State should not have loaned money to build to rent funds
GIVEN that the seeds of the housing crisis were sown in the financial crash of 2008, the announcement in 2018 of a plan to lend taxpayers’ money to developers was controversial but, in the context of the intractability of the broken market, actually an innovative move.
Developers might have overspeculated during the bubble years, but they do have a skill set – they know how to build houses and apartments, and how to build them to scale. Using those skills in many ways is no different to hiring clever computer hackers to test IT security. It makes sense.
However, the agency set up to manage this relationship, Home Building Finance Ireland (HBFI), decided to change the mechanics of how this would operate during Covid, when the Government had bigger things on its mind and the eyes of the nation were otherwise occupied.
HBFI’s remit partially changed to include the funding of build-to-rent apartments, some of which were promised to what are known as cuckoo funds, usually owned by foreign investors whose loyalties lie with shareholders.
In the original plan, no more than €35m was to be loaned to any single developer, yet a subfund, known as Momentum, loaned €274m of the €750m available for work on just five developments before that scheme was closed last year.
That the HBFI had this idea in the first place is concerning.
That it was granted this permission by the government to proceed with it is alarming.
Under a Fine Gael and Labour government with a confidence and supply agreement with Fianna Fáil, and now under a full on Fine Gael and Fianna Fáil Coalition, there has been a failure to tackle the roots of the broken housing market.
Yes, there is a place for institutional investors. Yes, there is a place even for buy-to-rent. What there is not a place for is a free-for-all for investors with the capital to skew the market in their favour, or for their lack of scruples when they see the underlying factors and the exorbitant rents being charged and view that as an opportunity for profit rather than a symptom of a fundamentally flawed market.
We are not against private investors, but they cannot be allowed to prioritise self-interest above the plight of the citizens desperately seeking to purchase or rent houses or apartments – homes, in other words – at reasonable prices.
None of this behaviour is unexpected, but for the State, through a recently established quango, to collaborate in this bad faith market engagement is a scandal.
The HBFI is run by Dara Deering who, in a previous role with EBS, promoted a controversial banking product that involved the building society offering mothers and fathers loans to help their children with deposits for their own houses during the Celtic Tiger years.
That she has returned to head up a taxpayer-funded organisation that has so wrongly viewed its remit, and changed its mission statement, is just the latest irony in an ongoing bonfire of the vanities that passes for government action.
Every night on our television screens we see political instability affecting countries around the world. The Government needs to get serious and realise that this instability is not all that far away. Whether they believe it or not, housing is the battlefield where the next election will be won or lost. We suggest the Government chooses better allies than cuckoo funds in that coming fight.