According to David Hall, the mortgage activist, the state’s mortgage-to-rent program has been “irrevocably undermined” by the entry of a commercial player who outbid the nonprofit agencies for the properties involved.
The system put in place in the wake of the financial crisis allows distressed borrowers to leave their homes, but to stay in the property as renters of public housing.
In a submission to the Department of Housing as part of a consultation on the initiative, Mr Hall, who leads iCare Housing – one of the approved housing companies (AHBs) involved in the program – said the department’s decision to approve the Home for Life investment firm in the process had “almost finished the scheme as we know it”.
Because Home for Life has the potential to sell the property for a profit after the home is rented to the community for a period of 25 years, it can start paying higher prices than the licensed housing associations, he claimed.
“This means that prices are driven up and licensed housing associations do not have the commercial opportunity to sell an attractive portfolio to private companies with state aid at a profit,” he said in his contribution.
Mortgage rental data shows that since 2018, Mr Halls iCare has acquired 256 properties through the program, while Home for Life has acquired 180.
However, the pipeline of properties actively being considered by Home for Life is 807 versus 721 by iCare. The next largest is the Tuath Housing Agency with fewer than 100.
Hall said the numbers suggest banks are now bypassing the AHBs in favor of Home for Life. He said the private operator is effectively getting a 25-year government bond and its process would result in higher buyback options for households at the end of the lease.
However, Home for Life, backed by UK investor LCM Partners and AIB, responded by stating that its entry into the process increased the number of lenders involved in the program and that it closed cases caused by AHBs have ended.
“The private financing model of Home for Life costs the state less, we do not charge up to 40 percent of the purchase price in advance from the state and all rents that are collected from the residents of real estate go to the state, not to Home for Life” said CEO Paul Cunningham.
“The facts speak for themselves, the number of closed mortgage-to-rental cases since Home for Life became an operator has increased significantly and will continue to grow in 2021,” he said.
Slow take up
The mortgage-to-rent model has been slow to adopt since it was introduced in 2011 as a system to rescue troubled borrowers. However, it has accelerated since the launch of iCare and Home for Life.
Nonetheless, participants claim that the program is cumbersome and time consuming as each property has to be valued on its own merits and many who are long behind are not eligible for social housing.
Housing Secretary Darragh O’Brien has indicated that he may consider raising the value limits on homes that can participate in an offer to expand the program.
The state’s top mortgage lenders have advised the Central Bank of Ireland that up to 16,000 households with long-term arrears could face the loss of their homes.