Alan Kelly (Tipperary, Labour) | Oireachtas source

I will go through the statement in full, if that is okay, Chairman, because there is so much in it and I might emphasise some points as I go along. I might also come back to some issues later on if that is okay. First, I thank the committee for the invitation to address it and for inviting me and my officials to today's proceedings. Second, as the Chairman is aware, because there was some comment, I was unable to attend here on Tuesday simply by the fact that I had to attend a Cabinet meeting. I think some people may have thought I missed it but it was obvious I could not attend because of a Cabinet meeting. However, I am glad to be here today at the committee's second sitting. I congratulate the Chairman on his role and the committee on its initiation and set-up. While the timeframe is short and it has a huge amount of work to do, I genuinely wish this committee well. It is a good initiative and it can achieve things. I will be very open with this committee today as regards solutions and I will be positive because we have to be positive.

I will introduce my colleagues, Ms Bairbre Nic Aongusa, assistant secretary of the housing section, and Mr. Barry Quinlan, principal officer in the housing policy area. I am also joined by Mr. Niall Cussen, principal planning adviser, and Mr. Brian Kenny, principal officer in the homelessness and housing inclusion section of my Department.

Housing matters, rightly, have been the focus of serious and considerable media commentary in recent times, usually based either explicitly or implicitly on a simple supply and demand model. In a simple model, supply and demand adjust and prices respond accordingly. However, and this is a key point, the housing market is not a normally functioning one at the moment. That is the real cusp of the issue. It is not a normally functioning market. I know that while there are children and families in emergency accommodation, it will remain the headline story in terms of housing. I understand and accept that fact. However, it is important to recognise that this is a symptom of much deeper supply issues and can only be dealt with through increasing supply of social, private and rental properties. In the meantime, we must continue to strive to help these families and I consider rapid build is the best immediate answer along with greater investment in social housing, increasing housing supports and services, and continuing to improve services for families in difficulties.

Every player, State body or otherwise, has a part to play in solving this housing problem. A multiplicity of different Departments, agencies, outside agencies, private bodies, local authorities, etc., all have a role. It is really a huge, intertwined web of various organisations and issues that are involved in the solving of this problem. Any long-term solution needs the entire housing system pulling in the same direction to a common goal and this committee is a move in the right direction in terms of getting a cross-party approach to repairing a broken system.

I will try to set out what I believe are the key systemic weaknesses and questions we need to answer as well as meaningful recommendations for what needs to be done into the future. The first point I would like to make is that when we are discussing housing, we need to separate out the issues in order to generate real and true learnings. There are issues all over the sector, including issues relating to private housing, social housing, the private rented sector, homelessness, those who are caught in excessive mortgage debt, working couples who cannot get mortgages, etc. All of these issues collectively interact and impact on each other.

I support the committee's efforts to discuss them individually but they are interconnected and that is a critical point - they cannot be separated out piecemeal. This is because there is no one cure-all to the housing situation. The remedies to the problems are not all to be found within my Department. That is not to say we do not have a major role; of course we have a major role as the Department with responsibility for the environment. However, all the levers are not in the Department of the Environment, Community and Local Government. Many pieces of this conundrum need to be aligned for it to be solved but they are not all within my Department. Issues around construction input costs, how building materials are taxed or the price of land are relevant examples but none of these come through the lever of the Department of the Environment, Community and Local Government. We need to be really creative when formulating solutions and I encourage the committee to carry out its work in that vein. Despite differing political ideologies our end goal is the same, namely, more and better affordable homes with adequate infrastructure to service the demand as well as an end to the boom to bust housing cycle.

The State, including elected members and non-elected officials, needs to come up with bold and innovative solutions. We must bring all the stakeholders in the private and public spheres with us. The simple fact is that our construction industry is not building enough houses to meet the needs of our people. New supply is very low, with 12,300 houses completed last year. Almost half of these are one-off and some are finishing out from the overhang of incomplete construction. This is a significant and real number and I believe it is not going to move quickly. The numbers being delivered are about half of the estimated required new supply given the country's growing population and economy. With the addition of new private supply so low, we really have to reassess the scale of the role of the State in the provision of housing broadly.

Social housing in Ireland makes up 9% of households, as compared with 15% in France, 22% in Germany, 31% in Netherlands and 20% in the United Kingdom. One of the effects of this is a considerable reliance on the private rented sector for the provision of social housing in Ireland. It must be made clear that the share of social housing as a percentage of all households will increase substantially under the social housing strategy. The central question for the next Government is how much of our housing problem can and should the State solve. The State has traditionally supplied approximately 10% of homes through social housing for those who cannot afford their own. This is a very real question. If that dynamic is to change dramatically as a result of inactivity from the construction sector then there are significant consequences for our overall budgetary programme. Increased funding for housing has to come from elsewhere, whether from health, education, etc. I will not talk about any other topical issues at the moment.

