I must oppose this amendment, which is the same proposal that was already defeated on Report Stage in Dáil Éireann earlier this month. It puts essentials of the HBFI scheme at risk while conferring no additional powers on the agency and these circumstances have not changed in the short period since it was rejected by the Dáil. Accepting this amendment could restrict types of projects that HBFI may finance from capital raised in the market. These restrictions have the potential to result in HBFI's activities being brought on balance sheet and leave the agency vulnerable to state aid complaints. Such issues arise because of how this amendment is drafted. In drafting the Bill, the Department of Finance has been careful to ensure that the board of management has full flexibility to provide any type of funding which serves to increase the supply of residential development generally. Referring only to particular segments of the market, such as funding for affordable housing, social housing or remedial work on multiple development units, this amendment could be interpreted as excluding all other types of residential properties and developments financed by money borrowed by HBFI. I am sure that is not the Senator's intention. This would inhibit HBFI's ability to achieve its stated policy of increasing the supply of housing in the State.
This amendment could also detrimentally affect the balance sheet treatment of HBFI in line with EUROSTAT rules. Restrictions on the type of lending in which HBFI may or may not participate will increase the risk of HBFI's activities being classified as within Government, with a resulting impact on gross general Government debt. Such an outcome could have implications for the amount of money the Government has available for other necessary projects and may restrict the ability of HBFI to provide funding in any given year.
The potential restriction on the type of lending HBFI conducts could give rise to state aid complaints from other prospective borrowers also wishing to access this funding who may be refused access where preference is given to other projects. These potential pitfalls would have the combined effect of discouraging HBFI from using its powers to borrow more funds, inhibiting its ability to boost the supply of housing in the State. This will be especially detrimental in circumstances where demand for funding exceeds the €750 million provided by ISIF. It is important to recognise that there is little to be gained by increasing this level of risk.
This amendment does not grant HBFI any additional powers regarding the type of projects it is able to finance that it does not already possess in the current Bill. The additional powers of lending that this amendment seeks to introduce are also available under section 7 of the Bill. Section 7 provides HBFI with powers to lend for the purposes of funding residential development in the State, provided such developments are commercially viable. Section 7(2)(b)(i) provides that HBFI shall aim to "contribute to the economic and social development of the State" in its lending. The Government made an amendment on Committee Stage which further extended these considerations to require HBFI to have regard to Government policy on housing when lending. These safeguards underpin that HBFI already has full flexibility to fund affordable or social housing schemes, provided these schemes are commercially viable. For example, were the applicant for a similar project to that of the Ó Cualann Cohousing Alliance for a housing development in Poppintree in north County Dublin to seek finance, HBFI would be in a position to grant it.
As for providing finance for remedial works for multi-unit developments, I fully understand and appreciate the stress and difficulties experienced by owners of homes which require remedial works. There is nothing in this legislation which prohibits HBFI from engaging in this type of lending, providing it is on commercial terms. In providing such lending, it is important to note that HBFI would not be able to do so at cheaper rates or for longer maturities than are already available in the market. Under state aid rules, it is simply not possible for HBFI to lend on terms that would not be acceptable to other market operators. Any deviation from this principle would jeopardise the scheme and would likely require state aid approval. It is envisaged that HBFI will conduct a number of market engagement exercises later in the year where it will meet prospective borrowers and industry representatives to provide clarity on the application processes and eligibility criteria. I suggest that any prospective borrowers seeking funding for the type of remedial works outlined in this amendment should engage with HBFI at that time to explore potential options.
This amendment increases the likelihood of a number of key risks to HBFI's operations without providing any tangible benefit. I therefore oppose it.
