Michael Noonan (Limerick City, Fine Gael)
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I thank the Deputy. It is always good to hear his views on housing, given his expertise in construction. He said affordability was the issue rather than supply. However, affordability is a function of supply. If the supply of any good increases, the price tends to decrease. If the supply decreases, the price tends to increase. If supply was to increase, the price would either stabilise or tend to reduce and houses would become more affordable. It is just another word to describe the same problem, approaching it from a different point of view. Again, it comes back to asking what builder will build if the cost of constructing a house is greater than the price of the equivalent house on the market.

There was a basic imbalance after the economic crash. Two years ago, in parts of the city, not far from the Chairman's place, one could have bought a house for €150,000, while one could not have built a house for that figure. The model was broken and builders were impaired by debt. It was not a financial proposition to build three-bedroom semi-detached houses, given that, as recently as two years ago, they were available on the market for significantly less than the price of construction.

However, there is an affordability issue. It is a function of the supply side and we have to examine that as well as considering all ways of financing home purchasers.

REITs have been successful. They have increased supply because not only did they buy many apartments, which they refurbished to ensure better quality, they are professionalising the rental market and there is capacity to build beside many of the existing apartment blocks. The trusts have plans to construct 600 apartments in the immediate future but they are subject to the same controls, including rent controls, as everybody else. This is something we keep under review. There are three trusts on the market now and, therefore, they are not overwhelming it. The trusts are a new model and a new way of doing things, which is helping supply. It is true that they bought at the bottom of the market but the same buildings were available to everybody else. When the market goes bust, the first run of stuff is sold cheaply but many people will not buy at that time. Warren Buffett came in and invested in Bank of Ireland and he made a great deal of money. He invested in Greek banks and he lost his shirt. He thought both were a good idea at the time. That is what happens at the bottom of the market. There are various arguments about property being given away and I was asked why I did not wait and so on but unless somebody sells cheap and there is somebody to buy cheap, there is no market. It is from then on that the market builds. There is a viable market now for commercial property in Dublin but that is on the back of these initial sales which recreated the market.

With regard to land banks, the same constraints apply to a use it or lose it tax as to a vacant site levy. I would like to have a use or lose it tax on them. The large builders who have come in from abroad intend to build. Cairn Homes is actively developing sites and it does not seem to be hoarding. I met representatives of the company to see what they are about and I discovered are in the business of making money from construction. They say that are not in the business of making money through capital gains by sitting on land banks. The same applies to the other large developer which bought Cherrywood. There will be approximately 4,800 units when it is built out with a commercial centre. The company is actively pursuing the development of Cherrywood. There are others who are sitting on land banks. For example, there are people who bought land at extravagant prices and are hoping that if they sit on it, they will at least recover their money, or that if they wait a little longer, they will generate capital gains. We are examining a use it or lose it model for land banks but I do not have a solution yet. The committee might help us with this issue. The Chairman is correct that too few landowners control land in Dublin and if everyone holds back from the market, first, there will not be a supply coming through and, second, if the site element of the construction cost is too high, it will drive prices beyond the affordability level. It is an area that needs examination.

I would like to support local authorities but their elected members have a function and a responsibility in this as well. When I brought in the property tax, I provided for 15% discretion in setting the rate to local authorities. Most local authorities, for reasons that were never fully explained, decided - when they were skint for money - to avail of the 15% reduction. One of the Dublin local authorities not only reduced the rate by 15%, it took money from the housing budget when it made the reduction.

I want to make the point, without making it too strongly, that local authority members also have a responsibility. There is no point in cutting their own budget, especially the housing budget, and then coming crying to central government and stating, "Give us more money". It would make anyone a little cynical about giving more powers to local authorities when that was what happened. Other local authorities were cash rich and cut the figure by 15%, although some cut it by smaller amounts of 3%, 4% or 5%. That is fine and that is the discretion that was given. However, when there was a clear and obvious need, cutting the housing budget was less than admirable, but I will not put it any stronger than that. In general terms, I would favour supporting local authorities more and favour more autonomy for them, but, unless local authority members are prepared to take responsibility and use it in the best interests of citizens, delegation to local authorities will not work.

We are always looking for more discretion from the European Union and have been given a lot of discretion from it. The last piece was signalled before Christmas but delivered just after the general election, whereby the European Union now states that because Ireland has made significant progress, it can be considered we have balanced the budget, even if we are within a figure of 0.5%, which is €1.5 billion. The European Union has provided us with that leeway, which is one of the reasons I am signalling that we will be reviewing the capital programme in 2018. Owing to that change in the rules, we have extra flexibility and it will be quite a lot of money, including for spending purposes. My preference would be to spend it for investment purposes, in other words, increasing the capital programme, rather than on current expenditure measures. That is one example of flexibility being given by the European Union and we are working on other models.

It is true to say other countries, especially the bigger ones, take French leave - not to coin a phrase - and break the fiscal rules. When one is smaller, one has to obey the rules as best one can, but, as well as this, we have gained by being prudent in meeting the fiscal and economic rules. This is the fastest growing economy in Europe. Last year it grew by 7.8% and for this year every agency, including the Department of Finance, has marked it up. The Department puts the figure at 4.9%; the Central Bank, 5.1%; the ESRI, 5%; and the European Commission, around 5%. We are, therefore, having a very strong year again. The sustainable rate of growth in the economy for the foreseeable timeframe of five, six or ten years is about 3.25%. We are above that figure significantly this year and will be above it again next year. What is Mr. McCarthy's figure for next year?