A quick guide to Vulture funds, AHBs and Social Housing

A quick guide to Vulture funds, AHBs and Social Housing

Housing in Ireland is a problem. In fact, it is probably one of the biggest issues this generation will face (besides that bloody virus). In recent weeks you could be forgiven for confusing the housing news with a David Attenborough documentary. Let me explain…

The state of housing

Since 2012 house and apartment prices in the capital have risen by around 80-90%. A sharp rise whatever way you spin it but it looks even worse when you consider that wages have only increased by 18% in the same time. Also, don’t think for a second, “Oh, it’s fine, I’ll rent” because the same squeeze is being felt in rental rates also. Well, generation rent is growing as more and more young people struggle to get onto the property ladder and how can you be surprised? If we consider an affordable home to be one that costs 3.5 times your annual income (as advised by the central bank’s borrowing guidelines) and that the median income was around €38,000, most houses in Dublin are around 10 times the “affordable” price.

Since 2012 house and apartment prices in the capital have risen by around 80-90%. The Irish Times, 2020

So what is the answer? Well, it is quite simple actually… Supply, supply and guess what? Some more supply.

Vultures and Cuckoos

So what exactly is a vulture fund. The name lends itself quite nicely to a little story, so sit back and try and read this bit as if you are David Attenborough…

The young first-time buyer approaches, they have been searching for a suitable home for years now. In the distance, they see it, a perfect and affordable first home. As they approach with giddy haste, the home becomes more real and they imagine how they will arrange the kitchen and living room. As they reach out to sign the paper, a well funded and well resourced swooping vulture (fund) outbids the buyers and lists the property for resale. For the young buyer, the search continues…

Ok, so that’s a nice little story you’ve told but I am still no closer to finding out what a vulture fund actually is. I hear you, a vulture fund is a scary sounding term for an investment fund, most of the time these are overseas pension funds looking for an undervalued asset to put their money in, in order to secure a high return on investment. Housing in Ireland makes perfect sense, low-risk investment that guarantees good returns. And to be honest, the presence of private funding has been part of the government’s Rebuilding Ireland plan for years, they only become a problem when they start taking the homes from first-time buyers.

On the other hand, a Cuckoo fund differs slightly. While a Vulture swoops in and snatches up the goods a cuckoo plays the long game. Just as is the case in the animal kingdom, the fund nestles in, nice and cosy into the market. They stay here for years and profit through a steady stream of rental income from their massive number of cheaply bought rental properties. In many cases, the terms are used interchangeably for any international firm that invests in housing.

So why all the fuss now? Well, as the situation becomes more dire and the need for housing units becomes more apparent the presence of these investment funds comes under scrutiny. For example, recently a development of 170 properties was completed in Maynooth, of these 170 units 130 were sold to two investment funds working in partnership. The reason for all the bad press boils down to the fact that these units are designed for families looking to secure a first home and when they try and purchase them they end up competing with a well resourced and well funded global investment fund. These investment funds then use the property for long-term rentals and prevent the families from getting on the ladder. Not very fair…

Recently a development of 170 properties was completed in Maynooth, of these 170 units,130 were sold to two investment funds working in partnership.  Irish Examiner, 2021

In other instances, it isn’t just the first time buyers that these funds are competing with but with approved housing bodies and local councils also.

Approved Housing Bodies

We have written in length about the AHBs and the great work that they do and just recently their importance in tackling the housing crisis. Their central role in this has been confirmed and as the government aims to facilitate the greatest social housing development in the history of the state it is only going to become more apparent just how crucial they are.

We need up to 400,000 houses, new houses, by the end of this decade. That’s not all going to be done by the State on its own. Taoiseach Micheal Martin

So you’ve told me about the feathered funds so will you tell me a bit more about the AHBs.

Ok, so enters this non-avian player into the market… The AHB or approved housing body are non-profit organisations that aim to deliver social housing units cost-effectively to the people who need them. A strong social housing presence is a prerequisite to any healthy housing stock. As the situation in the country worsens, the reliance on these organisations becomes ever greater. These charitable bodies deliver housing across several sectors; general needs, the elderly, people dealing with homelessness and disability. Chances are you’ve heard of them, in total they account for around 40,000 housing units nationwide. Though, as I mentioned before, with the pressure being put on these orgs to help tackle the housing crisis does more need to be done to help them?

They (AHBs) account for around 40,000 housing units nationwide.

In the past few weeks, you may have heard that the government has attempted to curb the impact of our feathered friends by introducing a stamp duty tax on the purchase of 10 or more properties over a 12 month period. What you may not have heard is that AHBs and local councils have been made exempt from this levy. One thing that you may not know about this change is that the purchase of apartments has been excluded from this change, this means that the funds can still purchase blocks of apartments without incurring the charge. If you consider that six out of seven homes in Dublin City would find themselves exempted, it might not be the actual solution to the problem.

The solution?

I don’t want to get too bogged down with bashing the funds, in reality, they are part of a very real solution to the crisis. It is just that there will have to be careful and guided oversight every step of the way and a number of issues to overcome beforehand. One such issue that I have mentioned before is the reclassification of AHBs. A while back the government reclassified AHBs as government orgs; which means that they are listed on the gov’s balance sheet and have to compete for an ever-dwindling amount of resources. Not really ideal when you’ve been coined as one of the instrumental players in solving a crisis. What this prevents AHBs from doing is securing their own private funding…

Uh Oh! Who is this we welcome back? The birds, like that Alfred Hitchcock movie here they come… Only joking, we’re being positive now, remember?

A possible solution to reduce the stigma of these investment funds, potentially solve the housing crisis and improve the performance of the AHBs, is to establish a mixture of properly directed funding streams. The presence of these funds has long been involved in the governments plans to add supply into the market and a mix of public and private streams properly directed to the experts in the field… the AHBs will do this. By allowing parts of social and cost-rental developments to be sold to the investors while being managed by the AHBs will reduce the cost of the units while ensuring a steady stream of affordable units and a healthy housing market. Though, again, this is still dependent on the government reclassifying the AHBs as non-government organisations.

So while the funds should be scrutinised when they compete with first-time buyers, they may yet serve useful in achieving the shared goal of tackling the housing crisis.

The Reclassification of AHBs

Cyber-security in social housing 

Ireland’s broken housing market 

Housing costs – How Dublin Compares 

Vulture funds spreading their wings 


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