Oireachtas Joint and Select Committees
Tuesday, 10 May 2016
Committee on Housing and Homelessness
Master of the High Court
Before the meeting commences, I draw attention to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the Chairman to cease giving evidence on a particular matter and they continue to do so, they are entitled thereafter only to a qualified privilege in respect of their evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable. The opening statements submitted to the committee will be published on the committee website after the meeting. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.
I welcome Mr. Honohan. His full submission has been made available to members. I invite him to make a summary of the submission.
Mr. Edmund Honohan:
I thank the Cathaoirleach. Undergraduates and, indeed, graduates always start with demand and supply. There are demand and supply curves in the housing market. The supply curve is flat at the moment with no additional houses coming on stream. The demand curve is hopping. In a situation like this, the market regulates by price and the prices we are being quoted in all parts of the market are well in excess of what can be afforded by the economy. We have to have regard to the fact that competitiveness is impacted by the price of housing and accommodation and that is a matter of importance to the public generally.
The housing market can be split into five portions and not three portions, starting with the homeless. There are two homeless groups. We have the group that was traditionally referred to as vagrants - people who live on the street. We know from previous studies that they have various problems. They even have problems feeling comfortable in accommodation that is provided for them but they, nevertheless, are a group that needs to be catered for and we cannot lose sight of that. I am not sure whether any proposal for regulating market prices will make a difference to them because they have no money. The second homeless cohort is people who have become homeless by virtue of some domestic problem or an increase in rent by a landlord. They find themselves unable to secure alternative accommodation because they are not on the housing list.
There are two groups at the other end of the spectrum - the private owner-occupier and buy-to-let investors - with which public policy does not concern itself. These are people who can afford to buy houses or to become landlords. The group we have traditionally dealt with as candidates for public housing is in the middle. The size of this group is almost impossible to predict. The first task of the committee should be to find out the views of local authorities in terms of how many people are looking for public housing, not just today but in five, ten or 15 years' time. We went through a rose tinted period when sub-prime mortgages swept up people who could not afford a full mortgage to buy a house. It is this group, primarily, which is falling back into the public housing subset.
The market rations by price but when the market fails, the State should regulate. That is a classic case for regulation and intervention by the State at all levels of the market and in whichever way is constitutionally permissible. What I am suggesting here seems to me to be quite obvious. It is the big bang approach. We need a big bang in finding property for the public housing and subsidised housing sector, which includes the affordable housing sector. That is a small group of people whose housing needs may be met by funding them with some State aid, perhaps part ownership arrangements, so they can part acquire a property. In general terms, subsidised housing is the part of the housing market which has been shrinking over the past 15 or 20 years. There is a reason for that. Government policy has shifted towards allowing the private market and private financiers to provide for our residential housing needs. We do not have to go back too far to remember the section 23s, section 27s and other tax expenditure mechanisms for providing for housing. In their time, they were a good idea and one wonders what the cities of Dublin or Cork would be like if they had not been in place at that time. Nevertheless, it was a conscious decision on the part of Governments and local governments at the time to invite on board the private sector and allow it to finance and take over the provision of housing. The Part V proposal, which was a slight attempt to row back on that, was watered down.
We have a language problem. There is an old joke about America and England being two societies that are not in agreement on the same language. I cannot remember the phrase. We have a problem that politicians and lawyers seem to have a difference in how they interpret things. It is understandable - lawyers tend to focus very clearly on the wording of a document or piece of paper and politicians tend to veer towards cliché. One example of that is Article 40.3, which refers to an unjust attack. It is not a political article but one that was drawn up at the time the Constitution was enacted. Politicians look at that and say it means any attack and therefore must be unjust. We all understand what an attack is - an interference or something aggressive and negative. The lawyers look at it in a different way. They say it means an attack which is unjust or one that is not capable of justification. The attack is, quite clearly, an interference and a delimiting of some right but there may be a justification for it. The word unjust means the lawyer will ask where the justice is. The lawyers also look at the question of reasonableness and ask what the reasonable approach to take is. I will give an example. When the NAMA legislation was challenged, the court was asked to rule on the constitutionality of the taking in by NAMA of all the bad loans from the private banks. The court said "It is only where the policy position adopted by the Oireachtas is one which could not reasonably be said to be required to achieve the end in question, that the legislation will be found to be inconsistent with the Constitution." A politician will read that and say that if it was not reasonable, the Supreme Court would tell us to take it away, shred it and do it again. That is not what it means. It means that the policy position adopted is one which could not reasonably be said to be required.
