Banks central in new funding structure for social housing stocks

Lending confidence is key to expanding model

A new finance model for social housing stocks would see private investment meeting up to 70 per cent of the overall cost of schemes in a departure from the local-authority-dominated supply model.

The Cluid Housing Association said it used the approach for the first time last year. It has appealed to the Government to increase its reliance on private investment as a means to counter limited exchequer funding.

The agency said that while the model – known as the Capital Advance Leasing Facility (CALF) – is only in its early stages, they are in negotiations with lenders to raise confidence levels for investment.

It is understood various banks have already funded such schemes, although many are in their infancy. The system requires up to 30 per cent of a housing scheme’s cost to be financed in a fixed 2 per cent loan from the State which is then used to leverage the balance of capital from banks.


Deferred State loan
Interest rates on private loans are set according to perceived risk, while the State loan would be deferred until the other was entirely serviced.

A banking source explained these deferred repayments to the Government, prioritising institutional returns, make the investment attractive.

Housing agencies would make repayments through a combination of rents and further “availability payments” from the department.

The scheme would replace or complement the current grant system whereby finance is supplied directly to agencies and local authorities from the Government and from the independent but State-owned Housing Finance Agency which raises money on capital markets.

Cluid’s efforts to push the model into the mainstream come as the Department for the Environment yesterday announced traditional funding of €32.5 million for the supply of 260 homes – €20 million for local authority acquisitions and €12.5 million for approved housing bodies.

Simon Brooke, Cluid's head of policy, said the approach was "revolutionary" in Irish housing terms and is established in the UK.

“Local authorities should continue to have a role but the bigger picture is that 260 houses make a very small hole in the number of people on housing lists,” he said. “The Government really needs to continue with this new scheme so that every euro put into housing can leverage another two.”

The department says it is fully supportive of the CALF structure, initiated in 2011.

Cluid developed its first 34-house scheme under the “70/30” model last year in the Beacon South Quarter in Dublin but hopes the initiative can be greatly increased.

Mark Hilliard

Mark Hilliard

Mark Hilliard is a reporter with The Irish Times