A review by the Department of Finance has concluded that there is still a need for the HBFI to give loans to builders, but it should not be displacing private capital.
Private equity firms have been claiming that the HBFI was winning deals for big housing schemes by agreeing to take on a bigger portion of the risk than banks and other funders.
This point was also made to the Government by stakeholders during a review of the agency, which was set up in 2018 and whose CEO is Dara Deering. They said the HBFI should concentrate on small and medium-sized developers, and on projects in regional areas.
“It is important that HBFI remains agile in responding to gaps in the funding landscape and focusing its lending on segments which are underserved by other lenders, in line with the policy intent,” the review says.
“Stakeholders advised that this should include a continued focus on small and medium developers [who are] developing private housing, particularly in regional areas.”
The debt market has matured since HBFI began operations six years ago, the review points out. Some segments are now well served by existing lenders, and there is even competition to provide finance to social and affordable housing and to large developers.
Stakeholders told the Department of Finance they felt the HBFI had expanded into funding housing schemes which would otherwise have got money from private sources. Meanwhile there are still parts of the market where debt finance is constrained because the projects are riskier.
Launching the review, Finance Minister Paschal Donohoe said: “It is essential that in contributing to the development funding available in the market, HBFI targets those areas of the market where it can have the greatest impact, ensuring additionality in the market.
“Given that the debt market is fluid and continuing to evolve, this means that HBFI must actively calibrate its lending to the market and complement other sources of funding rather than displace it.”
After its launch, as a provider of finance to builders who had been refused by other lenders, HBFI’s only offering was a single senior debt-finding product aimed at housing projects with more than 10 units but up to a maximum facility size of €35m.
Two years ago, HBFI launched an “Accelerate” product, aimed at builders planning schemes with 100 or more homes, and who had reached concentration limits with their lenders.
The agency also launched a dedicated social housing product, with reduced margins and fees, specifically for developments being delivered to Approved Housing Bodies (AHBs) and local authorities.
Up to the end of last year, HBFI had approved 184 facilities and loaned €2.7bn, supporting the construction of over 13,000 homes.
Ms Deering said: “HBFI has a strong track record assessing the evolving funding landscape and responding to new and emerging funding gaps in the market. By continuing to evolve its product offering, HBFI will support increased housing supply and give confidence to housebuilders that funding will be available as they scale up.”
