Alan Kelly lends support to €5bn credit union housing plan

Minister for the Environment Alan Kelly has lent his support to proposals from the Irish League of Credit unions to create a €5 billion fund to provide social housing.

The Minister described the involvement of credit union funding for social housing as “a good idea” which was only dependent “on some regulatory measures”, a spokesman for Mr Kelly said

Support for the proposal has also come from housing associations Respond! and Clúid which between them have provided more than 10,000 social homes. Respond! said it “very much” welcomed the proposal, particularly as the homeless crisis created a need for in excess of 6,000 social homes every year.

“The credit union funding proposal would go a long way towards helping us reach this target,” Respond! chief executive Ned Brennan said.

Long-term stability

Clúid’s head of policy Simon Brooke said the involvement of the credit union movement would add long-term stability to the housing associations’ funding model.

He also said the scale of the €5 billion investment would be a significant measure to tackle the homelessness problem.

Similar links existed between credit unions and housing associations in the UK, the Netherlands and Denmark, both organisations said.

The Irish Council for Social Housing had been working on plans for a special purpose funding vehicle for social housing for about six months, chief executive of the housing association umbrella body Donal McManus said.

The council also supported the credit union plan.

He said the last few months had seen extensive dialogue with the Irish League of Credit Unions on its potential for funding housing associations while fulfilling its own community development ethos.

Mr McManus said about 30,000 homes had been provided by association members, initially by direct funding from Government but since 2011 through a variety of loans from State and other agencies.

The most common form of finance was a 30 per cent repayable grant from Government, followed by a 70 per cent loan from the State’s Housing Finance Agency, he said.

While this arrangement kept loans “off balance sheet” from a government perspective, the source of finance needed to be widened, he said.

“It is something that we have done quite a bit of work on. We are looking at setting up a special-purpose vehicle, which would fund the approved housing bodies.”

In its proposal submitted to the Government last October the Irish League of Credit Unions offered to fund a special purpose vehicle on the basis of a return on members’ funds of about 3½ per cent.

This is a similar figure to the rate charged by the Housing Finance Agency, but considerably less than the 6-6.5 per cent charged by banks.

The agency is potentially subject to political decisions by the government of the day.

However, a long-term relationship with the credit union movement would allow greater certainty over longer-term funding for housing associations.