Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I thank Deputy Brassil for his questions. His country is like my country. I know his part of Kerry. It is not so different from west Limerick, where I came from originally.

Deputy Brassil is right in that there are a lot of unused property in small towns and villages, but much of this is for social reasons as much as economic reasons. It is the ambition of every young working couple not to live in the village but to build on a half acre on the approach roads to the village. What has happened, as that has developed as the model over the last 30 years, is that the villages and small towns are becoming the residential areas for those in social housing. That then has its own economic effect on the villages because the purchasing power of those benefiting from social housing is obviously lower. The shops close down and so on while the people living on the approach roads get into their cars and drive to the Aldis or Lidls or the various big supermarkets and shop anywhere, even 20 miles from home. We need to come up with a way of encouraging young couples to live inside the speed limits rather than out in the countryside. I will not get into the environmental advantages that might have but if one looks at it purely as a model of development and wants to encourage that kind of a model then it would have to be done through grant schemes, as the Deputy suggests, rather than tax breaks. Tax breaks work at the marginal rate of tax, and a young person starting out and acquiring a home is probably paying tax at the lower rate, 20%. A tax break provides a big advantage if one is paying tax at the higher marginal rate, but a lot of the people who are paying tax at that rate have long since provided themselves with a decent home. It might be considered whether there is a way to tip the economic balance. A grant could be provided inside the speed limits of small villages and towns of a certain size, and perhaps we could figure out the level at which that grant should be pitched and whether it should act as an incentive. There is something in what the Deputy says.

I am not sure whether that would then be extended to original owners. There are cases where parents die, the owner is in Dublin, he or she has the shop closed down and there is residential area overhead. I would be open to the suggestion of that happening with the intention of leasing the property to the local authorities for social housing. I think that is the Deputy's idea. There is a housing crisis, but there is also the crisis of the declining village and small town.

In solving one, perhaps we could solve the other. We need fresh thinking, which is why we have this special committee. I am very open to this.

I met the credit unions on several occasions and told them we would like to expand their activities into the provision of assisting in housing development. We must remember the credit unions are regulated by the Central Bank. The credit union regulator is a senior Central Bank official. They are independent in how they are regulated. The primary concern of the Central Bank in dealing with credit unions is to protect those with savings in them. The only money credit unions have is that from small savers throughout the country. The Central Bank will not allow the credit unions to get involved in speculative activity that would put those savings at risk in any way. This is not to say they are not putting some money into house building. My officials are speaking to them and we are working on it. I see an initial role for the credit unions as being in a position to supplement the purchase of houses and the type of thing we used to do previously. If they cannot contribute to a loan for the purchase of a house, they might be able to give a small loan for the kitchen, equipment or furniture. The committee might check it out with the credit unions this afternoon in order to discover what is their current thinking on the matter.

A difficulty I have is that when I speak to individual credit unions, they do not seem to have a unified approach. They come up with different proposals. In dealing with the Central Bank, there needs to be a general mandate on which the latter will agree. We spoke to the Ireland Strategic Investment Fund, ISIF, and the National Pensions Reserve Fund, which have quite a lot of money. This is for SME lending rather than lending for the purchase of houses. They are developing a programme whereby they will use credit unions and post offices as a platform for interfacing with small firms so they can lend to them. The actual analysis of the loan application will be done by the bodies themselves but the interface will be at credit union level. There is much happening and we want viable suggestions. The bottom line for the bank and for me is that whatever the credit unions become involved in, they cannot put at risk the savings entrusted to them by advancing money in respect of investments that would be regarded as overly speculative. The Deputy would agree on that point.

In every economic activity, there is a supply and demand side. The analysis of the housing issue at present is that there is just a shortage of houses and we need to build and provide more houses. Giving grants, for example, is on the demand side as is giving tax breaks to purchasers. Trying to reduce the price of houses could increase demand. There are two sides to it.

Deputy Durkan spoke about emergency accommodation. I am not the Minister with responsibility for the environment or housing, and initiatives on emergency accommodation come from the Department of the Environment, Community and Local Government. The Deputy is aware of them. Like many things in life, there is a supply-and-demand problem and, to return to the equation, there is a tipping point whereby 1,000 houses short or 1,000 extra houses can drive one from crisis to surplus. I examined the figures for Dublin and while approximately 5,000 people are homeless, the average seems to be approximately five per family. If we had more than 1,000 housing units in Dublin now, we would solve much of the problem. It is a tipping point situation. Some of the analysis being done does not contemplate the basic economic difficulty or address this issue.

