Public housing projects under threat as state agency hikes lending rates

Major nonprofit social housing providers said they would not be able to proceed with some projects following a surprise hike in lending rates by the state Housing Finance Agency.

The agency told the Accredited Housing Bodies (AHB) this week that it was raising interest rates on long-term fixed loans. The agency’s 25-year fixed rate rose half a point to 2.25%, while the 30-year fixed rate rose a quarter point to 2.5%.

Non-profit housing associations, which depend on these loans, said the move would reduce the amount of new social housing they would be able to deliver, further straining the government’s plan to fight against the housing crisis.

AHBs are expected to provide 45% of the government’s social housing target of around 21,500 homes under the Housing for All plan over the next four years.

Housing providers say rising loan costs, on top of rising building material, labor and supply chain costs, will undermine the viability of rental housing projects .

Rents paid by residents under cost-rental programs cover the cost of building and maintaining new homes, providing long-term rentals and rents up to 40% below market levels local. The government is planning up to 18,000 rental units over the next eight years.

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The Housing Alliance, representing the six largest housing bodies, said the rate increases were “likely to put further pressure on the provision of social and affordable housing”.

Brian O’Gorman, managing director of Clúid Housing, said he was reassessing and assessing the impact on rental projects under development in light of higher financing costs. “It is inevitable that we cannot pursue certain projects in the future. These concerns are shared by all AHBs,” he said.

A spokeswoman for Respond, another AHB, said the overall social housing and rent funding model would require “adjustments” to cope with the higher costs of providing housing.

A Department of Housing spokeswoman said that in the event of a rate increase, officials engage with individual AHBs to determine the effects on projects and “if necessary, reassess the initial financial assessment”.

“The department will now work closely with the AHB sector to ensure that the increase in HFA loan rates does not impact the delivery of social housing projects under Housing For All,” said she declared.

“modest” increases

Housing Finance Agency chief executive Barry O’Leary said the “modest” increases were due to “high volatility in the bond markets” – where the agency funds itself – and the increase ” substantial” government borrowing costs.

Mr O’Leary said the fares represented “excellent value for money“.

Sinn Féin housing spokesman Eoin Ó Broin said the rate hikes were “very disappointing”, given that the cost of finance was a key factor determining the provision of social housing.

“I would be very concerned that any changes to interest rates on loans already secured but not yet drawn down – or even on new loans – could significantly undermine the viability and affordability of the rental cost offer. and that would be a very retrograde step,” he said.

The AHBs had borrowings of 2.6 billion euros at the end of April.

Mr O’Leary said the agency’s plan was to lend €6 billion over five years to 2026, representing at least 25% of total funding under the Housing for All plan.

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