Aideen Hayden (Labour) | Oireachtas source

I thank Professor Honohan for attending the meeting. It is always nice to engage with him. I wish to follow up on his macro prudential policy for the residential real estate sector and the various issues he raised in that document. I realise it is a consultation process and that we are part of that process. One of my concerns is the impact, which was alluded to in one of the national newspapers today. There has been much concern since this was announced and today, in a leaked report, the National Economic and Social Council, NESC, expressed its concerns about the numbers that would be unable to access home ownership in Ireland in the future. I wish to explore the interface between banking policy and public policy. There are reasons Governments wish to encourage home ownership, not least some of the research that shows that people in older age suffer less poverty because they own their homes, for example, and that home ownership is a very good means of redistributing wealth in society. People who do not have their own homes will never save that amount of money by investing, for the sake of argument, in stocks and shares or whatever else. There is much international research and many reasons Governments want people to own homes; therefore, it is a concern if a large number of people are excluded from the home ownership market.

I wish to explore some of Professor Honohan's methodology in what he has proposed. Are we dealing with prudent or exclusionary lending? Professor Honohan's paper raises the issue of boom and bust cycles. A question I raised with all of the banks' representatives who have appeared before the committee in the past few weeks was whether they thought we were either heading into or were in a property boom. The answer universally was "No", that when one took into account the rises and falls in the market, we were still 40% below where we were at the height of the market. This is for Professor Honohan's information in case he has not seen the reports from the committee. A number of the banks' representatives also said they would make submissions and that they were not in agreement with Professor Honohan's policy.

To move on to the methodological issues in what is being proposed, it appears to be a case of one size fits all. In other words, three and a half times a very large income is very different from three and a half times a very low income. I have concerns that what Professor Honohan is proposing is not sufficiently nuanced to the reality of people's lives.

The second point made by Professor Honohan refers to boom and bust, with rising and falling prices. Let us say my income is €80,000 per annum and house prices fall to, for example, €120,000 for the average home. I can see how the system works when prices are rising, but I do not see how it works when prices have fallen. Professor Honohan mentioned the European Systemic Risk Board as the framework he consulted, but when I looked at the rest of his research - he was looking at the Irish system - he only went back as far as 1998. He has not explored the Irish lending market pre-1998. Historically, Irish people do not default on mortgages and have no particular history of doing so, yet there has been a very high level of home ownership. Has Professor Honohan looked at the historical local authority mortgage market to examine the levels of default of people who have been on very low incomes? I am very concerned that we are closing doors based on an historical earthquake, as it were, at a particular time, rather than the norm in the Irish housing market since widespread lending began from approximately 1972.