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Could Ireland use European Union funding to build houses?

Naomi O’Leary in Brussels examines the possible sources of financing

28 May 2021 | Social, Economy, The future of the EU & Housing

The European Union’s budget rules — which hold member states to running an annual budget deficit of no more than 3 per cent of the size of their economy, and overall debt levels of below 60 per cent of GDP — are sometimes cited as a reason why the Irish Government could not undertake large-scale borrowing to build social housing.

But the EU suspended these budget rules in 2020 in response to the Covid-19 pandemic to allow member states to take advantage of current extremely low interest rates, and borrow and spend to counteract the economic damage of the crisis. These rules are expected to remain suspended in 2022.

The organisation Housing Europe describes this as a “unique opportunity” for EU member states to borrow to build social housing, and reverse a trend across the continent of steady reductions in availability of such homes that has been accompanied by a housing affordability crisis in most member states.

In its recent report The State of Housing in Europe 2021, the Federation of Public, Cooperative & Social Housing found rents and house prices had risen steeply across the continent, fuelled by the increased use of housing for private investment and a shift by governments away from direct building of housing stock towards income support to poorer households — a policy that can “drive up prices and create an unaffordability feedback loop”, according to the report. But Ireland is among the worst affected: in December, Eurostat figures showed house prices were 77 per cent above the EU average in 2019 after the largest price rise in the bloc over the preceding decade. Rents increased 63 per cent over the same period. 

The Irish Government could borrow more if it wanted to, but Minister for Finance Pascal Donohoe is cautious about increasing debt further after borrowing to fund the pandemic response, including employment support programmes, and he has said such borrowing should be reduced to ensure “fiscal sustainability”.

If it didn’t want to borrow directly on the markets, Ireland could access EU funds for housing through a number of routes.

The European Investment Bank lends billions to member states to build social housing. Loans for social and affordable housing were a “major component” of the €150 billion in urban lending it provided between 2012 and 2019. Of this, €350 million went to Ireland’s Housing Finance Agency, which had built 1,512 units as of September 2019, according to the bank.

Various funding programmes within the EU’s overall budget could be used by member states for housing projects, such as European Regional Development Funds that are earmarked for tackling poverty.

The last budget from 2014-2020 included €14 billion in direct investment for improving the energy efficiency of buildings. Over the next few years, EU cohesion funding as well as the grants and loans provided through the bloc’s Covid-19 recovery package could be used for social housing, if the project also helped towards EU climate goals.

Part of the €38 billion InvestEU loan programme is earmarked for social investment and skills, which could also include house-building projects, particularly if targeted towards disadvantaged groups.

Fianna Fáil MEP Barry Andrews believes Ireland could tap more EU funding to address the housing crisis and met Minister for Housing, Local Government and Heritage Darragh O’Brien last year over the issue. He suggested Dublin local authorities establish a “Dublin” office in Brussels to pursue the available EU funding for housing and urban projects, that Ireland should call for EU monitoring of financialisation and speculation in the housing market, and that Dublin should host a pan-EU ministerial meeting on how to address the continent’s housing affordability crisis. 

He also suggested Ireland push the European Commission to broaden its exemption for social housing in its state aid rules. “Services of general economic interest” such as childcare, healthcare and social housing are not generally included in the measures, which are aimed at stopping state spending that distorts competition by giving companies in some member states unfair advantages.

Support for social housing is technically already EU policy.

A European Commission spokesman described the issue of affordable housing to The Irish Times as “one of the fundamental elements that determine young people’s capacity to build their lives and therefore an important issue that needs to be addressed”.

In its annual policy recommendations for Ireland, the European Commission called on the Government to meet the needs of the almost 70,000 households on social housing waiting lists, warning of the risk of “deepening inequalities, entrenched poverty and social exclusion”. It suggested “improved infrastructure, combined with spatial planning” along with “solving administrative deficiencies in the vacant site levy”.

In addition, the EU’s member states and institutions have agreed a “Pillar of Social Rights”, an agreement to reduce inequality and improve social protections.

It includes three commitments on housing: that access to social housing or housing assistance of good quality shall be provided for those in need; that vulnerable people have the right to appropriate assistance and protection against forced eviction; and that adequate shelter and services shall be provided to the homeless to promote their social inclusion.


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