Rebuilding Ireland: Minister Eoghan Murphy, TD
1st August 2018
Re-classification muddies funding model for new housing
1st August 2018

AIB Corporate Banking and the social housing sector

AIB Corporate Banking is actively engaged with the Irish Social Housing sector. We continually look for ways to support the delivery of housing with a key focus of helping those that have a funding requirement.

My team and I have been fortunate to work with some of the key operators in this sector over recent years and it is clear that the Approved Housing Bodies have evolved into very professional ‘not for profit’ organisations with excellent management teams and staff. In meeting with the various Approved Housing Bodies and the advisors in the sector we are always impressed by their professionalism and their strong desire to deliver housing for those most in need.

AIB Corporate Banking currently offer a long-term loan with the amortisation matching the term of the main revenue source e.g. the term of the Payment and Availability in the general social housing model or the term of the Local Authority Rental Agreement in the recently launched Enhanced Long Term Social Housing Lease program. This makes for a straightforward transaction and gives the Approved Housing Body a schedule of repayments similar to those currently provided by the Housing Finance Agency. We will typically only look for security over the assets being acquired and the associated revenue streams and will not require any further security. We will not look to restrict the Housing Body’s activity once the property being funded is essentially protected or ‘ring fenced’ from any potential negative impact from other activities.

We can also provide funding to a newly incorporated special purpose Approved Housing Body or a new Investment Company that is being established for a specific project once that new entity can demonstrate the property management and tenant management functions will be professionally delivered, e.g. there may be a commercial contract with the existing Approved Housing Body to provide certain necessary services to the newly established Project or Special Purpose Vehicle. In summary, we can work with the customer to deliver for them regardless of the preferred approach to a transaction.

As part of the wider AIB Group we have also brought together a number of divisions within the AIB Group to provide solutions to many of the challenges facing those in the sector, e.g. the AIB Real Estate Finance team can provide Construction Finance, this division recently launched a €100 million Social Housing Development fund to assist experienced developers deliver newly built stock to the larger Approved Housing Bodies (AHBs) in Ireland, which is a key element of the Government’s Rebuilding Ireland plans.

My team and I also work closely with the AIB Corporate Finance Team which can provide advice on raising finance and investment and indeed mergers or acquisitions within the industry, AIB’s Treasury Team can also support by providing advice on Ireland’s overall economic outlook in addition to providing solutions to interest rate volatility risk.

The historic funding of the Irish Social Housing sector has been predominantly by way of government grant funding or in more recent years through long-term loan finance from the Housing Finance Agency. With the recent Eurostat opinion delivered to the Central Statistics Office in April this year pointing to the ‘government body’ classification of Ireland’s largest Approved Housing Bodies there may be some ongoing consideration by the sector as to how the government and the Approved Housing Bodies working together with the Banks can resolve the Eurostat and CSO opinion and ultimately bring about a wider gap between the government and the key players in the Sector. A potential solution currently under consideration by the sector is the establishment of special purpose vehicles by the Approved Housing Bodies in which they can acquire and fund assets using private and commercial Bank finance.

L to R: Catriona Bourke, Eoghan O’Neill & Allan Barrett.

Whilst there are numerous Approved Housing Bodies operating in Ireland, over the past decade the Irish Social Housing sector has now evolved into three key groups namely Tier 1, Tier 2 and Tier 3. It may be the case that the sector could avail of better cost efficiencies by introducing some consolidation. We are aware of some considerations being given by smaller Housing Bodies around the possibility of transferring housing and tenants to larger Housing Bodies to make for a more efficient operating model but there may, in time, be some increase in the levels of consolidation going forward. Overall, the outcome could potentially be greater purchasing power and greater operational efficiencies, e.g. a larger Housing Body will likely be able to negotiate a lower purchase price on housing based on volume than a Housing Body looking to acquire a small group of housing units, similarly outsourcing of property maintenance and tenant management can be disproportionate if the Housing Body does not have scale.

AIB UK is very active in lending to the UK’s social housing sector and we work closely with our UK colleagues to see what can be brought to those active in the Irish Social Housing. The UK’s social housing sector has evolved over recent decades and would be deemed to be a model that Ireland might in time begin to share some more characteristics with in respect of consolidation and also in respect of diversification of funding sources. The UK Housing Bodies also typically have relationships with multiple funders so as to diversify its sources of funding.

We have worked on projects involving construction and refurbishment of housing and most recently I believe AIB Corporate Banking was one of the first funders to provide long-term debt funding to facilitate the purchase of housing from the Housing Agency under its €70 million revolving fund. We were delighted to be able to work with Túath Housing Association to fund the acquisition of up to 192 social homes in every County and District in Ireland. This transaction supported Rebuilding Ireland’s vacant homes initiative whereby Túath purchased homes from the Housing Agency and let them to families on Local Authority housing waiting lists. I believe that we can provide a commercial and very swift funding solution which allows the client flexibility to carry out its day to day role. My team is currently working on four projects ranging from Mortgage to Rent to a mixed Private and Social Housing scheme where the social housing element is the majority of the project. In addition, we are working with colleagues in the AIB Group on the Irish Social Housing PPP programme.

Overall we wish to increase our involvement in the sector and we welcome any opportunity to help the Approved Housing Bodies and investors in the sector to deliver on their key growth objectives.

Eoghan O’Neill
Sector Head, Social Housing
AIB Corporate Banking
E: eoghan.t.o’