Minister Donohoe satisfied that role remains for Home Building Finance Ireland following third Review

The Minister for Finance Paschal Donohoe today published the third review of Home Building Finance Ireland (“HBFI”) as required under Section 24 of the HBFI Act. Section 24 of the HBFI Act provides for a periodic review of HBFI to ensure that it is fulfilling its functions as set out in the Act and that its continuation remains necessary given prevailing market conditions. This review is now available on the Department of Finance website.

Based on the submissions to the public consultation, stakeholder engagement and the assessment of input from HBFI, the Minister for Finance is satisfied that there remains a role for HBFI in supporting access to debt funding for housing delivery.

However, as a higher volume of funding will be required to support the sector scaling up, it is important that HBFI targets its lending to areas which are underserved by the market, where it can have the greatest impact and that it does not displace private capital. In particular, stakeholders advised that HBFI plays a key role in providing access to finance for small and medium developers and regional areas. Segments of the market which are generally well served by existing lenders include funding for social and affordable housing delivery and the funding of larger developers with a proven track record.

On this basis, the Minister has concluded that HBFI should continue in operation at this time. The next review under Section 24 of the HBFI Act will be published in 2027, or sooner if deemed necessary by the Minister for Finance.

Commenting on the review of HBFI, the Minister for Finance Paschal Donohoe stated:

“Since it began lending in 2019, HBFI has had a notable impact on the availability of senior debt finance across the country. In the period to the end of 2024, HBFI has approved total funding of €2.67 billion to support the delivery of up to 13,186 homes across 184 developments and 23 counties in Ireland.

“As we seek to scale up housing delivery, additional development funding from all sources will be required. As set out by the Housing Commission, diverse and stable sources of finance are required to deliver the homes we need. HBFI will continue to play an important role in supporting access to finance for viable residential developments, particularly for small and medium developers and developers in regional areas.

“It is essential that in contributing to the development funding available in the market, HBFI targets those areas of the market where it can have the greatest impact, ensuring additionality in the market. Given that the debt market is fluid and continuing to evolve, this means that HBFI must actively calibrate its lending to the market and complement other sources of funding rather than displace it.

“I would like to thank all those who responded to the public consultation and who engaged with my department during the course of this review. My thanks also go to the HBFI Board and team for their contributions to this process and for their continued work.”

Dara Deering, the Chief Executive of HBFI, said:

“This review shows that HBFI is continuing to play an important role in supporting housebuilders deliver new homes across Ireland. To date, we have funded over 13,000 new homes across Ireland for first time buyers, renters and people who need social or affordable housing.

“HBFI has a strong track record assessing the evolving funding landscape and responding to new and emerging funding gaps in the market. By continuing to evolve its product offering, HBFI will support increased housing supply and give confidence to housebuilders that funding will be available as they scale up.“

In compiling this report, the Department of Finance undertook stakeholder engagement, including a written public consultation. Stakeholders were asked to provide their views on the availability of finance and the funding landscape for residential development more generally, as well as on the impact HBFI is having on the market for residential development finance. The key themes arising from this feedback are set out in the report, with a high-level summary set out below.

Home Building Finance Ireland

HBFI was established in late 2018 as an important government initiative to address a shortfall of finance available for the construction of residential housing in the State. Through its broad product range, and agile business model, HBFI plays an important role in supporting the delivery of Government’s housing targets.

HBFI Key statistics as at 31 December 2024:

• total funding approved €2.67 billion
• number of homes supported 13,186
• number of loan facilities approved 184
• average loan size €14.5 million
• average number of homes per scheme 72

Through the consultation process, stakeholders advised that while the debt market has evolved and matured over the past five years since the establishment of HBFI, there remain segments of the market where the availability of debt finance is more constrained. On this basis, feedback from stakeholders is that there continues to be a role for HBFI in providing debt finance in the market, particularly for supporting the availability of finance for small and medium developments, and developments in regional areas, which can be inherently higher risk.

A range of stakeholders have underscored the importance of HBFI ensuring that it continues to calibrate its lending activity to respond to changing market dynamics, ensuring that it maintains a focus on segments of the market where it can have the greatest impact and thereby ensuring that it does not displace private capital.

Stakeholders noted this particularly in relation to funding for the delivery of social and affordable housing, which is well served by existing lenders, with strong competition from both senior lenders and alternative lenders, in particular where another State entity purchases the completed homes. The second clear theme arising was in relation to HBFI funding of larger developers with a proven track record. Typically, such developers can source debt funding for viable schemes. Stakeholders advised that HBFI should prioritise the funding of small and medium developments.

Funding Landscape for Residential Development

The report includes an overview of the key themes arising from stakeholder engagement in relation to the funding landscape for residential development more broadly.

Stakeholders advise that the debt market has matured in recent years since the establishment of HBFI. While there are fewer retail banks now lending for property development in Ireland than was previously the case, recent years have seen the entry of a broader pool of alternative, non-bank, lenders providing funding to residential development. This broader range of funders is welcome in the market, as the Housing Commission has found that Ireland must attract diverse sources of finance in order to deliver the homes we need.

Debt finance is readily available for viable projects, with strong competition in certain segments, in particular for the delivery of social and affordable homes and for larger developers with a proven track record.

Access to equity remains a constraint, particularly for SME developers. This is driven by viability challenges in the housing development process, such as through the planning system or the provision of infrastructure and utilities. In order to support greater availability of equity capital, early-stage construction should be de-risked insofar as possible. Policy stability is also critical to minimising equity risk.

Feedback from stakeholders is that there is appetite for private capital to support homebuilding in Ireland. To ensure a sustainable, long-term flow of capital into the market, the focus must be on providing certainty for that capital by smoothing the pathway to commencement. There remain segments of the market where viability is challenged, and consequently the availability of funding to these areas is more constrained. This includes the acquisition of land without planning permission, the development of infrastructure and the delivery of apartments for the private market at scale.