Joint Committee on Environment, Culture and the Gaeltacht debate -
Tuesday, 15 Dec 2015

General Scheme of Housing (Regulation of Approved Housing Bodies) Bill 2015: Discussion

Chairman

This meeting has been convened to discuss pre-legislative scrutiny of the housing (regulation of approved housing bodies) Bill 2015 and related matters. The heads of the Bill and all the documents are available on the committee's website and members of the public are welcome to make comments. Is that agreed? Agreed.

From the housing division of the Department of the Environment, Community and Local Government I welcome Mr. Damian Allen, Ms Sheila Power and Mr. Andrew Harkin; from Co-operative Housing Ireland, I welcome Mr. Kieron Brennan, chief executive, and Mr. Dermot Sellars; and from the Irish Council for Social Housing, I welcome Dr. Donal McManus, chief executive officer, Ms Karen Murphy, director of policy and Mr. Justin O’Brien, president

I draw witnesses' attention to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if directed by the committee to cease giving evidence on a particular matter and they continue to do so, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

It is proposed that the opening statements and any further documentation supplied may be published on the committee website after the meeting. Is that agreed? Agreed.

I ask those speaking on behalf of the groups to keep their opening statements to approximately five minutes, as the general gist of what they will say is well documented. I call on Mr. Damian Allen to make his opening statement.

Mr. Damian Allen

I thank the Chairman and members for the opportunity to discuss with them today the proposed housing (regulation of approved housing bodies) Bill. Before outlining the main provisions of the Bill, I will provide some brief background and context to the proposed legislation.

Approved housing bodies, AHBs, are not-for-profit housing organisations formed for the purpose of relieving housing need and the provision and management of housing. AHBs consist mainly of voluntary or co-operative organisations registered under the Companies Acts, societies registered under the Industrial and Provident Societies Acts and-or trusts incorporated under the Charities Acts. At present, there are 536 approved housing bodies and the sector is largely reliant on a mix of fragmented regulation under various legal instruments, including the Companies Act, the Charities Act and the Industrial and Provident Societies Acts. The sector has grown over the past 20 years but largely in a low-risk environment where the State has provided high level capital funding at 95% or 100%.

More recently, the sector has had to rely less on such grants and more on current funding, that is to say, borrowing, to develop social housing.

Approved housing bodies, AHBs, have a key role in the delivery of social housing, as recognised and set out in Social Housing Strategy 2020. In this context, the need for regulation becomes more pressing to underpin stability in the sector, to better protect tenants and to provide reassurance to potential investors. At present a system of voluntary regulation is in place. A voluntary code, Building for the Future, was published in July 2013. In February 2014 an interim regulation committee was established as an independent committee working within the Housing Agency. A dedicated regulation office is established in the agency as well and I understand the committee heard from representatives of the regulation office last week. The regulation committee includes experts on housing, finance, regulation and law. Encouragingly, the number of AHBs that have now signed up to the voluntary code - some 210 at the last count - represents approximately 82% of all housing stock held by such bodies.

All the relevant people in AHBs who sign up to the code are expected to submit a signed charter of commitments and make themselves available for interview, if necessary, and for assessment. In July 2015, the Housing Agency published the financial standard and assessment framework, a further development of the voluntary code, as well as its first annual report.

In the programme for Government, a commitment was given to facilitate larger housing associations to access private sector funding for social housing. More recently, Construction 2020 and Social Housing Strategy 2020, to which I referred earlier, affirmed the central role in which approved housing bodies have been placed for the provision of social housing. The strategy includes a specific commitment to establish a statute-based regulator for the sector. This was first signalled in the voluntary code.

The interests of the tenant are very much to the fore in the development of regulation as well. This priority is explicit in the regulator's oversight role of the performance of AHBs in respect of landlord functions but it is also implicit in the regulator's focus on financial feasibility and the good governance of AHBs. These functions underpin stability and security for all parties concerned. Against this background, the Government approved the general scheme of the Bill in September. The purpose of the proposed legislation is to: safeguard public and private investment in AHBs and the associated assets developed; provide the necessary legal arrangements for the oversight of AHBs in respect of their governance, financial feasibility and performance as landlords; protect the interest of tenants and other stakeholders through the regulation of AHBs in their provision of housing-related services; and give assurance to investors that the AHB sector is well governed in Ireland.

I will conclude with an overview of the main provisions. The first is the creation of an independent regulator. The regulator will be responsible for establishing and maintaining a register of AHBs and for granting or refusing approval to applicant bodies for approved status. The regulator will also set, monitor and assess standards. The regulator will set and publish standards and then assess the AHBs against those standards in respect of their performance generally.

