Fianna Fáil Spokesperson on Finance Michael McGrath TD has said the escalating housing crisis in Ireland will not be solved until the broken model for funding the construction of new homes is fixed.
Deputy McGrath commented, “Funding is an indispensable link in the chain of developing the tens of thousands of new homes we need throughout Ireland. This aspect of the housing crisis has not, in my view, got a fraction of the attention it deserves at this point.
“The lack of finance and the cost of finance for building new homes is restricting supply and making what supply is coming through even more expensive. This is resulting in a lack of viability and a lack of affordability.
“The banks will now typically lend no more than 60 – 65% of the cost of certain select residential developments, normally at a cost of 4% – 6%. The balance will have to be found from the developer’s own equity or from other borrowings. What is happening in practice is that international funds are stepping in to provide funding but at exorbitant interest rates of well north of 10%. I have heard of cases where the cost of finance is as high as 16%. Expensive finance is ultimately added to the cost of the home, making it less affordable for a growing number of people.
“The Ireland Strategic Investment Fund (ISIF) is involved in a joint venture known as ‘Activate Capital’ with global investment firm KKR to provide funding for residential developments. The total fund is €500m and it is currently involved in just 13 developments that are on site. This is a woefully inadequate response from the State. At a time when ISIF is sitting on a Global Portfolio of assets of over €6.5bn, which is not invested in Ireland, the money needs to be redirected and invested in Ireland.
“The Government needs to intervene and either reform and expand the Activate Capital fund or else come up with a new system of providing finance on commercial terms for the construction of homes throughout the country.”