an assessment outcome in May 2024. That came with recommendations and, as I explained earlier, they are really important for the AHB to keep an eye on as time goes on. We also send an information request to all registered AHBs every year. The large AHBs are required to submit fairly sophisticated financial information to us. That came back to us in the early months of 2025. We had questions about Circle's liquidity at that point-----
Aubrey McCarthy (Independent)
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Is that when Mr. O'Leary said there was significant non-compliance?
Mr. Fergal O'Leary:
No. There is a process we have to follow before we can reach that conclusion but, to give the Senator assurance, we were in contact with the AHB throughout the second half of 2025.
We then issued them the draft determination that was non-compliant in April of this year. They then have a right of reply and an opportunity. That is when they came to us with their plan for how they would be compliant. In as brief as I can, that is the timeline around what the interaction was.
Aubrey McCarthy (Independent)
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Were they voluntary disclosures?
Aubrey McCarthy (Independent)
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I apologise. I meant if the issues were voluntary disclosed or were they audited-----
Mr. Fergal O'Leary:
Everything was asked for under our powers. They were voluntarily disclosed. However, really importantly, all of the information and evidence that we were getting from the AHB was being tested against what had been said previously and against their peer group of AHBs to understand what way is this trending and how are they managing at a particular point in time. That is where we reach our assessment outcome based on that process.
Aubrey McCarthy (Independent)
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In my earlier exchange with Mr. Hannigan, Mr. O'Connor and Ms Clarke from the Circle Voluntary Housing Association, it was evident that what might have been done for €1 million is now taking a multiple of millions of euro. A lot of the boards have a vast experience but it is dated. I notice that when any building is being done - I do not what sort of calculator they use - but all bets are off.
I wish to ask the HFA questions. Did it have any governance concerns going back? Was requirement for refinancing needed when it became aware of the AHBRA's assessment?
Ms Deirdre Collier:
We indicated in our opening statement that we are not in a position to discuss the details of any individual borrower. We are covered by a number of different confidentiality requirements. We can talk about our processes, procedures and generalities but I cannot disclose details of any particular borrower.
Aubrey McCarthy (Independent)
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Is the taxpayer out of pocket in any way?
Ms Deirdre Collier:
Again, I cannot comment on any specific borrower. What I said at the start, which is possibly helpful, is that we have not had any defaults in more than 40 years of operating. We have not had any loan defaults. We also do not have any loan loss provisions in our accounts currently. We do not expect that any of our existing loans will not be repaid. I hope that is helpful.
Aubrey McCarthy (Independent)
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My next question is for Ms Timmons. Has any funding been withheld from the Department?
Ms Caroline Timmons:
There is no suggestion of funding being withheld. We have contractual arrangements that we will continue to comply with. What is happening is that it is no new funding until the compliance plan has been seen through. This is by agreement that the Circle Voluntary Housing Association will not apply for any new funding until we are very happy on both the capital assistance leasing funding, CALF, and cost rental equity loan, CREL, sides that the recommendations of the regulator and the compliance plans they have put in have been fully seen through. Earlier, the chair suggested that might be about nine months. We certainly would like to see it doing more social housing into the future. That would be a very valuable contribution that it can make. We want it to be in a good financial position to do so.
Aubrey McCarthy (Independent)
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Santry and Marrowbone Lane are the last two housing transfers that have to be dealt with but everything else seems to be on track. They have gone through the most awful situation but it seems to be righting itself. Is the Department happy going forward that the issues that were pointed out are being fixed?
Ms Caroline Timmons:
At the moment, it looks like the compliance plan is a good plan. It needs to be implemented going forward. What we will be watching for now is to make sure that everybody stays on track. All the organisations here will be monitoring that. If it does, we hope that things will work out fine. We need to keep an eye on it.
