Dáil Éireann Debate, Tuesday - 25 January 2022
96. Deputy Thomas Gould asked the Minister for Housing, Local Government and Heritage if his attention has been drawn to the fact that the average local authority will pay over €300,000 to an organisation (details supplied) for mortgage-to-rent schemes over the next 25 years for properties the local authority will not own; and if he will make a statement on the matter. [62338/21]
View answerThe Mortgage to Rent (MTR) scheme introduced in 2012 is targeted at supporting households in mortgage arrears who have had their mortgage position deemed unsustainable by their lender under the Mortgage Arrears Resolution Process (MARP); agree to the voluntary surrender of their home and are deemed eligible for social housing support. The property in question must also meet certain eligibility criteria. The concept of the scheme is that a household with an unsustainable mortgage goes from being a homeowner to being a social housing tenant. The borrower surrenders their property to their lender who sells it to a MTR provider which can be either an Approved Housing Body (AHB) or since 2018 a private company, Home for Life Ltd. The AHB or local authority (in the case where the property is sold to a private company) becomes the landlord and the borrower remains in the property as a tenant paying a differential rent to the landlord based on his or her income.
To the end of September 2021, 1497 households with unsustainable private mortgages have completed the MTR scheme. The 1497 households in the scheme represent 2460 adults and 2091 children who have remained living in their homes and communities. The availability of the MTR scheme means that people can avoid losing their homes and the associated family upheaval. It also ensures that the State is not required to provide alternative housing for such households at a time when supply continues to be constrained.
In the initial years of the scheme, the scheme relied solely on AHBs to purchase from lenders, properties that have been voluntarily surrendered by borrowers. In the MTR scheme, AHBs fund the cost of purchasing units from a combination of low interest borrowings under the Capital Advance Leasing Facility (CALF) administered by my Department and only available to AHBs, and private finance or other borrowings. While the CALF debt is not required to be paid back to the State for a further 20-30 years, the private finance must be repaid over that period. This debt and the ongoing maintenance and management of the unit is financed from the income from the payment and availability payments made by the local authority and recouped from my Department which are related to the market rent of the property.
A Review of the MTR scheme for borrowers of commercial private lending institutions was published in February 2017. While there are obvious social and economic benefits to be derived from the MTR scheme, most significantly by facilitating individual households in mortgage arrears to remain in their home, the 2017 Review acknowledged that consideration needed to be given to the capacity of AHBs to intensify their involvement in the MTR scheme given the ambitious targets for the AHB sector around delivering new social housing supply.
The 2017 Review committed to exploring the potential of private institutional investment in MTR in order to allow the MTR scheme to deliver at scale. The capital outlay to purchase these properties could be provided through private finance to avoid competing for upfront exchequer capital resources within the overall funding available for social housing. An Expressions of Interest (EOI) Request issued in 2017 inviting parties from the private sectors to express their interest in participating in a new alternatively funded long-term MTR lease model. The National Development Finance Agency (NDFA) acted as financial advisor during the process, undertaking due diligence on the financial capacity of the proposers to commit to the long-term undertaking of the scheme. The outcome from the EOI process was that a new MTR alternatively funded lease model was announced in 2018 with Home for Life Ltd. as the participant from the private sector.
Under this alternatively funded model, Home for Life Ltd. purchases properties from lenders subsequent to their voluntary surrender by borrowers that meet the MTR eligibility criteria and then enters into a long-term 25 year lease arrangement with the local authority in whose area the property is situated for a defined term at an agreed rent, thereby enabling the borrower to remain living in their own home under a tenancy agreement with the local authority. Home for Life Ltd. is also responsible for managing and maintaining the property on behalf of the local authority in accordance with the lease requirements.
Regardless of who the property owner is under the MTR scheme, AHB or Home for Life Ltd., the local authority is obliged to meet the housing needs of social housing tenants indefinitely and beyond the term of the applicable lease arrangement.
The inclusion of a private entity, in addition to the existing AHBs who continue to be an integral part of the MTR scheme, gives opportunities to achieve greater scale and meet the long-term housing needs of a greater number of borrowers who have unsustainable mortgage arrears. Given the sizeable cohort of borrowers still in long-term mortgage arrears, all the MTR providers participating in the scheme are needed in order to meet the demand for the scheme.