The Bill will provide for a suite of enabling powers to allow the regulator to make inquiries in respect of AHBs, carry out investigations, if necessary, issue guidance and make assessments regarding the performance of approved housing bodies. The Bill also gives certain intervention powers that will allow the regulator to intervene in many different ways according to the risk identified. The Bill also provides for AHBs to adhere to certain obligations under the regulatory framework, including, for example, the submission of information to the regulator and notification to the regulator of any change to articles of association or memoranda.

The Bill is complex. It includes many provisions that will require careful legal scrutiny in the course of drafting. As the drafting of the Bill proceeds, I expect the proposals to be refined. The Minister will of course consider any views of the committee arising from its consideration of the Bill.

Dr. Donal McManus

I thank the Chairman and members for the opportunity to address the committee. I will go through the detail of our presentation and pick out some key points.

The Irish Council for Social Housing is the representative federation of housing associations or approved housing bodies. We have almost 280 members. Collectively, we provide over 30,000 homes for families, older people, formerly homeless people and people with disabilities. At the peak, the sector would have taken over 3,500 people off the waiting list in 2009. That gives some idea of the scale. As well as providing social rented housing, a number of housing associations and approved housing bodies undertake a wide range of additional services, such as community-based education and social and health-related supports. Housing associations include a large number of organisations which provide housing and related supports. They were established as approved housing bodies by local communities. Often they cater primarily for specialist groups such as older people, the homeless and people with disabilities. A small number of larger associations provide housing over a number of locations and manage a significant number of homes.

Housing associations have delivered through new-build provision, acquisitions, Part V delivery and regeneration projects with local authorities. More recent initiatives include various forms of leasing with the private sector and, importantly, non-Exchequer finance, which has played a major part in recent years.

I will outline the structure of our associations. The majority of housing associations are incorporated as companies limited by guarantee. They are governed by a board of directors. Where housing associations have sufficient scale they employ specialist staff to undertake the operations. A large number of smaller locally based approved housing bodies have no staff and their work is undertaken on a voluntary basis at no cost to the State. Overall, housing associations are motivated to provide good-quality, well-managed housing at affordable rent levels. A small number of housing associations are also currently examining additional types of housing, such as cost rental and affordable rental as part of mixed tenure developments. Currently, due to the range of activities that approved housing bodies undertake, the bodies often have to comply with a range of regulatory requirements from a number of different bodies. These include provision of audited accounts and returns to the Companies Registration Office, returns to the Revenue Commissioners and the HSE, where required, as well as compliance with terms and conditions of the capital funding scheme with the Department of the Environment, Community and Local Government and local authorities.

Following recent changes, approved housing bodies will have to comply with the requirements of the Charities Act and the newly amended Residential Tenancies (Amendment) Act, under which housing associations have to register their tenancies with the Private Residential Tenancies Board. At present no single body has full oversight of the sector.

The introduction of a regulator for approved housing bodies will provide an important level of assurance and confidence for the various stakeholders the sector engages with, such as private financial bodies, elected members, local authorities, tenants and the general public. The legislation is focused on the organisational regulation aspects of approved housing bodies rather than the landlord-tenant relationship, which will come under the Residential Tenancies Act and which approved bodies now have to comply with from 2016. Committee members can appreciate the range of increased existing regulatory requirements that the sector has to comply with.

It is important for a new statutory regulator to be fully aware of the regulatory requirements from other regulators which have a role in the sector. In this context we believe there is a need for a memorandum of understanding to ensure the housing regulator is fully cognisant of the requirements of other regulators. This should be provided for in the Bill. We believe the regulator should be independent to ensure credibility and that the regulator is not captured by any specific public or private interests. It should be set up in the public interest, while also having a key enabling role to ensure the long-term sustainability of the sector. The regulator should set standards on finance, tenant services and housing management. It should also set standards on governance and provide oversight with a plan of engagement and intervention where required. The regulator should not undertake a role that could be viewed as that of a shadow director nor should it micro-manage the business activities of approved housing bodies. In part, we envisage the regulator having to provide consent to an approved housing body for disposal of an asset to the value of €10,000 as overly punitive unless this measure was focused purely on physical assets such as stock. This could require consent, for example, for the sale of a maintenance van or photocopier from the regulator.

I will summarise some of the points in response to questions posed by the committee. We will make a full submission on the heads of the Bill.

We welcome the introduction of statutory regulation as an able and supportive role for the sector but believe that, as the heads are currently worded, the spirit is not fully captured as yet. Our key objective is that assurances be provided to tenants and there is detail to be worked out on that.

