Piecemeal approach to housing not leaving much room to manoeuvre

While HBFI plugs gaps in housing, big holes are opening up in State pensions

HBFI provides the cash to build the houses, and local authorities then buy them, allowing the developers to repay the money. Photograph: Chris Ratcliffe/Bloomberg via Getty Images

HBFI provides the cash to build the houses, and local authorities then buy them, allowing the developers to repay the money. Photograph: Chris Ratcliffe/Bloomberg via Getty Images

 

Amongst the new homes that State body House Building Finance Ireland (HBFI) backed last year were 150 dwellings destined to be used by councils or approved bodies for social housing.

HBFI is one of the outgoing Government’s various initiatives to tackle the housing crisis. Established by legislation in 2018, it began lending to builders in January last year, committing €114 million to finance the construction of 616 homes around the country during its first 12 months.

The organisation has a budget of €750 million from the Irish Strategic Investment Fund, itself a State body set up during the recession to back job-creating projects with what was left from the old National Pension Reserve Fund after much of that went to bail out the banks.

HBFI must loan cash on a commercial basis, but its job is to back projects that those same banks won’t support. So far so good. It is mainly loaning to developments outside the capital – Dublin isn’t the only place with a housing shortage – and it is probably fair to argue that a lot of these new homes would not get built otherwise.

The next government will have to build far more social homes than any administration in recent decades

However, the fact that it provided €25 million for properties that will be used for social housing makes it look like one part of the State is financing another. HBFI provides the cash to build the houses, and local authorities then buy them, allowing the developers to repay the money.

It is the builders that sell the homes to local councils. HBFI is not involved in this – it simply provides the finance. However, this means that some of the cash that was once meant to fund future State pensions is now plugging a glaring gap created because successive governments neglected social housing.

It is not HBFI’s fault, but this piecemeal approach to the problem is not working. No matter who forms the next government, they will have to build far more social homes than any administration in recent decades. Then, if they solve that problem, whoever follows them into power faces another headache entirely: covering the spiralling cost of State pensions.

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