That means "could not" on any basis of rationality and that there was no possible way in which one could see how the policy objective could be achieved by the measure that was being adopted. It is not that it was reasonable - that is not the phrase. It means it is capable of being reasoned and capable of having a rational basis.
Headnotes are quite useful for politicians who want to see what the law means. The headnote in the same case states that, in determining the limits of what might be constitutionally permissible - we are getting close to the nub here - the interpretation of legislation and how the legislation, properly interpreted, was to be applied to the facts of any individual case was a matter for the courts, which had a significant role. However, the headnote also states it was important to note the limitations of that role and that it was not the function of the court to consider whether measures were the best or even a good solution to the problem which such measures sought to address.
This essentially means that the decision by the Oireachtas as to how to tackle an area which requires being tackled in the public interest is a decision which will be respected by the Supreme Court. I know it can be difficult for people to understand how we can spend so much time in courts arguing about the minutiae of the legislation but, at the end of the day, what the Oireachtas does not seem to understand is that the courts spend most of this time trying to interpret what the Oireachtas meant to say. It is the intention of Parliament which is the paramount consideration in interpreting what the Oireachtas says.
Occasionally, one gets an insight into what the judges themselves think about policy. I will give the committee an insight into that through a quote from Professor Kenna's book, Housing Law, Rights and Policy, published in 2011. The foreword, written by Ms Justice Mary Laffoy of the Supreme Court, is quite interesting. She points out that, in chapter 17, the contemporary challenges are identified, such as stricter criteria for borrowers of housing loans, negative equity and so forth. She also makes the point that the author's observations at the end of paragraph 17-07, outlining the roles which the law can play in the housing arena, set out a useful marker as to the approach which might be adopted in relation to meeting these challenges. Therefore, we now have a judge actually crossing the line and saying this is the sort of policy area which we might find interesting.
Paragraph 17-07 of Professor Kenna's book states:
Law can play two roles within the housing arena. Firstly, it can reflect the market reality of housing as a commodity and support the contemporary housing system, such as it is, dominated by the market. Irish housing law has acted primarily, and in some areas exclusively, to underpin and bolster this housing market system. Secondly, law can be a source of autonomous values that can temper the market and structure it in different ways. It can draw on the reservoir of international jurisprudence, rights, and principles to inform and creatively expand the conceptual framework of housing law, rights and policy.
Far from the judges being anxious to stop everything and to say, "This is our area of expertise", they are in fact trying to breathe life into the often sterile or cliché-ridden documentation which emerges from the Oireachtas. One of the reasons that we often feel the courts have a firm grasp on this and will not let go of it is that the Oireachtas tends to enact legislation which gives the discretion to the courts. Oireachtas Members tend to feel, if they have a difficult area, that, on a case-by-case basis, they should give discretion to the courts to do something. I can tell the committee, from behind the scenes, that the judges tear their hair out and say: "How are we to tackle this? We have been given a discretion but no guidelines as to how to operate it." We have to try to fill in the gaps and work out what it is that may be of some use in providing, if one likes, guidelines for the judges in dealing with such matters.
With regard to judicialization, the 2009 Law Reform Commission report on debt said we should try to depart from the judicialization of insolvency. Here we are now, as I understand it, with a new proposal to interpose another layer of judges into the housing market and the area of mortgage arrears.
