State plans to borrow from pension funds and investors for housing
THE State is planning to borrow billions of euro from pension funds and other institutional investors to finance the delivery of new homes, the Irish Mail on Sunday can reveal.
Under the plans, a large portion of the State’s cost-rental housing stock – which is being developed and managed by the Land Development Agency (LDA) – would be leveraged to raise capital on the bond markets.
The LDA would use the rental revenue generated from costrental tenancies to pay the yield on the bond.
‘Potential for increased affordable housing’
The agency was established in 2018 with the aim of delivering 150,000 new homes over a 20-year period.
Initially, its remit was to actively manage State land for public and private housing development.
However, since the current Government came to power in 2020, the LDA’s remit has pivoted to the development of 100% social, affordable and cost-rental homes.
Housing Minister Darragh O’Brien is preparing to get Cabinet approval on providing a further €4.75bn in capital for the LDA for projects over the next five years.
At the moment, the LDA is capitalised to the tune of €1.25bn and has the ability to borrow the same amount.
Pension and other institutional funds would be targeted to purchase a bond on Stateowned housing stock.
Economist Austin Hughes told this newspaper that there would be ‘a lot of interest’ on the market for the bond and that it would be viewed as an ‘attractive’ investment.
Mr Hughes said it makes sense to ‘future-proof’ investment in housing now, at a time when the public finances are healthy.
Sinn Féin housing spokesman Eoin Ó Broin told this newspaper that he would be concerned about the privatisation of the cost-rental housing stock.
‘Any proposed change to funding model would have to be assessed against what it means for cost renters… I would also be concerned about the creeping privatisation of affordable cost-rental homes,’ he said.
Mr Ó Broin said that using cost-rental housing stock to leverage further investment from a fund ‘could impact overall financial viability of the model’.
A spokesman for the LDA said the agency was in discussions with government on its future funding need and welcomed the Minister for Housing’s recent announcement of his intention to seek Cabinet approval to substantially increase the LDA’s capital to €6bn in the coming weeks.
‘The Agency looks forward to representing a substantial part of the State’s overall €5.1bn housing capital investment for 2024.
‘The potential to increase the Agency’s capital is in line with recent constructive discussions between the LDA and the Government on the LDA’s business plan, which includes the potential for increased delivery of affordable housing.’
The LDA is currently in the process of advancing over 3,500 affordable and social homes through planning approved projects on State-owned lands.
The LDA is also delivering a programme for at least 5,000 affordable homes in partnership with developers on stalled sites as part of the Government’s Project Tosaigh initiative.
A spokesman for the Department of Housing said discussions with the LDA, Department of Finance, Department of Public Expenditure and Reform as well as New ERA – a financial advisor to the State – are ‘ongoing’.