Struggling homeowners to become State tenants under leaseback plan

Private finance houses will be able to bulk-buy the mortgages of struggling families and lease the properties back to the State, under a new plan to be rolled out by the Government.

The move from Minister for Housing Simon Coveney marks a significant expansion of the "mortgage-to-rent" scheme which has been so far hampered with poor take-up.

The new plan will see increased involvement from private finance houses who will lease the properties back to the State.

Families then become the State’s tenants with a guaranteed 20-year lease and an option for a further 20 years. It is understood there will be another option for families to buy back their homes at the market rate any time they choose.

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Sources said it is hoped thousands of households will take up the revamped offer. Since the existing scheme’s introduction, only 217 homes have gone through the process, with a further 635 “reaching conclusion”.

The existing scheme has been criticised because it meant holders of distressed mortgages were dealt with on a one-on-one basis, and was not attractive for private finance to become involved. The current scheme is administered by housing bodies and county councils only.

Trial scheme

The new approach will be initially rolled out on a trial basis by Mr Coveney and Damien English, the Minister of State in the Department of Housing.

It is envisaged the time frame for people transferring from holding a mortgage to a mortgage to rent would be as much as halved, from 18 months to less than nine months.

Sources said private funds may examine the loan books of banks and ascertain who would possibly qualify for the scheme before making a decision to purchase loans.

However, it was stressed that the decision to enter the scheme would be a matter for the homeowner. Those who express an interest but who do not qualify would have the reasons for the refusal explained to them by the bank.

“The owner has to choose this,” a source said . The qualifying criteria will also be broadened to allow more people to avail of mortgage to rent.

Mr Coveney said he wanted to give “mortgage to rent a shot in the arm by testing alternative funding models that can deliver volume”.

"The Housing Agency will work with a number of financial entities who have come forward with an interest in working with the mortgage-to-rent scheme to progress a minimum of 200 units based on these new arrangements," he added.

Potential

Mr English said: “As we trial this over the months ahead, it is important we get this right. There is potential here to help an awful lot of people.”

One well-placed source said: “There seems to be interest from the private funds, and to clarify this we will prepare some pilot schemes in advance of making a final decision for budget 2018.”

The initial scheme was set up in 2011 and saw homeowners voluntarily surrender their property to their lender who, in turn, sells the property to an associated housing body.

To qualify for the existing mortgage-to-rent scheme, the household must be eligible for social housing and the property must meet the appropriate standards for social housing.

The new scheme will see the price threshold for a qualifying house in counties Cork, Dublin, Galway, Kildare, Louth, Meath and Wicklow increased to €365,000, with the corresponding figure for an apartment or townhouse increased to €310,000, from €350,000 and €300,000 respectively.

The rest of the country will see the thresholds rise to €280,000 and €210,000 from €250,000 and €190,000.