Paschal Donohoe (Dublin Central, Fine Gael)
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As announced in my Budget speech on 10 October 2017, it is my intention to establish Home Building Finance Ireland (HBFI) to increase the availability of debt funding on market terms to commercially viable residential development projects in the State.

The purpose of HBFI is to address the concerns raised by many developers and other participants in the residential development market that the relative scarcity and cost of development debt funding is proving to be a major contributory factor to the shortfall in residential supply. While appetite is increasing both by the main banks and alternative funding providers to fund residential development there is evidence of emerging supply constraints which could be exacerbated as house building levels increase to meet the economy’s required levels in the coming years.

Given this policy objective it was never the intention of the Government to provide cheap or subsidised funding to developers, nor would it be appropriate to do so. It has always been envisaged that HBFI would lend on commercial, market-equivalent terms and conditions, which would depend on the risk profile of each individual project, the quality of collateral and the creditworthiness of the borrower. This approach would be akin to a bank or private equity investor, in that HBFI would not be directly involved in development – its role would be solely as a commercial lender. In taking this approach HBFI will be also be designed to comply with State aid rules and its onoing lending activity is not expected to impact the General Government Balance.

With a proposed allocation of up to €750m, it is estimated that HBFI could have capacity to fund up to 6,000 homes in the coming years. The current estimated shortfall in residential supply is 15,000 – 20,000 units per annum and, accordingly, HBFI, with an annual average delivery of 2,000 homes, would reduce this shortfall by about 10% (assuming a three year horizon). This would be a significant contribution but it would not make HBFI a dominant player in the residential funding market and it would clearly leave room for banks and other finance providers to increase their contribution to funding much-needed residential development.

Clearly housing finance alone will not deliver houses. However, the Government, through its agencies, will do what it can to provide finance on a commercial basis for housing development. As set out in Rebuilding Ireland, policy actions are required in other areas and the construction sector must play its part in adopting innovative delivery approaches that can boost the productivity of the sector.