It is a time for big ideas and considerations. Between NAMA, the social housing strategy and the mixed-use developments that local authorities like Dublin City Council are pioneering, there will be major State intervention in the supply of housing. I believe a balance is necessary and I believe in such intervention but I also believe that in the short term the State is going to have to increase its role in the provision of housing and it should be supported in doing so. At local authority level, elected members need to ensure better use of limited land supply in urban areas and they need to embrace higher densities and potentially high-rise living in cities. We need to future-proof our housing supply, ensure our ageing population - we are all included in that cohort - is catered for and ensure that the system is sufficiently flexible to deal with increasing demand. Collectively as politicians we need to ask ourselves whether we are doing all we can to ensure housing projects are supported and promoted at all levels of the planning and development process. I am referring to the political process beyond these Houses to local authority level, which has a key role. We need to come back to this point during our discussions. For example, I genuinely believe it is contradictory to have politicians of all persuasions and none calling for urgent action to deal with areas where there are housing shortages only to object to the very housing projects needed, either on an individual basis or on a multiplied basis or whatever.

Politicians of all political persuasions need to address some of the negative associations that go with social housing development if we are to get a speedier resolution to our housing crisis. There are many objectors to social housing developments, even where they are being carried out by the Peter McVerry Trust or the Simon Community or, more recently, in Beaumont. Dublin County Council recently provided my Department with a list of 16 projects last year, all of which are being met with objections. There is no question in my mind but that NIMBYism and an incorrect negative perception of social housing leads to objections which delay local authorities in their work.

We also need to face up to the cold hard truth that, with the cost of constructing a new home now being significantly higher than second-hand prices in most parts of the country, we are going to have to improve the economics for the private market to supply badly needed additional homes. The sums do not add up. If it is not beneficial to build houses, builders will not build them, if they cannot make at least a modest profit. Comparing these costs with the new affordability dynamic created by the new Central Bank rules, which in general I support, it can be seen why many potential builders are waiting before they build. The Department has been to the fore in deploying a wide range of measures to bring the cost of constructing homes more within reach of what ordinary people and families can afford to pay, but it appears that these measures may not be enough, and that we must go further. I spoke earlier about levers. We addressed issues within our domain, but many of the issues relating to costs are not within the Department's domain. Reductions in local authority development contributions, a streamlining of Part V social housing requirements, more consistent application of minimum apartment standards and, recently, a targeted development contribution rebate scheme have together reduced the input costs by anything from €20,000 to €40,000, depending on whether apartments or houses are being constructed. We need to go further.

The next Government will have to grapple with the basic economics of housing on the supply side in this country if it wants to see a significant uplift in activity by the private market. That is one of the key messages I want to get across here today. Recent history should demonstrate to us the dangers of over-reliance on the private market, but we do need to decide what exactly is the appropriate mix of private and public housing. The housing action report, Laying the Foundations, which I published a fortnight ago and which I take it everyone here has had a chance to read, provides further information on 31 major actions taken across the housing spectrum in the past 21 months to increase the supply of housing, including social housing. Every one of those actions is important and will have a positive impact on dealing with the problem, but, evidently, we must go further.

Some are calling for a relaxation of Central Bank lending rules as the answer, but with what result? It would clear the way to go back to the failures of the past, which we all know about, when families ended up paying €500,000 for a family home and then worried for 30 years afterwards how or if they were going to pay for it. Surely if two people on the average industrial wage of €32,000 can afford something, say approximately €200,000, is that not the type of house, built to proper standards and regulations and in good locations, that we should be aiming to provide with every strand of public policy?

As a nation we must also think seriously about our attitude to renting. If we can reform the rental market to make it more secure and attractive to tenants, I believe it can become a real long-term option for future generations, but the sector needs further reform. The rental market in Ireland has doubled between 2006 and 2011 to approximately 320,000 households, around 20% of total Irish households. In Dublin, rents are now back to 2007 peak boom-time levels. The measures I put in place last November will bring much-needed stability to the sector, but to really offer a secure, stable and attractive housing option, the rental sector needs more supply, with the associated competition that would bring to the market.

