Government prepares €500m ‘backstop’ loan for Land Development Agency

The Government is preparing a €500 million “backstop” loan for the Land Development Agency (LDA) to secure its finances going into 2024, amid divisions over long-term State funding for a body critical for housing delivery.

The LDA needs the temporary loan because its original €1.25 billion budget is nearly fully committed, raising short-term funding questions while political agreement remains elusive over its long-term budget.

The talks on a special LDA loan come as the Coalition faces a growing Opposition clamour to set out how a new €6 billion business plan for the State body will be funded. The LDA was set up in 2018 to build social and “affordable” housing on public land but it has been criticised for the slow delivery of new homes.

The question over LDA funds was raised in the Dáil on Tuesday when Labour leader Ivana Bacik called for clarity over the body’s “mystery €6 billion” and criticised Taoiseach Leo Varadkar for “missing billions” in the housing budget. Mr Varadkar promised the LDA would be “adequately capitalised” but failed to provide detail.

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With the LDA’s long-term funding an open question, a well-placed Government source said the body was set to receive a €500 million temporary loan from the Housing Finance Agency to ensure its operations continue into next year without interruption. The Housing Finance Agency is a State institution which usually lends to local authorities, universities and approved housing bodies.

Although the LDA business plan assumes the budget will increase by €6 billion to escalate housing delivery in coming years, the Coalition is far from agreement on where the money will come from.

Minister for Housing Darragh O’Brien plans to bring a plan to Cabinet next month but the scale, scope and sourcing of the long-term budget is still not settled.

Talks on the body’s future come after NewERA (New Economy and Recovery Authority), which provides financial advice to the Government, examined the business plan for Mr O’Brien and Minister for Public Expenditure Paschal Donohoe. The NewERA assessment is said to have questioned the long-term financial plan and delivery profile for housing.

One key question now is whether the LDA receives new money from the Investment Fund, the State development fund from which its first €1.25 billion is being drawn down.

Another question is whether the LDA draws money from new State funds unveiled in Budget 2024 a fortnight ago: the €100 billion Future Ireland Fund was supposed to save windfall corporation tax receipts for population ageing services and the digital and climate transition; and the €14 billion Infrastructure, Climate and Nature Fund was for capital investment.

A senior figure familiar with the talks on the LDA said Mr O’Brien faced difficulty drawing more LDA money from the Ireland Strategic Investment Fund, because it had other plans for its limited resources.

Similarly, there were potential problems seeking LDA money from the two new funds as they were set up with a specific purpose. Above all, the senior figure said there was no allocation in the budget for long-term LDA funds.

A spokesman for the LDA acknowledged discussions with the Government on future funding requirements. “The intention to increase the LDA’s capital is in line with recent constructive discussions between the LDA and the Government on the LDA’s business plan, which has outlined the potential for increased delivery of affordable housing.”