The below is from a debate in Dáil Eireann on Tuesday, October 8th. The context was the discussion of the second stage of the Housing (Miscellaneous Provisions) Bill 2024. The Bill itself includes one or two things about cost rental, but SF housing spokesperson Eoin O’Broin took the opportunity to raise some interesting questions about the financing of cost rental in the context of both the LDA and the AHBs. These questions highlight the importance of transparency in terms of financing and, especially, exactly how rents are set in the sector, and the importance of at least some degree of standardization as to how this is done. I’m circulating the below passages from O’Broin’s speech in the Dáil as part of that debates as I think many of you have been closely following the development of cost rental.
Going to rain on Eoin's parade here but Michelle Norris has correctly pointed out that the reason 40 year and not 60 year loans are being taken is because 40 years is the maximum available. Apparently in models where 60 years appears to be the case what is really happening is that an initial 40 year loan is taken out and then refinanced for another 20 years. I think the proliferation of funding models is because this is entirely new and because there isn't a clear consensus on what model is going to work best without actually doing it
Very good point re needing to try out new models to see what works. But some tenants, e.g. LDA tenants, might wonder why their rents are somewhat higher than their counter-parts in the AHB sector.
Eoin claims the NTMA have OKed 60 year loans, and I have heard similar things from others. It is the case of re-financing as you say, but I believe there is already an element of refinancing built into how the model currently works. Not 100% on that though
Mike, on the proliferation of cost rent setting, see the standard calculation rules applied to the Finnish cost rental sector. These are also prescribed in their law on interest subsidy loans. The Finnish regulator is very careful about how rents are calculated annually through audits of this. Julie
Going to rain on Eoin's parade here but Michelle Norris has correctly pointed out that the reason 40 year and not 60 year loans are being taken is because 40 years is the maximum available. Apparently in models where 60 years appears to be the case what is really happening is that an initial 40 year loan is taken out and then refinanced for another 20 years. I think the proliferation of funding models is because this is entirely new and because there isn't a clear consensus on what model is going to work best without actually doing it
Very good point re needing to try out new models to see what works. But some tenants, e.g. LDA tenants, might wonder why their rents are somewhat higher than their counter-parts in the AHB sector.
Eoin claims the NTMA have OKed 60 year loans, and I have heard similar things from others. It is the case of re-financing as you say, but I believe there is already an element of refinancing built into how the model currently works. Not 100% on that though
Mike, on the proliferation of cost rent setting, see the standard calculation rules applied to the Finnish cost rental sector. These are also prescribed in their law on interest subsidy loans. The Finnish regulator is very careful about how rents are calculated annually through audits of this. Julie
That's really useful Julie. I think auditing and regulation have a really important role to play, but i think they are quite underdeveloped in Ireland