I was listening to an interesting News Talk radio discussion yesterday about why tax breaks for developers may be a bad idea. You can read the summary and listen to the interview HERE.
During the interview, I quickly realised that I had little idea about how financing for large residential blocks was acquired. So I thought it might be interesting to research and share what I have learned in a concise blog post.
Buying a House in Ireland: A Step by Step Guide by a Builder/Solicitor
But before that, I would like to briefly highlight some of the biggest public issues preventing the much-needed house supply in Ireland today.
- AN OVERLY COMPLEX PLANNING SYSTEM.
John Downey, a chartered town planner and managing director of Downey Planning, gave an example of about 400 acres of agricultural land in Donabate, north Co Dublin, which was rezoned for housing in 2003.
“That land was all rezoned in 2003 but houses are being built now since 2023, so that took 20 years because of all the obstacles in front of us,” Downey says – Irish Times
2. A LACK OF ZONED LAND.
Land zoning allows for untouched or agricultural land to be made available for large scale residential building, and servicable by ESB (Electricity), Irish Water and TII (Transport).
A lot of land zoned for housing was previously dezoned, so there is a school of thought that argues the government could issue a decree to rezone all of that previously dezoned land overnight. Irish Times
3. DIFFICULTY IN RAISING FINANCE
From both public and private sources.
4. THE ABSENCE OF LARGE DEVELOPERS
In both the public and private sectors.
Anyway, let us get back into the main reason for this blog post.
Buying a House in Ireland: A Step by Step Guide by a Builder/Solicitor
Types of Loans for Large-Scale Residential Property Development in Ireland.
Financing large-scale apartment complexes and residential estates in Ireland involves two primary avenues:
- Public investment
- Private investment.
Each plays a distinct role in housing development, with its own set of mechanisms, advantages, and challenges.
1. Public Investment in Irish Housing
DEFINITION & MECHANISM.
Public investment refers to funding provided by government bodies or state-backed entities to develop housing projects. In Ireland, this is often channeled through local authorities and Approved Housing Bodies (AHBs).
AHBs are non-profit organizations that provide affordable rented housing for those who cannot afford to pay private sector rents or buy their own homes. They receive government funding to build, purchase, or lease properties for those on social housing waiting lists.
According to Citizens Information, there are approximately 500 AHBs in Ireland, varying in size and services provided. However, the most popular ‘Big 6’ include:
- Clúid
- Respond
- Tuath
- Oaklee Housing
- Circle Voluntary Housing Association
- Co-operative Housing Ireland
Together, the have a combined €7bn worth of property under management. See more HERE.
Advantages of Public Investment
- Affordability – Public investment prioritises the provision of affordable housing, ensuring that vulnerable populations have access to necessary accommodation at a lower price.
- Stability – Government-backed projects are less susceptible to market fluctuations, providing a steady supply of housing. (That should be the case, but the current house crisis is especially bad in Ireland because the government stopped building social houses since 2008 after the property crash).
- Consistent Returns for Property Owners – Even if a resident faces unemployment, the government guarantees full rent payment, ensuring stability and financial security for property owners.
- Benefits Communities – Beyond addressing residents’ immediate needs, affordable housing also drives positive economic impact by creating job opportunities and boosting local consumer spending. Beach Front
Disadvantages of Public Investment
- Bureaucracy & Scarcity – There are usually fewer social houses compared to private houses. This scarcity can result in high red-tape, long waiting lists and few options for those urgently seeking housing, worsening issues of homelessness, and housing instability in urban areas.
- Funding Limitations – Government budgets are finite, potentially restricting the scale and speed of housing development.
- Location – Public Investment is often used for building in areas with relatively lower land costs, which can mean fewer nearby amenities. These locations may be far from job centers, schools, and healthcare facilities.
Private Investment in Irish Housing
DEFINITION & MECHANISM
Private investment involves funding from non-governmental entities, such as private developers, foreign institutional investors, and real estate firms, to finance housing projects. Developers typically secure financing through a combination of equity and debt, often involving bank loans or investment from private equity firms.