If we, the democratically elected parliamentarians, wish to see more people get access to the homes they deserve, at prices or rent they can afford and in locations they desire, I believe we are going to have to go further and address a number of questions. What is an affordable price or rent for a home? What exactly is the State’s future role in housing provision? How do we reduce input costs, including direct and indirect tax take - currently more than one third of the cost of delivering a new home? Is the negative perception of social housing developments leading to unfounded objections causing major delays? I think we all know the answer to that. Do local authorities and approved housing bodies have the capacity to build sufficiently? How do we guarantee that any reductions offered by the State in respect of these input costs will be passed on to households by developers? Where will the money come from to invest in the infrastructure needed to prepare land for development? How do we make land available over many years at fair prices?

Addressing these real issues raises politically and socially important questions. It also gets to the core of our problems. Many of them are very sensitive questions. We are going to have to face up to the fact that, if we truly believe people's incomes rather than the demands of the market should determine housing costs, the a number of things must happen. For example, the State should set real housing output targets and set out the wide-ranging, time-bound actions required to meet that objective, not just for social housing - which I have done - but for housing in general. Targets for big reductions in housing construction costs are going to have to be set and delivered on by all stakeholders, including developers, suppliers and the State. Perhaps the State could lead on this. Local authorities must be encouraged and incentivised to invest for the future in preparing housing lands for development. A grown-up conversation needs to take place on Article 43 of the Constitution in order that we might achieve a better balance between the rights of individuals as property owners and wider social needs, including housing needs. I have a number of other recommendations which I would like to share with the committee later.

Social housing is arguably the one part of the housing system that is turning a corner. The last summary of social housing assessments in 2013 showed that there were almost 90,000 households on local authority waiting lists at that time. In April last year, as part of the Social Housing Strategy 2020, I announced over €1.5 billion in funding allocations in respect of social housing to be provided by all local authorities for the period out to 2017, via a combination of building, buying and leasing schemes, to meet the housing needs of 25% of the housing list. As members know, the various projects across the country are listed in this document. From the capital budget alone, in excess of €680 million has been allocated for over 3,900 social housing new builds, turnkey developments and acquisitions. That is just the capital budget and does not include approved housing bodies, AHBs, etc. I want to see local authorities advance these projects as soon as possible and have assured them that funding is available to fully support their efforts in this regard. There are no issues.

In all, over 13,000 sets of keys were delivered to people and families in 2015, the first full year of implementation of the strategy. This represents an 86% increase in unit delivery over the figure for 2014. These figures are independently verified in the other document on social housing output, which was compiled by the Housing Agency. This level of delivery was achieved in a very difficult operating environment and represents a good start to the implementation of the strategy. I am not saying anything other than it is a good start. I expect in the region of 17,000 social housing keys to be delivered this year. Local authorities have been geared up again to deliver at scale and well in excess of 450 staff have been allocated to them. That takes time and the announcements I made will be delivered in the years ahead. That is why this document is called Laying the Foundations. We have to be realistic; houses do not appear overnight.

I would argue that investment in and delivery of social housing are not the main issues provided we can get the housing market functioning appropriately again. The latter is key. Almost €3 billion in capital funding will be provided under the capital plan up to 2021, as well as other funding models such as public-private partnership, PPP, in order to deliver social housing. The real issue is supply for the other elements of the market and, particularly, supply of housing that is intrinsically affordable for the average or lower income household.

This is the cohort I am most concerned about - namely, those who are put to the pin of their collar paying rent while, in some instances, trying to save for a deposit. We all know it is a catch-22 situation. Without the required supply of housing coming on stream to take the heat out of the rental market and provide a supply of homes at an affordable price, we are simply storing up problems for the future.

In the short- to medium-term, the focus needs to be on the residential construction sector and boosting supply. It is taking time to recover from the economic downturn and, as a consequence, supply from that sector is lagging significantly behind demand. As I said earlier, private market housing is currently delivering circa 50% of the estimated annual requirement of 25,000 dwellings nationally. Lack of supply is having an adverse effect on the rental market and, along with causing all of the problems I have alluded to, will impact on our competitiveness.

We have the housing system we have because of political and social choices made in the past. To a certain extent, because of the financial crisis and its impact on the housing sector, some of those choices were probably made for us. During my time in office I have used the powers available to me not to solve the problem in its entirety, because that was virtually impossible, but to lay the foundations for a long-term and sustainable solution to this problem. The 31 major actions taken in the past 21 months will have a substantial impact, but I need to stress that I and my team could only directly take the necessary actions that fell within my areas of responsibility. This is a key point for the committee and the incoming Government when they ask what decisions we should be taking now to put our housing system, by which I mean all elements of the spectrum, back on a sustainable footing.

To truly crack this nut, my successor, whether a Minister for housing or for the environment, needs to be able to exert sufficient influence over all of the levers that will bring us to that end, including certain elements of taxation, and the powers to introduce changes that will impact on the viability of development for builders and ensure that any reduction in input costs is passed on to homeowners so that we have affordable homes in the true sense of the word.

