Mortgage-to-rent scheme 'undermined’ by commercial entity, claims David Hall

The State's mortgage-to-rent scheme has been "irrevocably undermined" by the entry of a commercial player, which is outbidding the not-for-profit agencies for the properties involved, according to mortgage campaigner David Hall.

The scheme, set up in the wake of the financial crisis, allows distressed borrowers to surrender their home but remain in the property as social housing tenants.

In a submission to the Department of Housing as part of a consultation on the initiative, Mr Hall, who runs iCare Housing – one of the approved housing bodies (AHBs) involved in the scheme– said the department's decision to allow investment firm Home for Life into the process had "all but ended the scheme as we know it".

Because Home for Life can potentially sell the properties for a profit after leasing the home to the local council for a 25-year period, it can pay higher prices than the approved housing bodies at the outset, he claimed.

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"This is leading to prices being driven up and approved housing bodies don't have the commercial opportunity being gifted to the private companies to sell an attractive portfolio with State aid for a profit," he said in his submission.

Mortgage-to-rent data show Mr Hall’s iCare has acquired 256 properties via the scheme since 2018 while Home for Life has acquired 180.

However, the pipeline of properties under active consideration by Home for Life is 807 compared with iCare's 721. The next biggest is Tuath Housing Agency with fewer than 100.

Mr Hall said the figures indicate that banks were now bypassing the AHBs in favour of Home for Life. He said the private operator was effectively getting a 25-year Government bond and its process would lead to higher buy-back options for the households at the end of the lease.

However, Home for Life, which is backed by UK investor LCM Partners and AIB, responded by saying its entry into the process had increased the number of lenders engaged in the scheme and that it had completed cases that were terminated by AHBs.

"Home for Life's private funding model costs the State less, we don't require up to 40 per cent of the purchase price upfront from the State and any rent collected from the occupants of properties goes back to the State, not to Home for Life," said chief executive Paul Cunningham.

“The facts speak for themselves, the number of mortgage-to-rent cases completed since Home for Life became an operator has increased significantly and will continue to increase during 2021,” he said.

Slow uptake

Since its inception in 2011, as a scheme to rescue distressed borrowers, the uptake of the mortgage-to-rent scheme has been slow. However, it has speeded up since the arrival of iCare and Home for Life.

Nonetheless, participants claim the scheme is cumbersome and time-consuming as each property must be evaluated on its own merits and many in long-term arrears do not qualify for social housing.

Minister for Housing Darragh O'Brien has indicated he might look at raising the limits on the value of homes that can participate in a bid to widen the scheme.

The State's main mortgage providers have told the Central Bank of Ireland that up to 16,000 households in long-terms arrears could face losing their homes.