In Ireland today, there are only 2 private large developers! Most large developers left after the 2008 housing crisis. The rest of the State’s developers are small to mid-sized housing providers who often struggle to get the loans required to build at scale.
The 2 Large Developers include:
- Cairn Homes – As one of Ireland’s leading homebuilders, Cairn Homes has been instrumental in developing large-scale residential projects, offering a range of housing options from starter homes to luxury apartments. Cairn Homes
- Glenveagh Properties – Another major player, Glenveagh focuses on delivering high-quality new homes and has developments across Ireland, contributing significantly to the housing supply. Glenveagh Homes
Advantages of Private Investment
- Efficiency – Private developers often bring expertise and efficient processes polished from centuries of building in order to maximise profit, leading to quicker project completion.
- Capital Availability – Access to private capital can enable large-scale developments without immediate reliance on public funds.
Disadvantages of Private Investment
- Profit Motive – The primary goal of private investors is profit, which can sometimes lead to higher housing costs and a focus on upscale developments over affordable housing.
- Market Sensitivity – Private investments are subject to market conditions, and economic downturns can halt or delay projects greatly.
PS – There are many points that could be added above, but I decided to focus on the most relevant points – and keep them short & sweet.
Comparative Summary
| Aspect | Public Investment | Private Investment |
|---|---|---|
| Funding Source | Government budgets, state-backed entities | Private developers, institutional investors |
| Project Focus | Social and affordable housing | Market-driven, often targeting higher-income segments |
| Process Speed | Potentially slower due to bureaucratic procedures | Generally faster, leveraging private sector efficiencies (Unfortunately, Ireland’s approval process is also quite inefficient in this case) |
| Risk Exposure | Lower financial risk for developers; borne by the public sector | Higher financial risk for developers; influenced by market dynamics |
| Scalability | Limited by government funding capacities | Potentially higher, dependent on market conditions and investor appetite |
What is the Livret A Scheme?
The Livret A (Eng: Booklet A) is a government-regulated savings account in France. Citizens can deposit excess savings into the account, which earns a modest interest rate. Crucially, the funds collected are then used to provide low-interest loans to social housing providers, forming about 75% of the capital needed to develop new social housing projects. This has been very successful in France for over 100 years.
In recent years, many Irish housing experts have mentioned that such a scheme would be very beneficial for Ireland in the long term. This is due to the fact that Ireland is currently grappling with:
- A severe shortage of affordable homes
- Underfunded social housing providers
- Small-to-medium developers who struggle to access financing
- A housing market heavily reliant on private capital and international investment, which brings volatility and prioritises profit
Potential Benefits of a Livret A–style System in Ireland
Here’s how experts believe a Livret A–style scheme could be beneficial in the Irish context:
| Benefit | Description |
|---|---|
| Alternative to private finance | Eases the reliance on foreign capital or volatile investor markets. |
| Public participation in housing | Gives Irish citizens a direct way to support housing development while earning interest. |
| Lower-cost loans for AHBs | Provides a reliable pool of capital to AHBs at low interest rates. |
| More stable long-term planning | Helps fund cost-rental and social housing initiatives without depending on short-term political budgets. |
| Increased transparency | Publicly managed funds can be more accountable than private investor-driven models. |
Potential Challenges
| Challenge | Description |
|---|---|
| Set-up complexity | Would require new legislation, oversight mechanisms, and a strong public financial partner. This could take years to set up in the worst case. |
| Public trust | Success depends on strong participation and trust in how funds are managed. |
| Coordination | Requires close coordination between Revenue, the Department of Housing, and AHBs. |
Conclusion
Both public and private investments are crucial to addressing Ireland’s housing needs. While public investment ensures the provision of affordable housing and caters to vulnerable populations, private investment brings efficiency and additional capital to the housing market.
Adopting a Livret A–type savings model in the near future could give Ireland the financial innovation it needs — enabling everyday citizens to play a role in fixing the housing crisis while providing a reliable, domestic source of low-cost capital for social housing providers.
Regardless, a balanced approach that leverages the strengths of both sectors, possibly through Public-Private Partnerships (PPPs), could be key to effectively tackling the housing crisis in Ireland.
