On the face of it, the offer of €5 billion in credit union funds for a huge social housing scheme is alluring. But this is the wrong solution to the housing crisis.
Although the arguments in favour are straightforward, the practicalities are not. True, credit unions have plenty money and not much to do with it. In addition, the need for housing investment is quite pressing. Moreover, we are told credit union funds would not add to State borrowing.
None of this, however, is sufficient to surmount far-reaching questions over the viability of the initiative. These relate to the very nature of credit unions, the unique structure of the sector, its regulation and its past performance. There are numerous grounds for doubt.
The plan may be the brainchild of the Irish League of Credit Unions but the €5 billion is not money the league can spend. The money is held by 434 individual credit unions – 339 in the Republic, 95 in the North – and each is responsible for their own affairs. The league itself is not a regulated entity.
According to the league, a credit union “exists only to serve its members” and not to profit from their needs. Thus surplus income is returned via dividends or directed at services for members. It’s very laudable to think of social housing, but this is not what three million members had in mind as they opened an account or took out a car loan. Despite talk of mutual support, pooling billions of euro from hundreds of credit unions is quite a stretch.
This is to say nothing of prickly issues around risk and mitigation, funding models, investment returns and responsibility for any losses. The league has no institutional background in housing. Astringent regulation would be required to protect funds, yet the league habitually pushes for lighter regulation.
More than 200 credit unions remain engaged with the Credit Union Restructuring Board at varying stages of restructuring.
Implicit in the housing plan, however, is the notion that support for a State-controlled special purpose vehicle would be met with some kind of State security over credit unions’ money. How that could be married with an off-balance sheet structure is open to question.
The State’s failings on social housing are for the State to rectify. Tackling the problem via voluntary credit unions is not the answer.
