Central Bank governor casts doubt on easing lending rules to build more homes

Central Bank of Ireland governor Gabriel Makhlouf has cast doubt on Government proposals that would allow developers to invest less money and borrow more from banks to increase building supply.

Mr Makhlouf said that banks are “well capitalised” and already have the capacity to lend more, adding that the “number one issue” in housing is planning.

His comments come after it was reported that Government want banks to ease their lending rules for developers, which would see the amount of funding a builder has to put up front reduced.

The Irish Independent newspaper reported that Taoiseach Micheal Martin and Minister for Finance Paschal Donohoe will meet with the banks about reducing the level of equity and providing more funds.

The governor is due to meet the Minister for Housing James Browne in the next few weeks to discuss Government-backed plans.

Mr Makhlouf said it has been a long-schedule meeting, which he is looking forward to taking place.

Asked about proposals to ease the bank’s lending rules, Mr Makhlouf said: “Firstly, in my view, it’s obviously up to the Government to decide what policies (to) put in place.

“My very strong advice to Government is that there are many interventions that they have already made, and are making in the housing market, my advice would be to take stock of all of those interventions, make sure they’re all mutually supportive of each other before introducing new ones.

“So that’s a basic piece of advice.

“Otherwise, I mean, we think that the banks are well capitalised, and they have the capacity to lend more, it’s their commercial judgement at the end of the day as to whether they want to do that, depending on their own risk appetite.

“That’s at this stage that’s all that reading. So I haven’t seen detailed government plans. I can’t really comment on speculation.”

He went on to say that he is “very conscious” of the many Government housing policies already in place.

“My advice to people who want to introduce new ones, just to make sure that what you’ve got going, you know what it is achieving and you don’t do the wrong thing.

“I have said, and I wrote to the (housing) Minister in my letter last month that I would prioritise investing in making sure that land is available for development, and that’s infrastructure is where I put a particular focus on.

“We published a report before Christmas in October or September, on specifically on housing, where we made clear, and I’m happy to repeat it now, that the number one issue on housing is not finance.

“The number one issue of housing is planning. It’s absolutely planning. This is not a unique situation in Ireland, but planning is a problem.

“Changing the law is one thing, making sure that the new law is implemented well is as important as law itself. So I would put all my energies, at whatever levels of government, and whatever levels in industry, to making sure that planning rules are being implemented in a way that supports the construction of housing.”

Speaking later on Monday, Mr Browne said planning is not an issue in Dublin city centre.

He said: “We know finance is a real issue for delivering housing in this country, certainly in the private sector. As a Government, we have to look at every measure possible that could be used to deliver that housing.

“The Government has stepped up to the mark. It is delivering at least six-and-a-half billion euros in capital funding this year, and expect that will be exceeded.

“We need a multiple of that from the private sector to deliver that housing, and that includes financing that is needed to deliver that housing, but housing right across the country, but more importantly, or as importantly I should say, large-scale apartments in Dublin city centre, where we know that financing is simply broken and it is not working.

“It is not delivering those apartments, because if it was, they would be built.”

He added: “Planning is an essential part, and we do need more zoning. But planning is not really the issue in Dublin city centre, and it is Dublin that is dragging the whole housing delivery back where there’s a lack of delivery of apartment blocks, and that is a financing issue.

“That is not a planning issue. We do need to open up planning, in particular around the areas around Dublin city, but this can’t be simply about Dublin. We need apartments and we need them in Dublin city centre.”