Small home-builders can apply for State loans before planning granted, under proposed Bill

Small-scale home-builders will be allowed to access State loans before they have been granted planning permission for a site, under proposed legislation that will come before the Cabinet this week.

Tánaiste and Minister for Finance Simon Harris will bring a memo to Government colleagues on Wednesday on a new Bill expanding the scope of Home Building Finance Ireland (HBFI).

The lender operates under the remit of the Department of Finance and was established to support the construction of new homes.

Currently, small-scale home-builders can avail of finance only after securing planning permission on a suitable site.

Under Harris’s new proposals, HBFI will be allowed to provide loans for the purchase of residentially zoned land before planning permission has been obtained.

A report commissioned by HBFI and completed last April found that the vast majority of home-building firms in Ireland deliver fewer than 50 homes per year.

Harris is expected to tell the meeting that the Bill is designed to overcome one significant financial barrier facing small home-builders. It will, he will say, speed up the delivery of housing developments.

The rationale behind the change is that small building companies will have more confidence in purchasing land that has already been zoned for housing but does not yet have planning permission.

The report by KPMG found that the Irish home-building market was highly fragmented, with only 11 of Ireland’s active house-builders consistently delivering more than 300 units per year. A further 83 have been delivering between 50 and 299 units per year.

The Government has a target of building a total of 300,000 new homes by 2030. Harris has said the sector needs to scale substantially.

“That means supporting home builders to grow and evolve – from small to medium, and from medium to large,” he said earlier this year.

For its part, HBFI has said most of its customer base consists of small and medium house-builders. More than 80 per cent of its funding approvals went to firms seeking finance of €20 million or less.