State Aid to Social Housing Workshop

1. State Aid to Social Housing Workshop Philip Nugent Housing Policy, Finance and Social Inclusion Ministry for Environment, Heritage & Local Government

2. The Housing Finance Agency (HFA) • Established under Housing Finance Agency Act 1981 • Limited Share Company • Under aegis of the Minister for the Environment, Heritage and Local Government (includes responsibility for Housing and Urban Renewal) • Intended initially as a pilot scheme to “provide an option to purchase to many people who simply cannot obtain adequate mortgages” • Incorporated in 1982 • HFA Act amended on a number of occasions (’82, ’85, ’88, & ’92) • Significantly expanded role (same no. of employees…)

3. Role of the HFA - borrow and lend • Mission Statement – “to source and supply cost-efficient loan finance for local authorities and the voluntary and co-operative housing sector” • Lending • HFA advances funds to local authorities to be used by them for any purpose authorised by the Housing Acts (1966 – 2004) • Borrowing • HFA borrows or raises funds for these purposes

4. Lending • Outstanding loans now at €3.8 billion • Record activity in 2007 with €707 million net advances – reflected in volume of social housing output • What does this finance cover? • The provision of loan finance to local authorities who on-lend to individual borrowers, and; • Since 2002, HFA can lend directly to voluntary and cooperative housing bodies

5. Borrowing • Legislation provides that HFA borrowing may be subject to State guarantee by the Minister for Finance • Ideal borrower - Gives HFA best available rates and access to markets • Guarantee therefore assists HFA in principal statutory objective – assisting delivery of social housing supports

6. Notifications • Agency’s Guarantee subject of 3 notifications to the Commission • Decision on State Aid No. N209/2001 – generality of the guarantee • Decision on State Aid No. N89/2004 – increase in permissable guarantees (voluntary sector) • Decision on State Aid No. N395/2005 – infrastructure ancillary to social housing

7. Decision on State Aid No. N209/2001 Summary of Cion findings • Guarantee State Aid within meaning of Article 87(1) the Treaty • HFA – carries out “in house” activities • Area of loan finance – single market in existence • But the guarantee met all of the Cion criteria necessary for Article 86(2) of the Treaty to apply; • SGEI • Entrustment • Limitation of exemption • Development of Trade

8. Decision on State Aid No. N89/2004 Summary of Cion findings • Guarantee is State Aid within meaning of Article 87(1) the Treaty • In principle possible that guarantee confers “real” financial advantage on local authorities and voluntary bodies • But, given nature of the specific functions discharged, the guarantee, as amended, continued to satisfy the Article 86(2) derogation criteria

9. Decision on State Aid No. N395/2005 Summary of Cion findings • Under S. 56(2) of Housing Acts, local authorities may provide infrastructure ancillary to social housing • Guarantees for these purposes not state aid within meaning of 87(1) • Provision of loan finance for these purposes by HFA sees Agency acting as not as an undertaking within meaning of 87(1) – but as an “intra government funding agency” • Therefore guaranteed lending for these purposes is either not State aid within meaning of 87(1) or is compatible state aid within meaning of 86(2) • HFA suporting social policy acting as instrument of Irish State

10. Summary and Conclusions • HFA plays a crucial role in delivery of social and affordable housing in Ireland through the provision of loan finance at the keenest rates possible • Cion have been invited to comment on key aspects of their business model in the context of State Aid on 3 occasions • Cion has found that notifications do not constitute State Aid within meaning of 87(1) • Decisions allow the HFA to continue with its important role in context of National Development Plan & €4.5 billion loan finance that will made available in the period 2007 – 2013