The problem is not the law. The law is there. The problem is actually giving the judges the authority to change the law and apply a different set of guidelines. If a lawyer or judge gets an instruction from the Oireachtas that reads "consider in his discretion whether or not a person should be dispossessed of his property", he or she will say, "I can't make bricks without straw and the first piece of straw I have to use is the presumption of constitutionality, and I have to presume that I am not supposed to "unjustly attack" the owner's rights." Therefore, at that level, they are immediately told that they have the right to be sympathetic to the home owner but do not have the right to actually afford him any rights.
Again, I am going on too long. However, it is of interest to note that, at the time, just before the Oireachtas made its decision, Mr. de Valera said:
In future, the Legislature will have to look after the public interest, as it is doing today. Are we going to shackle the Legislature in the future in a way in which it is not shackled today, and in which it would be most unwise to shackle it? We are providing for that freedom of action to work in the public interest and to safeguard the public interest in the future which the Legislature has today - that and no more ... I think the Legislature ought to be enabled in its own judgment to decide [what the public interest consists of] and not the courts.
It is clear to me that when the phrase "the public interest" is used in the Constitution, it was the intention of those who drafted it and those who adopted it - namely, the public - that the public interest was a matter for the public to determine via its representatives in the Oireachtas. I quoted a judgment - I think it was by Mrs. Justice Denham - that said it was quite clear that it was within the competence of the Oireachtas to make that decision - in other words, to decide what is in the public interest and what the objective is, in the public interest, which justifies the interference with property rights.
Then one comes back to the simple question, "What interference?" What interference might be legitimate and what interference might not be legitimate? Where is the dividing line? Oireachtas Members say, "We just don't know where the dividing line is. If, therefore, somebody tells us there is a possibility we might stray across the dividing line, we better not go there at all." That is not the way Dev intended it. He intended that the public interest be promoted and secured by proactive legislation. Of course, he is dead now, so I do not know. That general approach to human rights and the limitation of human rights is echoed today in the European Convention on Human Rights, which takes a very similar approach. It says that we must give the member state or the Government participating, the signatory Government, a considerable amount of latitude in how they operate their own jurisprudence or jurisdiction regarding matters of public interest.
Even in America the jurisprudence is the same, that is, what is called in America "eminent domain", the idea that the state can step in and say, "Hold on a second, that area of property can now be taken into state ownership because there is a public interest in securing a better outcome for the public." That is the objective which US federal and state governments have acknowledged since time immemorial, and yet we find people saying, "Gosh, the American vulture funds wouldn't be too happy about this." They are used to it. They have dealt with it before. They take the good and the bad. That is how it operates.
I thank Mr. Honohan, not only for his presentation but also for his interventions on this subject since last year. I think many of us have been following them with great interest, and they have been very helpful to our considerations.
He has made the position very clear. I would, however, would be interested in him maybe applying his general observations to a couple of specific policy areas, of which there are four.
In his interview with the newspapers last year, Mr. Honohan mentioned the use of compulsory purchase orders, whether for vacant units, land banks which could be used for social or market use or mortgage portfolios bought over by vulture funds. Will Mr. Honohan speak specifically on how his legal observations could apply to these sets of circumstances?
Given today's topic, I am particularly interested in the Daft.ierent report published today. When rent certainty was discussed in the previous Oireachtas some politicians stated introducing rent certainty, for example, linking market rent reviews to the consumer price index, could fall foul of the Constitution and would be a so-called attack on property rights. I am interested in Mr. Honohan's observations on this issue.
Mr. Edmund Honohan:
In the United States, there is no problem with rent control. The difficulty in the Blake case, which is the 1982 case which challenged controlled rents, was the proposal to impose controls which effectively would have taken money from one group in society and given it to another group in society. The Supreme Court, in a judgment given by Mr. Justice O'Higgins, decided it was too specific and unfair to other groups in society. In other words, the principles of equality did not apply. Funnily enough, the Attorney General at the time, Peter Sutherland, produced alternative legislation to try to shore up the system. He went before the Supreme Court and also lost. The idea that rent restrictions can be specific and focused on particular sectors of the market seems to run the risk of falling foul of the principle that where there is to be an interference with property rights it should apply generally to the group affected and not specifically to benefit a single group.