Rory Hearne (Dublin North-West, Social Democrats)
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I apologise for not being here earlier. I have a general question. I will not get into specifics because it might have been covered. Regarding future AHBs or potential, do the witnesses see much risk in the sector for other situations? I am not talking about the detail of it but, for example, situations whereby the funding models that are currently in operation, particularly around cost rental, that there could be challenges coming up in terms of the viability of AHBs and potential for financial viability. Ms Timmons mentioned that they have had not had the experience of loans being repaid. Essentially, the State is the guarantor of the loans to a certain extent, but this is in private. Do the witnesses have a concern that as the cost-rental model continues, which is quite expensive, that there might be exposure around risk or with the expansion that has happened with AHBs that there are situations coming down the track that we should be concerned about in relation to the financial viability of AHBs?
Ms Deirdre Collier:
I might ask Mr. Keaveney to talk about how we make those assessments. We do regular assessments of our borrowers and whether they have appetite for either development funding or cost rental. We do an extra vigorous process in checking those. I will let Mr. Keaveney talk briefly about that.
Mr. Andrew Keaveney:
Going back to the certified bodies, for AHBs that are looking to borrow in excess of €5 million from the HFA and for AHBs that might be looking at accessing construction finance from us, or indeed engaging in cost rental, we do a whole-of-organisation review and assessment for a certified body status. That review covers an assessment of its governance, management experience and depth, financial resilience, financial strength, liquidity, cash reserves and business operations. That is not just a stand-alone or one-off event. We do that every year with the AHB. We do the same thing as part of an annual review. The outcome of that annual review feeds into our appetite for further lending with that particular borrower for the coming 12 months, and indeed, what sort of tenure we would be happy to lend to. We communicate that to the borrower.
In relation to our credit assessment of an individual scheme for cost rental, we do extra due diligence and expect to see the feasibility coming from the borrower regarding the demand in the local area, the income profiles and the demographics of the particular area where the scheme is proposed for. We do our own stress testing as well in relation to what is being asked of us. We stress what would happen if costs increased over the life of the scheme. We stress for interest rate increases and general inflation to make sure that the cash flow and the proposed income stream from the development is strong enough and resilient enough to be able to sustain the borrowing over the term that it is required.
Rory Hearne (Dublin North-West, Social Democrats)
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Have schemes come forward to the HFA over the past six months or year that it has had to turn down applications due to the concerns around viability?
Ms Deirdre Collier:
It is probably worth saying that we lend to five borrowers for cost rental. We have had a number of other existing borrowers express interest in taking on cost rental and a number of them have either conducted or are in the process of conducting their own analysis and assessment of whether they believe that it is an appropriate model and tenure for them to engage in. What we have seen - and it has been very positive from our perspective - is that our borrowers are really thinking this through before they will look at engaging in taking on cost-rental housing.
Séamus McGrath (Cork South-Central, Fianna Fail)
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Is that okay, Deputy?
Rory Hearne (Dublin North-West, Social Democrats)
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Will the Department respond?
Ms Caroline Timmons:
I am happy to. Regarding looking at how the sector manages risk and how we assess risk going forward, I am going to mention again the report we published in November 2025. As part of that report on the AHB sector that we did with the sector, we identified not only the positives for the sector, but also some of the insights that we got into the risks for the sector. One of the risks that the Deputy identified was around cost rental, which is a very new sector. The AHB sector is important in that. Over 6,000 houses that we have brought forward for cost rental have been a big part of that. We want it to be successful in a managed way, and in a risk managed way. In that report, the Deputy will see that arising out of those insights, there are eight recommendations that the Department and all the players that we see here and in the AHB sector are working on going forward to strengthen financial resilience. Internally in the Department, we are examining all our models constantly to make sure that we are appropriately calculated for risk. The sectoral reform working group that we have in place is constantly going to assess those risks. We are looking at what a restructuring body would look like. We are looking at what funding models there are abroad and internally and what we can learn from each other about that. Collaboratively, we are working well to try to manage that risk while growing at the same time.
Rory Hearne (Dublin North-West, Social Democrats)
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Does Ms Timmons have any concern about that risk going forward?
