Home Building Finance Ireland will increase the supply of funding for residential development

Minister for Finance and Public Expenditure & Reform, Paschal Donohoe TD, received Cabinet approval on Tuesday for the publication, in the coming days, of the Home Building Finance Ireland Bill 2018 . This will give effect to the measures announced in October as part of Budget 2018 for the establishment of a new body; the purpose of which is to increase the supply of financing for residential developments within the State. Minister Donohoe was joined today by the Minister for Housing, Planning and Local Government, Eoghan Murphy TD, in making the announcement.

HBFI will receive funding of up to €750 million from the Ireland Strategic Investment Fund (ISIF) from which it will lend, on commercial terms, to developers who may be experiencing difficulty obtaining adequate funding for commercially viable residential projects. With this funding it is estimated that HBFI could have capacity to fund in the region of 6,000 homes in the coming years, making a significant contribution to addressing the current shortfall in residential supply in the market.

Passage of the legislation is a priority for the Government and the Bill will now commence through the Houses of the Oireachtas.

Minister Donohoe stated:

“I welcome the publication of the Home Building Finance Ireland Bill as a measure to increase financing for much needed residential developments. Not only will HBFI contribute to addressing the current shortfall in the supply of new housing, but it has the potential to benefit small to medium-sized developers with viable sites in locations that are currently not receiving adequate investment.

“HBFI will be funded through €750 million, which is being made available by Ireland Strategic Investment Fund (ISIF), which is managed and controlled by the NTMA. It will be established as a temporary measure to address a shortage of funding in the market and its continued operation will be reviewed regularly. It is envisaged that HBFI will commence lending activity by the end of 2018, with the capacity to have a significant impact on residential market property development across the coming years.”

Minister Murphy added:

“HBFI will play an important part of the Government’s overall strategy to increase the supply of new housing within the State. Together with the action plan laid out in Rebuilding Ireland, I am confident that HBFI will help provide a further impetus for the continued increase in home building across the country.”

ENDS

Notes to Editors

HBFI is being established to increase the availability of debt funding on market terms to commercially viable residential development projects in the State. The lack of such finance has been identified as a key contributory factors to the shortfall in residential supply. Increased access to debt funding will broaden the availability of credit generally and particularly for viable projects which are not currently the focus for the main banks or alternative lenders operating in the market.
HBFI will be established as a private company formed under the Companies Act 2014 with shares held by the Minister. HBFI will be governed by its own board of directors and, similar to NAMA and the Strategic Banking Corporation of Ireland (SBCI), HBFI will be provided with staff and support systems from the National Treasury Management Agency (NTMA) on the basis of a management agreement.
HBFI will be funded through €750 million, which is being made available by Ireland Strategic Investment Fund (ISIF), which is managed and controlled by the NTMA.
HBFI lending will be on commercial, market-equivalent terms and conditions. The exact terms of lending will depend on the risk profile of each project, the quality of collateral and the creditworthiness of the borrower.
This lending will be regularly benchmarked to the market to ensure that HBFI is lending on market equivalent terms. It is essential that HBFI’s undertakes lending on such terms in order to ensure that its operations are compatible with EU State Aid rules.
Sites eligible for lending must have full planning permission, be under the control of the borrowers, have a minimum delivery capacity of 10 units and be commercially viable to develop.
HBFI will be audited by the C&AG and accountable to the Oireactas in the normal manner.
HBFI will be established as a temporary measure to address a shortage of funding in the market and its continued operation will be reviewed regularly.
Subject to successful passage of the Bill, it is envisaged that HBFI will commence market engagement later this year and will commence lending activity by the end of 2018.