Malcolm Noonan (Carlow-Kilkenny, Green Party) | Oireachtas source

This has been well debated. As Senators Fitzpatrick and Cummins both said, there is a role for limited equity funds to support the State's ambition of achieving the target of 20,000 cost-rental units, which figure has been mentioned. It is an important and significant figure and one we all wish to achieve collectively. Therefore, there is a role for the funds.

The Austrian model, or Vienna model, has been mooted as the state-of-the-art model but it relies on both private and public investment. That is consistent with good international practice. It is important to state that. The renter will be able to rent at a rate well below current rates pertaining to schemes. The benefits to the State in provision and easing market pressures on housing will be really significant.

Amendment No. 62 proposes to delete the words "and limited equity returns" from section 30. Delivery of cost-rental homes will be undertaken by public bodies and housing charities. The models employed for the first projects are to be entirely funded by State-backed debt and public subsidies. The crucial proving phase for this new housing tenure will be led by the public sector in partnership with the approved housing bodies. If, however, we agree that cost-rental accommodation must be delivered at scale, which is what we want to achieve, there is a necessary limit to which the Exchequer can manage this alone. There is a role in the future for loans from non-State sources, and, potentially, there is also a role for non-State equity investors. Government investment can be cost-free, effectively a form of subsidy, but other equity investments may come with some cost. Investors take a risk. Unlike lenders, who have security over assets, equity investments in cost-rental homes would have to generate a marginal return, as mentioned by Senator Cummins, so as not to be eroded by inflation and to recognise both the time value of tying up money over many decades and the opportunity cost of not choosing more profitable, less socially beneficial investments. This is not peculiar to our own cost-rental proposals; it is a feature of all mature cost-rental systems.

Looking ahead to the long term, it is not unreasonable for the Bill to provide that a cost of equity may form part of allowable financing costs. However, tenants cannot be made to bear the burden of excessive equity returns so these will be strictly limited by regulations. This limit will be informed by the equity return of 3.5% to 5% allowed to Austria's limited-profit housing associations, which are so much admired as comprising the model of a mature cost-rental system. Limited equity returns may attract non-State investors with a long-term view, such as pension funds providing for the retirement of workers and investors and with an emphasis on environmental, social and corporate governance, ESG, factors. Senator Fitzpatrick mentioned that these are ethical investments. It is for these reasons that I oppose amendment No. 62.