Séamus McGrath (Cork South-Central, Fianna Fail)
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Are we reaching the point where some of the schemes are not viable because developing them is so expensive, in term of taking on loans, etc?
Rory Hearne (Dublin North-West, Social Democrats)
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I know, but that limits the potential of cost-rental projects.
Ms Caroline Timmons:
Does it limit the potential of cost-rental projects if we have concerns about the viability? Viability is a different question. It will not depend on whether it is a local authority or the LDA doing it. Viability is very much dependent on risk factors that are external to the Department. The external risk factors that concern me are cost inflation and the overall cost of development. The Department has a number of streams of work to try to bring the cost of development down but we are, of course, facing headwinds from all angles. We work very hard to get the level of supply up. We are consistently looking at how to take cost out of each model so that we can get that cost down and the overall cost rents are tied to appropriate levels of the sector that we are trying to serve. It is something we also constantly have to work on. As such, I see the Deputy's point in that respect, but that is not about AHBs or any particular sector. It is just the sector we are working with, which is a complex one.
Séamus McGrath (Cork South-Central, Fianna Fail)
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Ms Timmons made the point that nine of the 425 AHBs account for 70% of activity. Of the 425, how many would be considered to be in an expansive mode and how many are in a static position?
Mr. Fergal O'Leary:
There are approximately 160 growing. As I said earlier, we are scrutinising that growth either through assessment or other types of regulatory engagement to ensure, as has been alluded to a number of times, that the risk is understood and being consciously managed because obviously growth is important.
Séamus McGrath (Cork South-Central, Fianna Fail)
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The number of AHBs that are growing is quite large.
Séamus McGrath (Cork South-Central, Fianna Fail)
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The vast majority are not getting funding from the Housing Finance Agency, obviously, because Ms Collier mentioned the small number of borrowers it has. Where are they getting funding?
Séamus McGrath (Cork South-Central, Fianna Fail)
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That is quite a small number. The AHBs in the overall cohort that are expanding are not borrowing anything outside of Department funding.
Séamus McGrath (Cork South-Central, Fianna Fail)
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Are relying on that.
Séamus McGrath (Cork South-Central, Fianna Fail)
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That is understood. What is the Department's view in terms of that overall number? Ms Timmons mentioned the report that was produced. Is it the Department's view that we need to reduce that overall number?
Ms Caroline Timmons:
It is a very big sector, and we have had ongoing conversations with the sector that it may be appropriate for mergers to take place to ensure efficiency in the sector. In terms of State funding, we are always looking at value for money and how we improve that. What we have is multiple business costs with CEOs and organisations which need to be under the CEO. There is a case to be made that some mergers would be appropriate, but obviously we need to help them restructure appropriately. We need to encourage mergers. These are difficult things to do. It is a project we are working on over time, but it will be for the AHB sector to come with us on that.
Séamus McGrath (Cork South-Central, Fianna Fail)
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Would Ms Timmons like to see that number increase as an overall quantity?
Séamus McGrath (Cork South-Central, Fianna Fail)
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The Department wants to go in the direction of reducing the overall number through mergers and so on. What is its view of 50% delivery for local authorities in terms of social housing output? Is that ratio likely to change in the coming years?
Ms Caroline Timmons:
I do not want to specifically say a ratio, but local authorities are really being encouraged to increase the level of direct local authority delivery. I see that they are expanding their direct build teams and successfully using their procurement models to do that. We also see the Land Development Agency building its models. I do not know what the ratios will be over time. Effectively, because we are trying to get to such high levels now, all comers are welcome. We want that delivery and scale. However, over time, I see local authorities probably trying to increase delivery and I hope they will succeed because they are certainly carrying the mandate.
Séamus McGrath (Cork South-Central, Fianna Fail)
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I thank all the representatives for assisting the committee in its consideration of this important matter. I propose we now suspend and resume shortly to discuss the regulations with the Minister of State, Deputy Cummins.