The principle of proportionality needs to be maintained to ensure that smaller local and voluntary housing bodies are supported rather than undermined during this transition to statutory regulation. The heads of the Bill introduce seven offences for non-compliance which is harsh for many small housing bodies and this needs to be handled proportionally to be flexible in this transition.

There is a need to ensure greater clarity over how the extensive powers of the regulatory body will work; under head 11 on consent of a disposal, head 12 on appointing board members and head 16 on investigative powers. These are extensive powers and, unless dealt with carefully, may be seen as intrusive by some bodies. The proposed co-ordination across agencies is needed and this is why the regulator will drive co-operation in interacting with the PRTB and the charities regulator.

The Irish Council for Social Housing welcomes the continued engagement as a representative body in the development of this legislation and its future implementation. I thank the Chairman.

Chairman

I thank Dr. McManus for his statement. I now invite Mr. Kieron Brennan from Co-operative Housing Ireland to make his opening statement.

Mr. Kieron Brennan

On behalf of Co-operative Housing Ireland I thank the Chairman and members of the committee for inviting us to consider the statutory regulation of approved housing bodies, AHBs. Co-operative Housing Ireland was formed as NABCO in 1973 to represent, promote and develop the co-operative housing movement in Ireland. We work with local housing co-operatives to help households meet their own housing needs in any tenure and we have supported 3,500 families into home ownership through local building co-operatives. The society is also an AHB in its own right and today manages more than 1,800 social rented homes through a network of affiliated local co-operatives across Ireland. The organisation is fully committed to playing its part in delivering the objectives of the social housing strategy and we have plans to deliver a further 1,500 homes by 2020.

Co-operative social rented housing is distinctive because tenants are also shareholding, owner members of their local society. Members elect the management committees of their local societies and select representatives to the national board of the organisation. Co-operative Housing Ireland has a board with majority tenant representation, supplemented by external expertise in governance and housing. Housing co-operatives are typically formed as industrial and provident societies and registered with the Registrar of Friendly Societies. They apply for AHB and charitable status in the same way as other housing bodies.

Co-operative Housing Ireland signed up to voluntary regulation on publication of the voluntary regulatory code in autumn 2013. The society has participated in two years of regulatory assessment. In addition, the society has participated in further voluntary oversight of financial performance in 2015. The experience of the voluntary regulation code has been a positive one. The interim regulation office has engaged on a proportionate basis and with a view to enabling compliance with the terms of the code. This spirit of enabling and facilitation should be brought forward into the emerging statutory framework.

Co-operative Housing Ireland welcomes the move to statutory regulation of the AHB sector. While the motivation for introducing this legislation may be to protect public investment or to promote further investment by the private sector, it is the view of the co-operative housing movement that the primary aim of regulation must be to provide assurance to tenants of AHBs that their homes are secure now and into the future. We recognise that the suite of powers developed for the regulator has been drafted with a view to the worst case scenario, requiring legal enforcement and even the transfer of an AHB's housing commitments. Nonetheless, we remain convinced that the main approach of the regulator should be towards enabling the sector to play a fuller part in delivering social housing and in recognising the diversity of approaches that the sector can bring to bear.

To be effective, the regulator must be independent and must be seen to be independent. While the context of the current legislation is to facilitate private sector investment by way of meeting the ambitions in the social housing strategy, the regulator must have an eye to long-term sustainability. For this reason we advocate establishing the regulator on an entirely independent footing and creating a clear distinction between the regulator and the Housing Agency. We advocate that positions on the board of the regulator be advertised publically and that provision be made for appropriate tenant representation on the board.

The enabling approach which we recommend for the regulator will be critical in the period during which the Act comes into force and in the early period of its operation. We suggest a process whereby AHBs who do not hold stock, or do not intend to develop stock, can notify the regulator before they find themselves subject to the full set of statutory requirements. It is also key, especially for smaller and voluntary AHBs, that the regulator is given sufficient flexibility to engage informally around compliance before the statutory powers are invoked.

We welcome the clear recognition of the role of industrial and provident societies in providing housing and that the Office of the Registrar of Friendly Societies is mentioned throughout. We ask that the Bill would also mention, under heading 11(3)(a), the term "rules" which are the co-operative equivalent of the constitution or memorandum of association.

