Home Building Finance Ireland

QUESTION

To ask the Minister for Finance the targeted amount of homes due to be built under Home Building Finance Ireland financing; and if he will make a statement on the matter.

 To ask the Minister for Finance the number of applications received for the Home Building Finance Ireland scheme; the number of successful applicants; the amount issued to date; the interest rate applied; and if he will make a statement on the matter.

To ask the Minister for Finance the number of NAMA staff transferred to Home Building Finance Ireland to date; the estimated operating costs of Home Building Finance Ireland in 2018; and if he will make a statement on the matter.

REPLY

In my Budget speech on 10 October 2017, I announced a proposal to establish a new dedicated fund, Home Building Finance Ireland (‘HBFI’) to provide funding on market terms to viable residential development projects whose owners are experiencing difficulty in obtaining debt funding.
In answering the Deputy’s questions it is first necessary to recognise that Home Building Finance Ireland (HBFI) is in the process of being established. The draft scheme of the HBFI Bill was approved by Cabinet at the end of January and drafting is currently being undertaken by the Office of Parliamentary Counsel in conjunction with my officials. It is expected that the Bill will be published shortly and I am hopeful that the Oireachtas will be in a position to pass the HBFI Bill in the first half of 2018, with a view to HBFI commencing operations later in 2018. The passage of legislation establishing HBFI is a priority for the Government.
While HBFI will be an independent legal entity established under the Companies Act 2014, in order to ensure that the fund is established in the most efficient manner possible it is proposed that HBFI will harness the considerable expertise and skills amassed through NAMA’s existing residential funding programme. It is envisaged that this will be achieved by enabling the NTMA to allocate current NAMA staff with the relevant skills and experience to HBFI where appropriate and subject to the need to ensure that achievement of NAMA’s own statutory objectives is not adversely affected. The allocation of NAMA staff will be commensurate to the level of demand for lending from developers and staff will only be assigned where the skills and experience match those that are sought by the Board of HBFI. However as HBFI’s establishing legislation has not yet been enacted it follows that no NAMA staff have been transferred to HBFI to date.
Officials in my Department have been engaging with stakeholders including the Construction Industry Federation and other market participants who welcome the proposed scheme. Formal applications for funding will commence once the entity is up and running later this year. While it will ultimately be up to the Board of HBFI, when it is constituted, to determine the terms and conditions of the fund's lending, the success of an application will depend on, inter alia, the risk profile of each project, the quality of collateral and the creditworthiness of the borrower. In order to comply with EU State aid rules, lending will be provided at market equivalent rates and will not constitute subsidised funding for residential developers.
Once HBFI is established it is estimated that the fund’s proposed allocation of €750m could have capacity to fund about 6,000 homes in the coming years. This delivery estimate is based on an assumed delivery cost of €250,000 per unit and an assumption that HBFI would recycle the allocated funding once over an estimated three year time horizon. 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, could help reduce this shortfall by about 10%.
 
HBFI’s operating costs will include salary costs, the cost of providing legal, financial reporting and other services in addition to loan servicing costs, audit fees, Board fees, office accommodation and systems costs. While it is too early to estimate operating costs in advance of a business plan which has been endorsed by the future Board of HBFI, it is envisaged that these costs will be commensurate with those of NAMA’s residential funding programme and costs typically incurred by other market participants.