The Coalition is close to a deal to provide “up to €3 billion” in new funding for the Land Development Agency (LDA), giving it the firepower to build 5,000-6,000 new homes in the next three years.
Although the LDA was set up as a State body to build social and “affordable” housing on public land, it has been criticised for the slow delivery of homes.
The new money is about half the €6 billion mooted when Minster for Housing Darragh O’Brien pushed to deploy a major portion of the State’s corporation tax windfall for social and “affordable” housing.
But senior Government sources said the LDA never needed that entire sum in a single swoop, insisting the new package would be enough to fund its work through the early years of a new business plan for 2024-2028.
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In a deal under discussion at the Cabinet subcommittee on housing, the agency will receive an initial round of funding for 2024 until 2026. It will be required to return to the Government at a later point to seek money for the final two years of the plan.
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Mr O’Brien had set his sights on giving money to the LDA from new sovereign wealth funds set up in the October budget to save windfall corporation tax receipts for population ageing services and climate investment.
However, a large portion of the next LDA funding round is now set to be drawn from direct exchequer funding. The Government will have to change the law to provide such funding because the LDA Act put a €1.25 billion cap on Government equity when it was enacted in 2021.
Also under discussion is a further injection from the Ireland Strategic Investment Fund (ISIF), a separate sovereign wealth fund from which the LDA’s first €1.25 billion was drawn.
Financial certainty is a critical issue for the LDA because it cannot tender to build homes on State-owned land without having money in place in advance to pay for the work.
With agreement now in prospect on money for 2024-2026, the arrangement assumes the LDA will use such funds to deliver between 5,000 and 6,000 new homes by 2027.
That is in addition to the pipeline of just over 3,000 homes committed under the first €1.25 billion. The current pipeline include homes in the Project Tosaigh partnership with private developers and direct delivery homes on public lands.
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Government sources believe the three-year funding arrangement will give the LDA enough financial cover for the next phase of its operations, saying it was not necessary to provide advance funding for five years in one tranche.
The move to settle the LDA budget for 2024-2026 comes ahead of local and European elections next summer in which housing policy is likely to be a major point of contention for the Government and the Opposition. There is also the possibility of an early general election, some time before the current Dáil term expires in early 2025.
The LDA’s initial €1.25 billion budget is almost fully committed, prompting divisions in the Coalition over the scope and sourcing of the next funding round.
The uncertainty led the Government to set plans in motion for the LDA to receive a €500 million “backstop” loan from the Housing Finance Agency, another public body that usually lends to local authorities, universities and approved housing bodies. Amid doubt over the next funding round, the aim was to secure the LDA’s finances going into 2024.
The LDA has powers to borrow some €1.25 billion but borrowing on the open market has been ruled out because interest rates are at the highest level for decades.
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