The explanatory notes to the Bill suggest that AHBs are not expected to contribute to the running costs of the regulator. We would suggest this provision is removed from the Bill so any future change of policy in this area would require new legislation. The proposal in the Bill that AHBs would contribute to a fund to be used in the event of a future AHB asset transfer should also require further legislation. AHBs already pay local property tax for their stock and pay contributions to the PRTB. Further requirements to fund the operation of the regulator would add another unwarranted financial burden that would hamper the ability of AHBs to meet pressing housing needs. Heads 13 and 17 relate to the issuing of further standards and guidance. Due consideration should be given to the proportionate impact these further standards would have on the sector. We recommend that a regulatory impact analysis be carried out on these standards and that consultation with the sector is a requirement.

In our response to the committee’s questions we raised concerns about the proposed restrictions on the disposal of assets. The suggested limitations do not appear to be proportionate or appropriate and we question whether they will assist in promoting confidence in the sector among private lending institutions. We are also concerned about the proposed process for the transfer of housing between AHBs. The acceptance of new housing by the recipient AHB does not necessarily mean that it gains an asset; there are potential liabilities attached to any properties. Due consideration should be given to the supports that may be required, including the provision of State funding, other than the lending from AHB funds described in the Bill.

We thank the committee for its engagement around this vital issue. Co-operative Housing Ireland will make a full submission on the Bill by 21 December 2015 and we have already submitted answers to the detailed questions posed by the committee.

Chairman

I will now invite members to contribute with concise questions please.

Deputy Catherine Murphy

I thank the Chairman. I will adhere to the order in which the contributions were made. I thank the witnesses for appearing before the committee today. The committee is looking at every available option for scaling up and having a more diverse housing stock. The approved housing bodies are very much part of that process. As it is a precursor to this legislation, I am curious to hear if the voluntary code worked and if there were parts of it that did not work which we are in danger of repeating.

With regard to scaling up, will the proposals assist in this? When the Housing Agency appeared before the committee on a previous occasion it told us there was a lot of money available that could have been accessed, for example from the European Investment Bank or pension funds. However, the housing associations tell us how difficult it is to access those funds. It is useful for the committee to understand that and what might be done about it.

We are talking about some level of co-responsibility or co-guarantee with the approved housing bodies. Do the witnesses have any assessment of what might be possible in the next ten years in terms of scaling up the sector? How does what is proposed impact on that? Is it positive or negative? Is there something that should be included which has not been?

A thread seems to run through the general scheme, which is that there is a great deal of additional obligations being put in place. Are these additional obligations balanced? I heard somebody say the regulator should have an enabling role rather than one that is to oversee good governance, and that it is a question of trying to find a balance between both. I am curious to hear what can be done and what it would look like if it were an enabling role. The regulatory impact analysis is a good idea in general because it is quite difficult to visualise the change in an academic sense. This would be quite useful. In terms of co-operative housing and the 3,500, what is the breakdown in terms of tenure? Have there been different experiences with stock that is tenanted as opposed to purchased?

We have quite a fragmented approach to much of how we do things. In many ways, it has not worked to our advantage. Why is it so important to have the role of the regulator being independent of the Housing Agency? The witnesses might just articulate that for us. Someone said the regulator will not govern the landlord-tenant relationship. Should it? While there is other legislation and an independent regulator, it is one thing to manage the physical stock. There is a significant role of tenant management, if one likes. How might that work where there is a mixed scheme? Is it seen as something that could be incorporated here?

Deputy Robert Dowds

I welcome all our visitors today. Deputy Catherine Murphy has asked most of the questions I wanted asked but I have a couple more. I get the impression from their contributions that, broadly speaking, the witnesses are in favour of the Bill. Do they see it primarily as improving how approved housing bodies work? Do they see it having any role in improving the delivery of housing, which is a vital and important issue? I would be very interested in the responses of witnesses to the issue Deputy Murphy raised about the Housing Finance Agency and the capacity to access that funding. While this is not directly to do with the Bill, the Minister for Public Expenditure and Reform, Deputy Brendan Howlin, mentioned that there were 536 housing bodies. How many are active and likely to deliver housing? I will leave it at that.

Chairman

We will go in the order in which people addressed the committee. We go to Mr. Allen first.

Mr. Damian Allen

I will deal with some of Deputy Murphy's questions first. In terms of how the voluntary code has worked, the evidence is that it has worked very well. It has been a positive experience for the bodies that have engaged with the interim regulation office. The principles of enabling and learning that have been inherent in the application of the voluntary code are something we want to ensure are maintained through to the Statute Book. That is something we have been keen to observe and maintain. For example, in the publication of the financial standard by the regulation office during the summer this year, it can be seen how it has been made proportionate. For example, if it applies to one of the larger approved housing bodies, there will be quite an onerous requirement on it to provide information. However, in so far as it applies to the smaller, so-called tier 1 approved housing bodies, the same level of long-term business planning and strategic plans do not need to be provided. Instead, they need to provide detailed income and expenditure accounts. As such, the application of the code has been tailored. It has worked very well and it is something we would like to ensure is maintained as the legislation develops.

