State fund worth €750m for housebuilders yet to make loans

A €750 million State fund to help smaller builders construct thousands of new homes has been described as a “monumental failure” after failing to lend any money six months after it was set up.

Home Building Finance Ireland (HBFI) was established by the Government in December last year as a publicly-funded company.

Under the scheme, builders who have been unable to secure loans from banks or other lenders will have access to five-year loans of up to €35 million, for developments ranging in size from 10 to about 200 homes.

The Government said it would deliver 7,500 new homes over the next five years.

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In response to queries, Minister for Finance Paschal Donohoe has confirmed it has yet to lend any money.

Mr Donohoe said the HBFI had engaged actively with small and medium-sized builders and developers throughout the country since January and had generated “a strong pipeline of interest from prospective borrowers”.

A public-relations firm which deals with press queries for the HBFI declined to answer questions about the number of funding applications received, numbers approved and the number of proposed houses involved.

“HBFI has approved its first lending facilities and is progressing a number of other applications through its credit process,” a spokesman said. “HBFI will be in a position to publish information on its lending activities on a half-yearly basis, with the first such report to be published in July 2019.”

Planning permission

Developers must have secured or submitted planning permission for a project, the scheme must be deemed commercially viable by HBFI, and the borrower has to provide a minimum of 20 per cent equity, which can include the value of the site.

Fianna Fáil housing spokesman Darragh O'Brien said the plan was vital for kick-starting new home-building but had "failed miserably".

“One of the sources of the numerous problems we have in housing is the fact that builders cannot get finance to do it – that is the reason the HFBI was set up,” he said. “The fact that they haven’t lent any money whatsoever just shows it is effectively another empty vessel.”

Mr O’Brien described the scheme as a “monumental failure”, saying it was “over-complicated” and builders “don’t have any confidence” in it.

“I have been speaking to many builders who are saying they have to go through a very lengthy process and they don’t believe they will be successful at the end of it,” he said.

“They are willing to pay an additional premium to get more expensive finance, much of it from England, while others are sent into the arms of investor funds who will give them a lump sum for a site so they can go and develop the next site.

“I want this to work, I don’t want it to fail. But it is not working, and I have been told by builders that it is far too cumbersome.”

However, Hubert Fitzpatrick, director of housing, planning and development at the Construction Industry Federation, insisted the fund should be given "a reasonable period of time" to be up and running.

“The fund is addressing areas where viability has been seriously challenged,” he said. “They are focusing on areas where other banks and lenders are not prepared to fund, so they have to be satisfied there is a viable project there.

“I would say at this stage I am quite positive and hopeful that the HBFI will meet the challenges ahead, and will meet the requirements of the industry.”

The CIF director said he expected the first house to be completed through HBFI funding by next February “at best”.

Last month, KBC Bank Ireland's executive director of retail banking Dara Deering was appointed as HBFI's first chief executive. She is due to take up the role in September.