Credit unions hold off on so­cial hous­ing loans

CUDA has been blocked from back­ing projects due to tight rules, writes Michael Cog­ley

Sunday Independent (Ireland) - Business & Appointments - - FRONT PAGE -

THE Credit Union De­vel­op­ment Agency (CUDA) has stopped short of es­tab­lish­ing a fund to back so­cial and af­ford­able hous­ing due to a lack of suit­able projects.

It is un­der­stood there are two sig­nif­i­cant de­vel­op­ments that CUDA could sup­port but it needs to in­vest at least €40m to cover the cost of set­ting up a spe­cial pur­pose ve­hi­cle and pay the man­age­ment fees as­so­ci­ated with main­tain­ing it.

Credit unions be­gan ask­ing the Cen­tral Bank to al­low them to lend to help ease the hous­ing cri­sis more than six years ago. In Fe­bru­ary, the fi­nan­cial reg­u­la­tor granted the unions per­mis­sion to in­vest in ‘tier 3’ ap­proved hous­ing bod­ies (AHBS), but stated that they must set up a spe­cial pur­pose ve­hi­cle to do so. Tier 3 refers to hous­ing char­i­ties that have more than 300 units on their books, such as the Peter Mcverry Trust and Tuath.

How­ever, a month af­ter the reg­u­la­tory changes were made, Euro­stat deemed that ap­proved hous­ing bod­ies should be con­sid­ered “on-bal­ance sheet”, se­ri­ously hin­der­ing their abil­ity to lend for hous­ing projects.

Kevin John­son, the chief ex­ec­u­tive of CUDA, said that he be­lieved there was a “nat­u­ral fit” be­tween the credit union ethos for ser­vic­ing the fi­nan­cial needs of lo­cal com­mu­ni­ties and the pro­vi­sion of so­cial hous­ing.

“Ini­tially we sought to en­able credit unions lend on a col­lab­o­ra­tive ba­sis,” he told the Sun­day In­de­pen­dent. “How­ever, the cur­rent credit union act does not fa­cil­i­tate this and fol­low­ing con­sid­er­able work by var­i­ous stake­hold­ers, the Cen­tral Bank in­tro­duced reg­u­la­tions that could see credit unions be­come in­volved in ef­fec­tively lend­ing to hous­ing bod­ies through a spe­cial­ist in­vest­ment fund to fast-track the pro­vi­sion of so­cial and af­ford­able hous­ing in Ire­land.

“These new reg­u­la­tions per­mit credit unions to in­vest up to €700m. Un­for­tu­nately this has not ma­te­ri­alised, as soon af­ter the in­vest­ment reg­u­la­tions were in­tro­duced, the sta­tus of the AHBS changed and our hope that our funds would en­cour­age AHBS com­mence more projects has not hap­pened.”

John­son said that it was time to “en­hance” the Credit Union Act to al­low unions to lend rather than in­vest.

He said that such a change would re­duce the over­all cost and ex­pand the range of projects that it can sup­port fi­nan­cially.

Dur­ing a Dail de­bate on the mat­ter last week, Labour fi­nance spokes­woman Joan Bur­ton ac­cused the Depart­ment of Fi­nance of “sit­ting on its hands” and that it was not help­ing credit unions lend for such projects.

“The min­is­ter and the Depart­ment of Fi­nance are not pre­pared to as­sist the credit unions in get­ting the ini­tia­tive un­der way,” Bur­ton said.

“He said that he wants the credit unions to do all of the work when, in fact, much of the ex­per­tise in the struc­ture of the project should be pro­vided by the Depart­ment of Fi­nance. The min­is­ter is stand­ing back from that; per­haps he is cold on the idea.”

In re­sponse, Fi­nance Min­is­ter Paschal Dono­hoe said that he and the Cen­tral Bank had put in place a frame­work that would al­low the unions to lend for so­cial hous­ing.

“The deputy is cor­rect that it now re­quires the credit unions them­selves to de­ter­mine what projects they want to be in­volved in, what level of risk they are will­ing to bear and what level of re­turn they want,” he told the Dail.

“That is work that they need to do them­selves for the sim­ple rea­son that, as the deputy well knows, it is the money of their mem­bers at stake.”

In a sep­a­rate de­bate, the min­is­ter also con­firmed that a com­mit­ment to es­tab­lish an off-bal­ance sheet fund, con­trolled by the Ire­land Strate­gic In­vest­ment Fund (ISIF), had been scrapped.

The prom­ise, which was in­cluded in Rebuilding Ire­land, the Gov­ern­ment’s catch-all plan to ad­dress the hous­ing cri­sis, has been re­placed by a new long-term leas­ing scheme, which in­volves pri­vate op­er­a­tors tak­ing long State-backed leases on new build­ings.

Dono­hoe said the fund had run into hur­dles that were “not pos­si­ble to over­come”.

Credit unions have work to do to as­sess the lend­ing risks in­volved, said Paschal Dono­hoe

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