As a matter of fact, one of the arguments to be made in favour of buying out people is the very fact the Blake decision, the prevention of rent control, is on the books. If we cannot restrict rent, we might as well go and buy rental properties. This is the point. One would run no risk at that stage because the owners would be paid compensation for what they paid for the property. It would not be an unjust attack; ipso factoit is not unjust if they are paid compensation, let us say the market price they paid for the place.
With regard to land, the Housing Act 1966 has compulsory purchase mechanisms for local authorities which requires land for housing. I do not know whether the committee wants me to cite the section on this, but it is one of a number of compulsory purchase mechanisms that has been used. Part V of the 1966 Act states: "A housing authority acquiring land compulsorily for the purposes of this Act may be authorised to do so by means of a compulsory purchase order made by the authority and submitted to and confirmed by the Minister in accordance with the provisions." There was no bother about this and it was not even challenged. I brought with me an old copy of the Electricity (Supply) Act 1927 to show the committee. Back that far it was decided to have compulsory purchase orders for the ESB. Section 45 states that if and when the board thinks it proper to acquire compulsorily any land, the board may by special order declare its intention to so acquire it. There was never any problem. Compulsory purchase orders are standard. If there is demonstrable public interest, there should not be any difficulty with a challenge.
To go back to the issue of rent certainty, what Mr. Honohan has stated is if, for example, legislation were introduced to apply rent certainty to the private rental market in general, there should not be a constitutional issue so long as it meets a general policy or social need. It is only if it were applied to specific categories-----
I mean rent certainty in terms of linking rent reviews to the consumer price index, for example, which is a form of rent control which provides rent certainty. My point is if it applied to the rental market in general, it probably would not fall foul of the law and it is only if it applied to specific sectors that it might do. Is this what Mr. Honohan is saying?
Mr. Edmund Honohan:
To go back to the NAMA legislation, there was a hard fought case and the Supreme Court was happy to authorise very wide-ranging jurisdiction to the Minister and NAMA to acquire all sorts of loans, including rubbish loans, good loans and bad loans, and to allow the Minister to designate by statutory instrument what types of portfolios might be acquired.
The objective was clear, namely, to prune the bad banks and hand over their bad portfolios. Once the objective is identified, and provided that the measure being proposed tallies with it and is not disproportionate, the court will be happy to deal with it.
There seems to be a distinction between rent control and rent certainty. Rent certainty is a measure that the landlord community has swallowed so far, but it is technically a limitation on their property rights, as are many other measures, for example, capital acquisitions tax, controls on interest rates, etc. All of these are in the nature of measures that, socially, society should adopt for the common good. It is difficult to see how there could be a challenge to rent certainty, which is simply a fixity of terms, to revert to the Land League. Having gone through the cauldron of the Supreme Court twice, it is difficult to envisage it turning around and saying that it will let rent control through this time. The courts generally have difficulty in rewriting old decisions. The legislation would have to be finely taut.
Regarding vacant units, in the executive summary the phraseology that I used carefully was "by compulsorily acquiring unoccupied and occupied homes about to be "repossessed"." If one reverts to the question of by how much will the public housing segment of the market expand, one must say that many people will lose their houses through repossession. How does one define the group of housing that it would be in the public interest to have in the public housing portfolio? It is "any housing that is likely to be of use". Vacant housing is likely to be of use, as is housing where the owners unfortunately have been served with a notice to quit effectively or a demand for possession. Once their right to redeem has been extinguished, the title deeds vest permanently in the mortgagee. It is at that point that the State can say it will acquire all of those without exception. It is a big bang. We acquire them all, we pay off the previous owners and now we decide what to do with them. Then we are into a different area.
