Sovereign fund could enable LDA expand to become a state developer

Finance Minister Michael McGrath proposes to set up a long-term savings fund and an investment fund. File picture: Niall Carson/PA

The establishment of a sovereign wealth fund could see the role of the Land Development Agency expanded to become a de-facto state developer.

Last month, Finance Minister Michael McGrath confirmed he will seek Government approval for a long-term savings fund and for a second investment fund to ensure that capital spending projects were not the first to be scrapped in any future economic downturn.

The push to establish the fund comes as Ireland forecasts some €65bn in budget surpluses over the coming years. Government sources say that anywhere between €4bn and €8bn of that money could be diverted to address the housing crisis, which sources say is “the most important issue both politically and to people” facing the Government.

Sources said that if the wealth fund was to be used to attempt a fix of the housing crisis, the LDA is “the perfect vehicle” to do so.

The agency has €1.25bn in government funding from its foundation and has the capacity to borrow the same amount. However, sources said that with lending rates high, that avenue could prove difficult if the LDA wants to ensure that projects deliver affordable homes, as is its remit. A Government source said: 

If there’s money to be deployed and it’s going to capital projects, it absolutely should go to housing. 

“The LDA was a bit slow in getting up and running, but it’s the perfect vehicle to be scaled up to build thousands of homes.”

However, Government sources said no decisions have been made on the funds and “all options” are being considered.

Sites in Dublin, Cork, Limerick, Galway, and Waterford

The additional funding would be used to work on larger sites of at least 200 homes and would see the agency work with developers on privately-owned and public lands. The LDA last month announced that it is seeking expressions of interest from landowners willing to sell their sites.

The strategy will initially focus on large sites that could be used to build higher-density housing projects in Dublin, Cork, Limerick, Galway, and Waterford. It is targeting sites that have existing planning permission for 200-plus homes.

The LDA said it would assess the suitability of the sites based on criteria including transport links, development viability, and building cost efficiencies.

Almost 2,000 affordable homes a year

The LDA estimates that it could build 67,000 homes on State-owned land — but less than 10,000 can be delivered within the next decade. With additional finances, it is felt that the agency could ensure a pipeline of nearly 2,000 affordable homes a year from 2026. This would be an increase on its 1,500 a year target. 

State bodies in ownership of the various lands include the HSE, the OPW, Horse Racing Ireland (HRI), Bord Gáis, the ESB, Ervia, CIE, and the Department of Education.

Of the 63,000 homes earmarked for the five cities, 35,100 are in Dublin, and 16,100 in Cork.

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The biggest development in Dublin considered to be Class 1 is on land owned by HRI at Carrickmines Little in Leopardstown, which could yield 2,080 homes.

Since its establishment, the LDA’s role has expanded to include Project Tosaigh which aims to see 5,000 new homes built by unlocking privately-owned land that has full planning permission but where delivery has stalled due to financing or other issues.

Once completed, the agency makes those homes available through affordable purchase or cost rental schemes.