DG State Aid – Control and Regeneraton of Deprived Urban ... - REVIT

N89/2004 Guarantee in favour of the Housing Finance Agency
Social Housing Schemes funded by the HFA - Ireland
The main aim of this measure is the same as in the case N 209/2001 (see its summary above):
provision of a good dwelling in a good housing environment to the most socially
disadvantaged households. Since the positive Commission’s decision in July 2001, where the
aid granted to the Housing Finance Agency (HFA) was held being compatible with the EC
Treaty, the Housing Act 2002 has been enacted. That Act includes, among its provisions,
Section 17, the subject of the notification at hand, which increases the range and scope of
HFA’s activities and responsibilities.
Section 17 of the Act 2002 provides that the HFA will:
1) be given increased borrowing powers;
2) be able to lend directly to approved voluntary housing bodies engaged in the
provision of social housing. The provision of cheap funding by the HFA is strictly
limited to the statutory functions of the voluntary housing bodies and requires the
approval of the Department of Environment and Local Government.
The HFA uses state guarantees in order to raise funds on the capital market at preferential
terms, which are then advanced to (a) municipalities as well as (b) voluntary housing
bodies, to be used by both of them for the provision of social housing.
The Commission distinguished between two different levels of assessment: 1) the effect of
the state guarantee in favour of HFA; and 2) the effect of provision of cheap financing by the
HFA to (a) municipalities as well as (b) voluntary housing bodies for social housing activities.
Regarding the effect of the guarantee vis à vis the HFA, the Commission noted that the HFA
is a legal entity closely connected to the public authorities, which is restricted by the
applicable legislation and by its own internal statutes to the performance of the activity of
fundraising for the social housing activities of the local authorities and voluntary housing
bodies. Thus the advantage accruing to the HFA as a credit institution by virtue of the state
guarantees cannot be exploited by the HFA to allow it to compete with commercial banks in
lending money to third parties. The Commission therefore considered that the guarantees
granted by the state remain within the sphere of financing of the state. As the HFA is
therefore not an undertaking within the meaning of Article 87(1) of the EC Treaty but a
special credit institution, the state guarantees granted to the HFA for the purpose of enhancing
its ability to raise finance thus were not found to constitute state aid within the meaning of
Article 87(1) of the EC Treaty.
Regarding the effect of provision of cheap financing by the HFA to municipalities and
voluntary housing bodies, the Commission found that state aid within the meaning of Article
87(1) EC Treaty is present, as it cannot be excluded that municipalities and voluntary housing
bodies enjoy a real financial advantage, which has the effect of putting them in a more
favourable competitive position than the undertakings competing with them. However, the
Commission found that the social housing activities constitute compatible state aid pursuant
to Article 86(2) of the EC Treaty, as the conditions for applying this provision has been
fulfilled, namely, that (a) the recipient undertaking must actually have a public service
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