Richard Bruton (Dublin Bay North, Fine Gael)
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111. To ask the Minister for Finance the way in which the funding model for housing has evolved since the financial crash; and if finance remains a constraint on reaching the Government’s housing targets. [55847/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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The Irish funding landscape has undergone significant change since the Global Financial Crisis in 2008. In order to address the current imbalance between supply and demand of housing across all tenure types, the Government's Housing for All plan aims to significantly increase the supply of housing to an average of 33,000 per year over the next decade.

While the plan is backed by unprecedented State investment of over €4bn per annum, the Government cannot deliver on this programme alone. The only way we can deliver housing at the substantial scale we need is by also attracting private capital to the market, alongside our public investment.

Through modelling undertaken by the Department of Finance in December 2021, it is estimated that €12 billion of development funding per annum, comprising both debt and equity, will be required to develop the Housing for All target of an average of 33,000 homes per year. Of this €12 billion per annum, an estimated €10 billion will be required from private capital sources.

Given recent withdrawals from the banking market, there are fewer retail banks now lending for property development in Ireland than was previously the case. Domestic banks set risk limits around the type and nature of lending activity, resulting in more selective and prudent lending practices. This approach is also influenced by improved risk governance and legacy exposures from the Global Financial Crisis.

It is not desirable that domestic banks provide senior debt at unsustainable levels and levels of debt should appropriately reflect the risk profile of development projects. Therefore, appropriate levels of risk capital from a number of sources is essential for a sustainable functioning of the banking sector.

To help address a shortfall of debt finance available for the construction of residential housing, the Government established Home Building Finance Ireland in 2018. To end of June 2022, HBFI has approved €1,156m of funding, across 20 counties, supporting the delivery of 3,229 homes and continues to support residential delivery, responding to demand, through its agile business model.

The number of alternative lenders has also grown in the Irish funding landscape in recent years, providing an important source of debt funding for residential development.

In relation to equity, in the aftermath of the Global Financial Crisis, the Irish developer community has, in the main, been more equity constrained, requiring private equity partners to support their development activities.

In general, international investors are often transient and securing embedded sources of risk capital can be challenging. Therefore, a stable, consistent and transparent policy environment is key to supporting private investment in housing.

As a result, we will continue to attract and welcome inward investment to our housing market, as we have successfully done with investment in other sectors of our economy. This private and patient capital coming from well-established investors such as pension funds is a normal facet of housing investment in many of our European neighbours and beyond.

Through the implementation of the Housing for All strategy, the Government plans to increase the supply of housing to an average of 33,000 per year over the next decade. This is an ambitious plan which will provide increased housing supply and affordability.