Finance Minister Michael Noonan has confirmed in a parliamentary reply to Fianna Fáil Finance Spokesperson Michael McGrath that the cost of funds to builders under the new fund to boost home building is to be ‘in the low teens’.
Deputy McGrath, “Most people agree that the lack of housing supply is central to our current housing crisis. The Ireland Strategic Investment Fund launched a €500m home-building finance joint venture with global investment firm KKR back in July. The fund hasn’t started lending to builders yet. In recent weeks, having been told that finance under the fund would cost builders in the region of 14%, I challenged the Tánaiste Joan Burton in the Dáil about the cost of funding and the impact this would have on the viability of home building projects. Minister Noonan has now confirmed that the cost of finance drawn down under the fund will be ‘in the low teens’.
“The reality is that the government is currently able to raise funds at record low levels of interest, including long-term money at around 2%. One of the key barriers to getting housing supply moving is the inability of builders to access finance from the mainstream banks at reasonable rates of interest. This new State-backed fund was heralded as a breakthrough but I’m afraid will end up as a flop. The truth is that many house building projects are simply unviable and the cost of funds is a key element of that. It is inconceivable that the State would intervene by setting up a fund that charges such a high level of interest. If any money is lent under this new fund, it is likely to prove very profitable for KKR but not very helpful in terms of getting house building moving again.
“In contrast, Fianna Fáil has put forward a radical plan to help alleviate the housing crisis and to ensure that our citizens have access to a suitable home in which to raise a family. This plan involves the establishment of a National Home Building Bond which will raise finance from a number of sources and provide funding to build homes in areas where they are required and, critically, at reasonable rates of interest.”
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