The Housing for All plan provides significant multi-year funding commitments and a number of incremental sales routes/supports to aid providers of new housing increase output.
Project Tosaigh
The early delivery of new affordable homes by the Land Development Agency (‘LDA’) through Project ‘Tosaigh’ will accelerate that agency’s new housing delivery (up to 5,000 homes) whilst it also advances its existing land bank through planning stages for medium and longer term delivery.
In recent years the provision of a committed take-out by institutional capital providers has been a key requirement to enable the development of housing delivery at scale, from both an ability to secure development funding and also ensuring the viability of the housing development. This additional committed sales route for the housing construction sector provides the opportunity to deliver new housing at scale on ready to go sites and widen delivery beyond primarily certain locations in Dublin which is currently the case.
Cost Rental
The delivery of a new form of long-term secure cost rental tenure builds on some existing pilot schemes in the market. This tenure provides a further committed sales route for the housing construction sector to assist with increasing housing output. Approved Housing Bodies in conjunction with Local Authorities and the LDA have been tasked with delivering approximately 10,000 Cost Rental homes, and the Housing Finance Agency is to have its borrowing capacity increased from €10bn to €12bn to support this area with an additional €5bn of lending whilst also looking encourage co-investment from other international funding partners.
Funders take a much more positive assessment of schemes that have a level of pre-committed sales, so building on existing social housing unit sales in a development, this cost rental element has the ability to further enhance the overall viability of residential developments. Importantly it can act as a funding catalyst to also benefit supply of housing for private sale in mixed tenure developments enhancing supply.
Hazel Cryan
Partner, Head of Debt Advisory
KPMG in Ireland
First Home Shared Equity
A First Home shared equity scheme is planned to be provided from Q1 2022 to aid new homebuyers while also adhering to macro-prudential mortgage lending rules. This can have a positive impact on the delivery of new entry and average priced homes in particular, including increasing the viability of developments in more locations across the country as has been from the experience of the UK’s Homes England shared ownership model in recent years.
Funding Assessments
The Department of Finance has been tasked with assessing (on a biannual basis) the adequacy of funding to deliver new housing from sources “including the domestic and international banking sector, capital markets and international capital, to complement public investment”. The high capital intensity of housebuilding requires significant resources across various funding types from equity, subordinated instruments through to senior debt and the State has already made substantial investment into the housing development funding market (Home Building Finance Ireland, Activate Capital, the LDA etc) even before the announcement of this Housing for All plan.
One additional source of funding not mentioned in the list is from the private domestic sector itself. In an environment of historic low interest rates and some deposit holding institutions capping deposit levels or charging negative rates, through the right structures and relevant incentives part of this large domestic capital base could also be utilised to provide an incremental domestic source of funding. This would:
- provide additional domestic tax take;
- reduce State funding dependency levels;
- bolster domestic pension assets/returns;
- provide an efficient investment opportunity for individuals/firms;
to list but a few benefits. There are additionally knock on economic benefits beyond just the capital implications from the delivery of each home making this an area that would merit further consideration in the overall assessment of funding sources.
Get in touch
The pace of change is challenging leaders like never before. To find out more about how KPMG perspectives and fresh thinking can help you focus on what’s next for your business or organisation, please get in touch with Brian Shefflin or Hazel Cryan of our Deal Advisory team. We’d be delighted to hear from you.
