Wednesday, 20 June 2018

Ceisteanna (24)

Darragh O'Brien


24. Deputy Darragh O'Brien asked the Minister for Housing, Planning and Local Government the status of the development of a special purpose vehicle to enable credit union fund investment in social housing; the timeframe for its launch; and if he will make a statement on the matter. [26723/18]

Amharc ar fhreagra

Oral answers (8 contributions) (Ceist ar Housing)

Question No. 24 was my first priority question, for those in the Irish League of Credit Unions who may be watching proceedings. I want to ask the Minister about the progress made or lack thereof in the development of a special purpose vehicle. For almost five years the credit unions have been advocating utilising about €10 billion worth of assets for investment in the social good, but not one cent of that money has been used to date. The Central Bank announced on 1 February this year that it had granted approval and changed regulations to diversify the classes of investments for credit unions which can play a really big role in investing in social and affordable housing. When will the special purpose vehicle be set up to allow credit unions to invest in social and affordable housing?

The Government's Rebuilding Ireland: Action Plan for Housing and Homelessness emphasises the need to look at new ways of funding social housing delivery, in particular, the need to provide structural, funding and policy supports to increase delivery of social housing by approved housing bodies. Against that background, credit union representative bodies put forward proposals for how credit unions could provide loan finance for approved housing bodies for social housing. In February, following the publication of a consultation paper and a period of consultation, the Registrar of Credit Unions who is responsible for regulatory oversight of credit unions amended the regulations to allow credit unions to invest in tier 3 approved housing bodies under certain conditions. Tier 3 approved housing bodies are the larger ones.

In May 2017 my Department announced that funding of €49,000 would be provided for the Irish Council for Social Housing, ICSH, to support an initiative through which it would develop proposals for special purpose vehicles and a mechanism that would enable the sector to attract investment in social housing projects from potential investors, including the credit union movement. Work has been ongoing between the ICSH, a number of larger tier 3 approved housing bodies and their financial advisers on the development of such a vehicle, taking account also of the recent EUROSTAT decision on the reclassification of the approved housing bodies sector. The ICSH anticipates that this work should be completed in the third quarter of the year. My Department and I have met the credit union movement on a number of occasions to discuss its wish to invest in social housing. The Department has also facilitated engagement between the credit union sector and the ICSH with a view to encouraging links between the two sectors and allowing credit unions to share the benefits of the work under way.

While it remains the case that the development of specific special purpose vehicles to enable the credit unions to make investments in the sector is a matter credit unions have to resolve, my Department will continue to be available to engage with the sector, as required.

On 27 February the Irish League of Credit Unions met departmental officials shortly after the Central Bank had given its approval for the diversification of the classes of investments. We understand it applies to tier 3 approved housing bodies. There is €700 million available to be invested that could be invested in the provision of about 5,000 homes. The Minister is talking about the third quarter. When will the regulated investment vehicle set out in the credit union regulations be established? Are we setting a target date? When will the special prupose vehicle be set up? I know that work is ongoing on it. The Minister is saying it will be completed in the third quarter. The Department had originally told the Irish League of Credit Unions it would be ready in June or September to receive the investments. Are we still working towards it being ready in September? I hope we are. I noted the Minister's comments earlier in the week. I welcome the discussions he is having with the European Investment Bank on investing in social housing. It is something I welcome. There is €10 billion available in Ireland in the credit union sector, with €700 million ready to be used. Discussions with the European Investment Bank are great, but there is Irish finance available for community good. Will the Minister give me a target date for when he wants the special purpose vehicle to be established and up and running?

It is very important as we resolve the housing crisis that we look to new finance vehicles. The Deputy is absolutely correct to emphasise the role the credit union sector can play. There are also a number of funds we are looking to get involved in the provision of social and affordable housing. We can leverage these streams of funding to make sure we put secure housing in place and at less cost to the taxpayer. That is why when we talk about housing delivery, it is very different from 30 or 40 years ago. There are different streams we can use to maximise value for the taxpayer, while also securing homes for people. We have to be very careful with the credit union sector as it went through its own difficulties during the financial crisis. We have to recognise that regulation of the credit union movement is a matter for the Central Bank, with which we do not want to interfere. It was a very welcome decision when it stated tier 3 approved housing bodies could receive funding from the credit union movement. It is a substantial amount of money, at just under €700 million. There are two classes of credit unions that could become involved. We are aiming for September to have clarity on the special purpose vehicle. We have to be careful in the Department because we cannot get directly involved with an approved housing body and a credit union. It is for the Irish Council for Social Housing to work with the innovative funding available to put the special purpose vehicle in place. The third quarter of this year is the deadline to which we are working in having clarity on the matter and moving forward to leverage the investment.

I appreciate the Minister's answer, but I am not sure for what clarity we are looking. The Central Bank has given its approval. This is about establishing the investment vehicle. The Minister has mentioned that we need to be careful with the credit unions because of their past history, but the Central Bank has given its approval for this form of investment. Therefore, no clarity is needed. The Department allocated funding to work with PwC to establish the special purpose vehicle. Establishment of the special purpose vehicle is needed to accept finance from credit unions to invest in tier 3 approved housing bodies. The Minister may want to advise separately on the need for clarification. If there are outstanding matters that need to be clarified, the credit union sector needs to be so advised. I certainly need to be so advised. There is an absolute desire for the credit unions for the common and community good to become involved in building social and affordable housing and investing in approved housing bodies, but we are dragging our feet. I am asking what clarification is needed. If the Minister is saying September, does it mean that the special purpose vehicle will be set up and established and that the credit unions will be able to start to invest from September? Is that what the Minister's response means?

We have to remember that it is a decision for the approved housing bodies to make with the credit union sector. We cannot force them into making it.

Phase 3 is about the technical work required to put together a special purpose vehicle. It is not simple to put a special purpose vehicle together. There are a number of technical requirements. It has been indicated to me that further clarification will come from the approved housing bodies to my Department on how exactly they can do it. We have to bear in mind the separate work happening in the Department of Finance on EUROSTAT's decision on reclassification. What we have said is that it will not stand in the way of delivering the houses we need to deliver through the approved housing body sector under Rebuilding Ireland, but that does not mean that it is a straightforward question as to how exactly the finance will be secured in terms of the balance sheet. It is technical work and there are further questions coming from the approved housing bodies. It will be up to particular approved housing bodies working with particular credit unions to put a special purpose vehicle in place. They will be in a position to do so from the third quarter of the year when the final step is completed. If they choose to enter into an arrangement, because there are other finance houses looking to undertake jobs with approved housing bodies, they will be able to do so from that point on.