I was asked if the Bill will assist in upscaling. I think it will because the presence of regulation has been shown in other jurisdictions to be an important consideration for lenders in order that there is some structure to underpin the overall sector. From that point of view, it should help. However, it is but one of a number of measures required for upscaling to take place. The Department works very closely with the sector in the context of the social housing strategy and the working groups there to look at what those various levers might be. Regulation is one, obviously, but the funding schemes and the mechanics behind them on the release of funding and at what stage in a project and how quickly it happens are all important considerations. While it will help, it is just one of a number of levers that need to be in place for upscaling to occur.

I was asked if the obligations are balanced. I think they are. I acknowledge that crafting the legislation is a balancing act in terms of providing sufficient powers for the regulator to function when it needs to while not wanting to interfere with the boardroom decisions of approved housing bodies, AHBs, on their own investment decisions and so on. This is a balancing act and something of which we are very conscious. We are trying to ensure a balance is present in the general scheme.

I was asked whether the landlord-tenant relationship could be integrated. Only two weeks ago, we enacted the Residential Tenancies (Amendment) Act 2015 which extended the Residential Tenancies Act to AHB tenants and landlords. That has worked to some extent to remove one of the areas of fragmentation that existed. At least now tenants in the private rented and AHB sectors have a common place to go. However, we still do not have a one-stop shop for all tenancies and providers of housing. What we propose in the context of the Bill is a very specialised outfit. There is merit in the short term at least in focusing on that and getting the regulation right before looking at a catch-all structure to encompass all tenancies and providers.

In terms of the number of bodies that are active, Deputy Dowds is correct that there is a large number of approved bodies at 526. There is a huge disparity, as the Deputy probably knows. Many of those bodies are very small local community projects which are providing one to four houses in their community. At the other end of the scale there are quite large bodies that are providing hundreds and even thousands of homes for people. It is quite a disparate sector. A total of 210 bodies have registered or signed up to voluntary regulation. One could say that is an indication, perhaps, of the ones that are most active and developing. However, looking at the regulation office's report, I believe the regulation office plans to undertake a review of all the approved bodies, and the Department will work with it on that, in terms of trying to get a better handle on the balance of 300 or so as to where they are, what they are doing, whether they are still in the business of providing housing, whether they are still in the business of wanting to develop that or whether they are happy with the service they currently provide, which might be just to maintain their service for the small number of properties they have.

Dr. Donal McManus

To follow up on what Deputy Catherine Murphy and Deputy Dowds mentioned about the scaling up aspect of the sector and how this regulation can deliver, it was mentioned earlier on the voluntary code that there are probably four dimensions to assisting the sector in scaling up. One is certainly regulation and the others were new financial models which have emerged, building capacity and predictable funding streams. Bringing those together will provide the platform for upscaling.

In terms of what the sector can offer, a couple of years ago we conducted a survey of the larger bodies and their ambition was to deliver 5,000 homes over three years. That is with private finance. The context should be borne in mind. Many other countries brought in private finance 30 years ago, and it took almost 30 years for that to be a major issue for delivering social housing. We are doing it in five years. We are trying to introduce regulation and to have funding for private finance at the same time, so a few things must come together. It is those four elements, including policy co-ordination, financial models and building capacity. Building capacity is related to the land supply. Land supply is another element the sector needs in terms of delivery.

There is ambition in the sector, especially for the larger bodies that want to supply more housing. They have targets for what they wish to deliver. We believe the sector has much more to provide over the next five and ten years. Private finance does not just manifest itself in housing over a couple of years. If we are looking at ten years as a life cycle, we believe the sector will move from being very much dependent on the public sector for 100% finance into private finance, but we must have the other elements in place as well.

With regard to the smaller, tier 1, bodies, we have been working with some of them to build up their capacity in the regulation process as well. Bear in mind that three or four elements of regulation were introduced in the last couple of years, such as the charities regulation and the Health Information and Quality Authority, HIQA, and HSE regulation. This has come on the back of a number of issues.

In terms of the landlord-tenant relationship, it is probably better to separate the regulation of the organisation rather than the landlords and tenants. Tenants and landlords have their own rights to seek remedies. Certainly for the future we see regulation as the key element of the four elements to assist the sector and build the confidence of investors. Over the last year we have found that the single biggest question from investors is whether the sector is regulated. Investors such as the European Investment Bank with the Housing Finance Agency, a number of private banks and a number of bodies in the capital markets see regulation as a very useful tool to build up confidence for them. That will certainly continue.

