Alleviating the housing crisis with the help of credit unions

By January 5, 2018Articles
The Oireachtas committee recently released a report that provides solutions that could help in controlling the current housing crisis in Ireland. While focusing on the credit union sector, this report also issues various recommendations to increase its long-term sustainability.

Credit unions should offer more loan flexibility

The report states that if credit unions could offer more loan flexibility and be regulated based on their size, we would eventually notice a decline in the housing and homelessness crisis. John McGuinness (Fianna Fáil), the committee chair acknowledges that it is high time to evaluate this sector and says, “the time is ripe to assess the wellbeing of the credit union sector and to review whether the measures put in place in the aftermath of the economic crisis remain appropriate”. He further adds that “whilst acknowledging and supporting the prerequisite objective of maintaining financial stability and safeguarding members’ funds, the Committee is also of the opinion that minor changes and incentives can boost and contribute to the growth of the sector”.

Credit unions can contribute to the Irish society

According to the statistics revealed in the published report, it has been found that if credit unions were allowed by the regulations to lend to the housing authorities last year, around €800m could have been used for the funding.

McGuinness admitted that “all committee members acknowledged that the credit unions’ community-led approach and emphasis on social inclusion is an innovative one which has contributed much to Irish society. The committee recommends that the credit union movement be empowered to contribute to alleviating the current housing crisis in the State. Serious consideration should be given to enabling credit unions to utilise their substantial assets to lend to approved housing bodies and help alleviate the housing and homelessness crisis”.

Tailoring regulations for credit unions

A commission on credit unions previously put forward a set of proposals on the tiered regulation. The report outlines the need to tailor regulations for credit unions that are dependent on their size. The main suggestion is a three-tier approach that will segregate credit unions with assets less than €10m, between €10m and €100m and in excess of €100m.

It is important to introduce a three-tier regulatory approach

The report further states the importance of implementing this type of three-tiered regulatory structure. The main objective is to provide a framework that allows both “small and simpler credit unions to continue to operate with proportionate regulations”. In addition, it also sets out various requirements that includes larger and more complex credit unions to operate. They can “avail of more permissive business models than they currently can avail of”.

Credit unions should lend more to become effective in the future

In order to operate effectively and be more viable in the future, credit unions should be given the opportunity to lend more to those in need. It states, “The committee is of the opinion that the current average loans-to-assets ratio of 26% is an issue of serious concern in terms of the future viability of the credit union movement. The figure should be at a minimum in the 40-50% ratio range and on that basis the committee recommends that the issue be addressed by all stakeholders as a matter of urgency.”

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