Mr. Mel Reynolds:

This is relevant to the policy since 2012. Most of the housing policies that have come in have inflated the value of either newly built housing or land for different reasons. On the one hand they have a positive effect in terms of negative equity. The return for NAMA will improve. Land values will increase to a point where building is feasible. However, I do not think anyone has carried out a stress test or risk assessment to see what happens when it is successful or to decide at what point we stop. The position now is that it has overshot. When a car is going up a hill, the driver needs to accelerate. That is fine, but at a certain point he needs someone beside him to tell him that he is at the top of the hill or that he is going down the hill and a corner is coming up. No one has checked the policy the way that a driver would check when driving a car to see whether we are at that point, whether we are okay or whether we are over it. Now we have a situation whereby land values are high. The difficulty is that if we overpay for land today, we have to wait for prices to reach a certain point. Effectively, it amounts to sterilisation. If prices continue to rise or even stabilise at current rates, effectively we are sterilising large areas of land from development. This is because there is a major gap between what a developer pays for it and what he can sell it for. No one is going to build at a loss.

This is a painful measure and I believe it is well judged. It is an intriguing countercyclical measure in terms of policy for the reasons mentioned. Certainly, the provision of affordable housing is challenging. It is a deceptively simple model. We can say that the market will cool down and refer to the prices. However, it leaves a hole in the balance sheets of local authorities that needs to be addressed. That is the first challenge. It is probably more of a systemic threat, which is what the question raised earlier was about. Affordable housing by a private developer is probably more dangerous to another private developer than social housing because of the unconscious bias everyone has towards social or council housing. If a person can purchase a social house built by a private developer in Shanganagh for €250,000, why would he spend €450,000 buying effectively the same thing two doors down? There are challenges in the model. If we want to try to stop the car hitting the corner at 120 km/h, we need to put on the brakes. This is a brake. If the driver does not have his seat belt on, he will be in trouble. That is the first thing. Then the driver needs to turn the corner and start doing stuff with the local authorities.