The four elements I mentioned, working together, will help to upscale the sector over the coming years.

Mr. Kieron Brennan

To a large extent I agree with what Dr. McManus said, but I will add some points. First, Deputy Catherine Murphy asked about the voluntary code. It has been largely successful. It has governed the activities of most of the social housing stock. However, it is very limited in its application. It does not bestow many powers on the regulator, so this new Bill provides a deeper and more appropriate framework. We would very much welcome that.

In terms of upscaling, I echo what the last two speakers have said. A number of items are required for the social housing sector to make a leap forward. Regulation is one. Regulation is a requirement for any large-scale investor so they can have confidence in what is happening in the sector. The fact that it will be on a statutory basis should increase that confidence and should bring us to a position where we can look at other forms of finance which are put forward in the social housing strategy. Indeed, we welcome the strategy. It speaks in three or four sections about enhancing the capacity of social housing bodies, so it sets out an aspiration that the sector will be upscaled in terms of its capacity. Again, there are a number of issues around that. There is funding, which we have already mentioned, and regulation. There is also access to sites as non-State agencies. That must be put on some type of proper footing. Without knowledge of the availability of sites on which to build it is very hard to put a programme of work in place within a very short timeframe, which is what we confront at present.

The other issue is co-ordination from the State side. We welcome the fact that the Department is reviewing its funding provisions for social housing, and they are improving. However, there is also the issue of co-ordination among State agencies. The average AHB must deal with quite a few. It must deal with the local authority under a number of headings, including planning as it is the housing authority and the allocator and nominator, the Housing Finance Agency, the Department, the Housing Agency and others, and it must deal with them repeatedly. A degree of co-ordination on the State side, with perhaps one agency taking the lead role in that regard, could take huge amounts of time out of the period necessary to produce housing, and we are anxious to produce as much as we can as quickly as possible.

Deputy Catherine Murphy also asked about the different tenures within co-operative housing. There are two main aspects to it, although we believe co-operative housing is for everybody regardless of their socioeconomic status. As a rule, Co-operative Housing Ireland manages social rented units, but in the past, and up to this day, we have assisted many people into co-operative ownership. Typically, what happens is that a group of people comes together and acquires a site, perhaps from the local council through the low cost sites scheme. Through their co-operative efforts they collectively produce housing at a lower cost and at less risk for themselves. Once complete, that housing would go into private ownership. Our organisation has assisted over 3,500 people to do that. We still do it, and we wish to continue doing it. Again, however, we believe it is something which must be enhanced and enabled with further assistance brought to it.

Deputy Dowds asked about the enabling aspect of the proposed regulatory arrangements before us. It is good that we are involved at an early stage on this. On the one hand one can fully understand why a new regulator would wish to set out its stall and gain what it would consider to be the appropriate powers. We wish to have appropriate, strong and independent regulation, but there must be some balance where the regulator has an enabling role. It is not just about protecting the asset and promoting security around tenure, it is also about the matters we have just been discussing. In other words, the regulator also has a role in enabling the entire social housing sector, not just by providing confidence but also by promoting standards and helping us all move to a place where we can aspire to do much more than we do today.

Mr. Dermot Sellars

I wish to add a point. Deputy Catherine Murphy asked why it was important to separate the regulator from the Housing Agency. As Kieron Brennan mentioned, there is a need for a single, stronger point of contact for us to work with and we would see the Housing Agency playing that role.

However, if one is holding oneself out as the regulator and the arbiter of good governance, it then is vitally important one's own governance is whiter than white. Consequently, if one has a regulator that sits within a Government body which is tasked with promoting delivery and securing highly challenging targets and objectives, it naturally follows there should be a split between the organisation that is trying to push delivery and the organisation that is trying to protect the interests of tenants and public investment. This is why we argue for that split between those two roles.

Deputy Robert Dowds

Through the Chair, I wish to come back on two points. Mr. Brennan mentioned one matter that obviously is highly important. To what extent can the bodies obtain access to land by contacting county councils or must they deal with private developers because in some cases, councils will have land? Does this depend on the bodies themselves or are there leads out to them from councils asking them to show an active interest? Second, I refer to the issue raised by both Deputy Catherine Murphy and me on the Housing Finance Agency, HFA, and access to its funding. Although it may not be directly connected with this legislation, it is a matter that arose at a recent meeting of the joint committee. The aforementioned agency appears to have quite an amount of money that seems to be simply sitting there at present. It would be far better if it were used for housing construction in some shape or form.