I have heard a lot of talk that we should have a Minister for housing, and such a recommendation may come from the committee. I have no objection in principle to that. Appointing a Minister for housing and taking the function from the Department of the Environment, Heritage and Local Government is a waste of time. We will have a Minister for the environment, who will have a particular role, but unless sections are taken from the Departments of Finance, Public Expenditure and Reform and Social Protection and other agencies and included in such a ministry, a new Minister would be left in the same position as me and the former Minister of State, Paudie Coffey, were over the past 21 months. I admit that we had a significant role to play, but it was part of the overall pie.

If we are going to increase the supply of homes to the extent needed, we need to take a comprehensive action-based approach that is broad in scope and recognises all tenures. It needs to be an approach that boosts supply, helps tenants as well as home-buyers and recognises that, alongside new homes, we need to address the issue of how zoned land is made available for development so that we make the very best of existing infrastructure investment, land and buildings.

We also need to have a grown-up conversation about Article 43 of the Constitution, and getting the balance right between the rights of the individual, as regards property rights, and the common good. The two specific items that were directly affected by this were the vacant site levy and the protection of tenancies during the property sales. On the vacant site levy, while I am delighted that it is now enshrined in our laws and it is something in which I believe, my original proposal, following my work with the former Minister of State, Paudie Coffey, was to have it at 6% to 7% of the market value of the land and for it to be introduced later on this year or in 2017. To ensure it is safe from a constitutional challenge, that provision was amended. Similarly, when it came to residential tenancies legislation, the Constitution acted as a barrier against protecting tenancies in cases in which a property was sold.

There has been much commentary on this. I say this not to attribute any blame to the Constitution but because for this committee I need to be open and honest about the situation as I faced it. For the record, because there was commentary on this, I never suggested that the matter of compulsory purchase of land for housing was not an option for local authorities. We might discuss that later. It is not a panacea. There are issues with that as well and it can go on for years.

The key question for the committee is what the appropriate role for the State is in all this. Some might say we should go back to the massive public house building projects because the house building sector will never deliver. That is a deeply flawed approach that accepts failure. Yes, we need a vibrant public housing sector but do we seriously think nationalising all housing provision in this State is the answer? Have any of us here today any sense of the budgetary implications that would pose and the schools or hospitals that we would be unable to build if we diverted a huge level of Exchequer resources into housing to the detriment of other needy sectors? We have this famous fiscal space, a serious amount of which needs to go into housing. Everyone in this room will argue for a section of that pie to go to other sectors. My point is that we need to have a mix. Do any of us here really believe that the answer to our broken housing system is the re-creation of vast swathes of local authority estates which in some cases have taken billions of euros to regenerate? Would it not be better to fix our broken housing market and bring about social housing with it rather than dancing around the edges and pointing out the weaknesses without the political bravery to fix them once and for all? I believe that housing economics in this country is an eminently fixable problem if the collective will is there by us, as parliamentarians, and all the other stakeholders. It cannot be beyond our ability to deliver housing at a cost that ordinary people on average incomes can afford to rent or buy. I certainly believe it is possible and I want to do everything to deliver that.

In addition, in an ideal world, public policy would not only espouse but deliver a plan-led supply of land for housing, acquire it at reasonable cost if necessary and then prepare it with the necessary infrastructure before making it available for public and private housing development in sustainable communities, capturing the uplift in value arising from the zoning and servicing of land and paying for the infrastructure through that process, which we might describe as active land management. That is another topic I believe we should get back to. I might add that, having debated this issue during the general election, I did not see or seek a quick answer or silver bullet in any political manifesto to resolve this overnight.

The committee heard from local authorities on Tuesday - I did not see their contribution but I went back over it - that there is a time lag of about two and a half years when it comes to housing development and that we need to buy and lease in the meantime. There is quite an amount of information in the documents, Social Housing Output and Laying the Foundations, both of which I have shown to the committee and which I am sure its members have had time to study. We can collectively create the ideal scenario. Perhaps the Thirty-second Dáil, through this committee, will grasp that opportunity. It might be the springboard and might take the lessons learned over recent years and the recent decade and develop a national strategy for the delivery of all housing in Ireland that addresses all types, tenures and sectors and, above all, the needs of our citizens.

In my contributions here, I want to be positive, solution-based and work with everyone. The election is over. We spoke about water yesterday but in my time in the Department this took up 90% of my time because it is the most pressing issue. Collectively, working together, we certainly can find some solutions. I have put forward four recommendations and at some point later on, I would like to put forward more based on the collective experience of this theme over recent years. I thank the committee for its time.