Minister for Housing Darragh O’Brien will seek Cabinet approval next month for draft laws to raise the Land Development Agency’s capital to some €6 billion, a critical step for housing delivery. But the legislation is the easy part. There’s still no clarity on where the money will come from.
As the housing crisis festers, the stakes could hardly be higher. For those struggling to buy or rent property, the lack of homes is a nightmare. For the Coalition, it is existential. Local and European elections loom next year – and there could yet be a general election. Come what may, housing will be the defining issue.
True, new data suggests the number of new homes completed this year will eclipse 30,000. But Taoiseach Leo Varadkar has said “at least 40,000″ units will be needed each year and property market participants believe 50,000 are required.
All of this underscores the rationale for beefing up the LDA. The body was set up in 2018 to build homes on State property but took new responsibilities to back developers building “affordable” homes on private lands. After heavy criticism for slow delivery, the push for more capital comes as Ministers urge the agency to accelerate building.
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Government pressure for more LDA delivery is unambiguous. But will such demands convert to real money for the agency? Extraordinarily, the jury is still out. Despite all the hype on housing and the multiplicity of initiatives, a deal to secure the LDA’s capital for the long term is still elusive.
When the agency was established, it was given the right to draw down €1.25 billion in debt and promised €1.25 billion from a State development fund known as the Ireland Strategic Investment Fund (ISIF).
[ Government prepares €500m ‘backstop’ loan for Land Development Agency ]
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The debt option never worked out, not least because interest rates rose to the highest level for decades. Another question centred on the LDA’s ability to generate commercial returns to sustain private debt when its return from social and “affordable” housing would be less than market returns.
This left the LDA wholly dependent on ISIF funding, only €350 million of which had been transferred by February because of the slow start to its operations. Still, it is a mark of the escalation in LDA activities this year that the remaining €900 million has since been almost fully committed.
The need for more LDA money is not new. The Irish Times reported in January that the Government was facing a call for up to €1 billion in additional funding, in talks on a new LDA business plan. The business plan is still not settled definitively but the scope is a lot wider now, as the drive to bring LDA capital to €6 billion shows.
But finding the money is a challenge. At one level, the State is awash with money thanks to booming corporation tax receipts and income tax payments from the full-employment economy. With a cumulative €65 billion budget surplus forecast in the coming year, Darragh O’Brien believes some of the money should go to the LDA. The logic is straightforward enough but execution is another matter, even if the plan is to draw down the €6 billion in increments over years and not in a single big-bang transaction.
When Budget 2024 was unveiled a fortnight ago, the package included two new State funds for the investment of windfall corporation tax money: the €100 billion Future Ireland Fund was for population ageing services, and the digital and climate transition; and the €14 billion Infrastructure, Climate and Nature Fund was for capital investment.
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These funds may seem like an obvious source of fresh LDA money but there was no such allocation on budget day. Similarly, a person briefed on the discussions said the Minister faced difficulty drawing down more ISIF money for the LDA because that fund had other plans.
Now the Government is discussing a €500 million “backstop’ loan from the Housing Finance Agency, which usually lends to local authorities, approved housing bodies and universities. Given the lack of agreement on long-term funds, the move is designed to ensure there is no interruption to LDA activities after its first €1.25 billion is deployed.
It will be included in a Housing Miscellaneous Bill from the Minister, for Cabinet sign-off next month. The legislation will empower him to increase the LDA’s capital and, simultaneously, raise the lending limit of the Housing Finance Agency to €12 billion from €10 billion. It is not too big a leap to imagine more money streaming into the LDA from that source.
For all that, the €6 billion is still a work in progress.