Mr. Kieron Brennan

I will begin with the first question. Deputy Dowds asked about the availability of sites or the seeking of sites for approved housing bodies, AHBs. I believe all AHBs are in the same position, that is, there is no entitlement to sites, if I could put it that way. As the Deputy suggested, one must go foraging among local authorities, the private sector and elsewhere. However, we are in a crisis situation in respect of social housing and there is a degree of co-ordination being brought to bear through the governing structure for the social housing strategy. We hope protocols will be agreed shortly with some local authorities on the allocation of resources, be they sites, completed Part V units and so on. I suggest voluntary bodies wish to avoid a situation in which they end up competing unnecessarily for sites or properties and, for example, pushing up prices against one another. That would be completely unwise and a bad use of our resources and those of the State. We think it is vitally important that protocols are agreed in this regard.

Deputy Catherine Murphy

It is very useful to hear some of the practical points, such as on co-ordination on the State side to enable the bodies to get on with what they are doing as opposed to spending a lot of time interacting with various State agencies, and on the availability of sites. In respect of the latter, it appears to me as though at the least there should be a national register of what is available and what can be brought into beneficial use as quickly as possible. Several witnesses have referred to the importance of regulation in respect of drawing upon international or institutional funds. I note it will take some time for this legislation to be enacted as it is only in its early stages. While I acknowledge it may not be the ideal situation for investors, is it still possible, under the voluntary code, to draw down some of the funds that might be available? All members are acutely aware of the country's level of indebtedness, the general Government deficit and the debt profile, which mean there is a limited capacity for Ireland to draw down funding on its balance sheet and obviously, the bodies are seeking opportunities off-balance sheet. It could be another year or 18 months before this legislation is enacted, as a couple of processes must be gone through before that stage is reached. Has operating under the voluntary code been an impediment, given that the witnesses are telling members it is?

Dr. Donal McManus

I will respond to a couple of the issues. In respect of the Housing Finance Agency, quite a lot of finance is coming into this sector at present because investors know they can get a reasonable return from the payment and availability, P and A, agreement. Government gilts are at a low level and the return is much higher in the sector. Consequently, there has not been much of an issue in respect of the scale of finance coming into the sector as such, it is just a process of translating that loan finance into schemes on the ground. While we have finance on one side, what we do not have at present is product. Over the past four or five years, the sector used acquisitions in the private market, that is, it bought properties and used the Housing Finance Agency and other finance bodies to acquire those properties. However, that product no longer is available to the same extent as it was. This is why, as has been mentioned, the whole emphasis now is on new build in order to get sites assembled. We have called for a land assembly programme. Sites have been identified by the Housing Agency and others and this should be translated into a land assembly programme. For a number of years, we had a very good low-cost site scheme operated by the local authorities. That worked very successfully as housing associations accessed that scheme and translated it into new build. In respect of community councils, that was a key tool 20 years ago, when community councils and voluntary groups donated sites to housing associations to deliver units. However, that option is no longer there as most of those sites have been taken up. Consequently, we have been relying on the private sector to bring forward both sites and new-build developments. However, we still need a number of options for sites and that is why a low-cost site scheme, which was successful a number of years ago, should be reactivated. In addition, there is land within the land aggregation scheme that could be used for the sector. It is important to focus on the issue of land now because it takes two or three years for it to go through the system. This is why a land assembly programme in place now would help to translate into units over the coming years.

As for the issue of the purpose of regulation, it is not a complete inhibitor for finance bodies that there is only a voluntary code at present because three years ago, we did not have the Housing Finance Agency and did not have the participation of the three banks. They now are coming in because they can see a return and as long as one can repay the loans, there is a return. Moreover, there is a structure in this context. The payment and availability agreement is quite a useful structure even in European terms. It is a cashflow for housing associations to repay investors over 30 years and is reasonably solid. Consequently, I do not believe that, in itself, it is an impediment. However, what I think will help is that as it becomes more statutory, it may help to lower the price coming in at that time. At present, there are approximately 12 approved housing bodies that have been approved by the Housing Finance Agency and probably a further half dozen housing associations are accessing private finance. One thing that has not been done yet is accessing the capital markets, although there have been some discussions internally within the sector on whether it would be possible to have a special finance vehicle controlled by AHBs. Deputy Catherine Murphy should note that idea is off-balance sheet and we are trying to progress. However, the lack of statutory regulation has not been a full inhibitor up to now because some financial institutions realise this will happen, albeit perhaps within six months or in one year's time. The benefit of having statutory regulation is it could bring in even more investors because they know there is intervention and engagement and consequently, it will not go awry.