If we could provide 1,500 additional units in Dublin, we would not have a homelessness or a tipping crisis. We are not talking about the need for hundreds of thousands of houses. Members will be aware of other initiatives, including the construction of modular homes in Finglas and the return to use by the Dublin local authorities of many voids. The councils are now doing much better in that regard. When a private landlord rents a property and it is wrecked by bad tenants, it will be ready to rent again within one month or six weeks because he or she is dependant on the income flow from it. In the case of a local authority property that is wrecked that process often takes up to two years. We see this happening all over the country. One of the interventions in emergency accommodation provision - this has been done successfully in Dublin - is to ensure that as a matter of policy local authority managers return voids to use within two months rather than two years. As I said, the turnaround time in the case of private accommodation is much quicker because the landlord needs the income flow to service the loan.

There are many small, as well as big, things that could be done. I am not prescribing to the committee or suggesting I have the solutions as this is not my area. I am speaking more as a constituency Deputy rather than as Minister for Finance. There must be a fast-track approach to the supply of the 1,200 to 1,500 houses required in Dublin. Fewer units are required in other areas. For example, while there is a homelessness problem in Limerick, it is not of the same magnitude and does not require the provision of 1,000 houses. The provision of several hundred houses would solve the problem in Cork. We have a tipping point economic problem such that on one side of the tipping point we have an emergency, while on the other we do not. Addressing that space is one of the issues I have been examining.

On off-balance sheet issues, the opening position is that we are bound by fiscal rules of the European Union. Following the passing of the referendum in 2012-13 European fiscal rules are matters of Irish constitutional law. We do not have a shortage of money. We have almost balanced the budget and can borrow money. Three weeks ago the National Treasury Management Agency, NTMA, borrowed €500 million at a rate of 0.81%. That is cheap money and it is ten-year money. It is the capacity to spend money that constrains us until we balance the budget. What we need to do in the intervening period is, as suggested by Deputy Berard J. Durkan, to try to secure expenditure that is not on balance sheet in order that it will not impinge on the fiscal rules and not take up the notorious fiscal space. The reason I push the National Asset Management Agency, NAMA, a lot is the 20,000 houses which it has committed will be provided off-balance sheet. We must be careful not to lead NAMA into State aid difficulties. If it does something that is competitively not commercial, private interests in the construction will complain. Some private interests have already made complaints to the European Union. If it had to be on balance sheet, the option of using NAMA as a vehicle for increasing supply would disappear. Currently, it is off-balance sheet and NAMA is committed to providing 20,000 houses.

Public private partnerships, PPPs, too, are off-balance sheet, if engineered properly. There are many schools being built around the country using the public private partnership model. As members will be aware, work is done on bundles of school projects rather than single schools. For example, seven or eight school projects are put out to tender and the bundle can be off-balance sheet because of the way in which it is engineered.

There is another area which I would like to track, and the committee might track it too. Somebody told me last week that the French Government had done a deal with the European Investment Bank for approximately €3 billion to channel through its local authorities for social housing. This was off-balance sheet. Perhaps somebody told me a tall story but I wish to check it out. It is interesting if that can be done because the Department of the Environment, Community and Local Government has been looking at ways of trying to get local authority houses off-balance sheet. That is what I have been told but it might not be simple. One often hears travellers' tales and when one checks the detail, they are partially true but not applicable to Ireland. However, when looking at NAMA and PPPs, the committee should take a look at the European Investment Bank and see if it can be used to fund PPPs where the local authority would be the central agent and if that could go off-balance sheet. If that were to happen, it would relieve a huge financial bottleneck and would get the process moving for social housing.

There is no problem with having a Government bond and calling it a Government housing bond. We would get the money at less than 1% for ten years. If it went out to 20 years, we would still get it at 110, 120 or something similar. I say 20 years because that would be the lifetime or model of a house paying for itself. The trouble is that it would all be on-balance sheet. The key problem is not a shortage of money. We can raise the money. The NTMA can raise money for us, it can go into the Exchequer and it can be used for house building. The problem is that it goes on the balance sheet and then we break the fiscal rules and the expenditure ceilings.

There is some relief down the line. Our model shows us balancing the budget in 2018 and once we balance the budget, we have more scope. Again, and not to be too technical, up to now we have been spending money, if we can, on reducing taxes a little, increasing expenditure across the key Departments and reducing the deficit. Once one balances the budget, the money is only going two ways - either reducing taxes or increasing expenditure. There is then much more scope. We have already committed to reviewing the capital programme in 2018 because we will have balanced the budget, so we will have extra resources. In reviewing the capital programme, obviously extra money will go towards housing. I am only giving the committee background for its work.