Chairman

Do any witnesses who have not spoken wish to say a few words?

Ms Karen Murphy

On the question of scale, which has come up repeatedly, we have conducted an internal survey that looked at the pipeline among some of our larger members. We estimate there are approximately 3,200 units in the pipeline for delivery by 2017. As with all development pipelines, schemes will fall in and out of that but we estimate the capacity of the sector has been growing, albeit incrementally, in recent years. Even if one considers the level of applications to the Housing Finance Agency, I note it has increased over the past year. I believe €180 million in applications are with the HFA at present, even though only €60 million has been drawn down. This is part of stage payments and the building process and will be drawn down over time. Moreover, up to €500 million is available there and it is to be hoped the particular pipeline to which I refer, the 3,000 units, can be built. However, the question regarding some structural barriers, such as the co-ordination of the schemes and access to sites, must be tackled now in order that from 2017 onwards, the pipeline will be built up in advance. It has been well stated that it takes 18 months to two years for a scheme to come to fruition and those structural barriers and, in particular, access to sites in a co-ordinated and programmed way should be considered because local authorities and public bodies have sites in their ownership. Were a programme in place in this regard, it would make a significant difference over the lifetime of the strategy because there is very little product available on the market at present from the perspective of acquisitions.

We need to construct - and to be planning for that now - in order to ensure delivery during the coming year.

Deputy Robert Dowds

Are those 2,700 units largely in the greater Dublin area?

Ms Karen Murphy

Is the Deputy referring to the 3,200 units?

Deputy Robert Dowds

Yes.

Ms Karen Murphy

That is a nationwide survey among a small number of the AHBs, the larger bodies. This year there was a capital assistance scheme, CAS, call at the beginning of the year and approvals were granted at the end of July. If there was a CAS call, they would be spread fairly well throughout the country. However, it is difficult to plan ahead for CAS when it is based on a call. One may have a scheme in mind for a CAS programme but one cannot submit an application until there is a call in place. That is part of the co-ordination issue we are talking about. We do not know from year to year when the next CAS call will be. It is a matter of being able to bring together such systems in place so that we can predict and plan to deliver better.

Mr. Justin O'Brien

To add to what my colleagues have said, I reiterate the point that the statute regulation, when it comes in, will give security to banks and financial institutions which want to loan to the sector. It is evident that they want a framework that gives them safety. In that sense, the proposed regulator's Bill and the office will enable better delivery. Some of the members' questions were on the performance aspect and on the delivery by the sector, which is understandable in the current context, but I would refer back to the heads of the proposed Bill. The powers being proposed for the regulator are substantive.

We all would be of the view that the enabling aspect - of enabling the sector to develop and providing safety in respect of it - is important in terms of the governance of the sector and to ensure that boards and the sector deliver and that there are common criteria on performance standards. The sector has worked with the voluntary regulator's office to have an agreed financial code. We are now going to engage on performance standards with the voluntary regulator's office as well in order to ensure that there is common measurement of how we deliver our services. It is reassuring for everybody that there is transparency in respect of what we are delivering and how we are delivering it.

The proposed legislation is quite complex. It is alluded to even in the heads of the Bill. There are constitutional aspects to this that are alluded to in terms of the suggested powers being given to the regulator's office of intervening over the disposal of assets. That is not an insignificant statement and it is noted. I am sure the principal officers and the Attorney General will have to deal with it. It is really important.

Equally, it will overlap with other legislation, such as the Companies Act 2014 and, no doubt, the Finance Acts. It is not simple legislation. It will need careful preparation by the Department, consideration by the members and, equally, input from the Irish Council for Social Housing and the co-operative movement in terms of trying to temper this in an effective, efficient and transparent way for the delivery of housing under regulation. It is quite a large and complex proposal and it will take some time to progress. It is important that it is enacted. The sector welcomes it in broad terms. We have engaged with the voluntary regulation code to which most are signed up. We see it as being necessary for public confidence among both citizens and legislators. I can only wish the committee well in its endeavours over the coming months.

Chairman

Time is against us.

Deputy Catherine Murphy

We have a mere general election to get out of the way as well.

Chairman

I thank the witnesses for their interaction with members this evening. They are now excused. They are free to go, although I hate saying that.

We will suspend for two minutes and resume in private session.

The joint committee suspended at 3.34 p.m., resumed in private session at 3.35 p.m. and adjourned at 3.50 p.m. until 2.15 p.m. on Wednesday, 27 January 2016.