An important byproduct of this relates to people who are in mortgage arrears. If the State steps in and buys all of the properties that have been the subject of demands for possession or possession proceedings, we have an instant freeze on all dispossessions and evictions. When we sit back and ask what we will do with them then, the answer is to negotiate and put in place the mortgage-to-rent scheme that was proposed several years ago. We will have the option of taking that portion of the houses that we will acquire by compulsory purchase, flipping them over and renting them to the people living there.
I welcomed many of Mr. Honohan's recent comments, in particular because I represent a constituency in which residents in Tyrrelstown are facing eviction by a vulture fund and where the housing crisis is probably the most acute.
I wish to refer to a couple of the legal issues that Mr. Honohan has raised. The tenor of his contribution is to the effect that compulsory acquisition of public housing is arguably now for the common good and legally justified. If compulsory acquisition of distressed and vacant properties is legal and there is a major housing crisis, why has the State not done it? This is the question that Mr. Honohan is posing. Would he agree that we can deduce that it is because the State is putting the interests of private capital, be that capital foreign vulture funds or domestic banks, ahead of the public good and the interests of ordinary people?
Would he agree that it must be ideological? I welcome that he used what is a dirty word around here, the "n" word, which is nationalisation. There is an idea that the State should just sit back and not do anything when people are threatened with the ruination of their lives. It is good the witness used that word and the State can nationalise these vulture fund or distressed properties.
In the statement the witness advocated that the State would probably have to pay the full market price for the properties. He also cites a European court ruling indicating that in exceptional circumstances, it would not have to do so. What are the exceptional circumstances under which these properties could be expropriated without compensation? For example, is the current housing crisis an exceptional crisis wherein the State would not necessarily have to pay the full market price but would be justified in paying lower than the market price or even not compensating these funds?
Does the witness know of any legal impediment to resuming local authority home building on the scale mentioned in the contribution? The witness mentioned that 200,000 dwellings were built by councils and urban housing developments between 1880 and 1960. Is there any legal reason the State could not do that again? Has a State order to mortgage write-down been considered as a cheaper alternative to the State buying these properties, as well as being in the common good? I welcome the witness mentioning children, indicating that enhanced rights were given in the Constitution to children by the recent referendum. Children are being really badly affected by the housing crisis. I attended a court scenario recently and a homeless woman made that point to the judge. What about the rights of children? She made a pithy contribution when the judge said nothing could be done. She asked about the rights of children and that has been raised again by the witness. Could the constitutional rights of the child be a way of blocking evictions, whether from rented or mortgaged accommodation? That would be in conjunction with the State compulsorily purchasing properties as a way of keeping children in their communities and where they attend school etc. I am particularly interested to hear the witness's view on that.
Mr. Edmund Honohan:
There are quite a few questions there. With respect to children's rights, it seems there would be a problem in an individual case where a child wanted to claim a constitutional right to be protected against dislocation, if one likes. That is such an innovative approach and runs counter to the general understanding of the fundamental rights. It is an unexplored area. I do not know what we decided when we decided to pass the children's referendum. I do not know what we decided should be the benefits for children. I am sure this was not taken into account. That is why the outright purchase is the better solution. It is in a broader context of an overall solution for an overall problem.
There is no legal impediment to local authorities pressing on with home building. There seems to be a difficulty in the reality of doing it because of the problems sourcing skills and materials. We are going back to the old Marxist system where one had to count the bricks to make sure there were enough. If everybody starts building at the same time, putting in new water pipes, the new Luas line and so on, there will be a massive collision of demand and supply with respect to labour costs. That is a major difficulty. It is far cheaper for local authorities to be handed properties already built but which are empty or occupied by people who are about to be repossessed. Personally, I do not want to see a repeat of what happened in Ballymun. That is the difficulty for local authorities. They will ask how they can do this fast and the answer might occur of building what was in Ballymun again.
Unfortunately, that is the way local authorities dealt with it in the old days. They have a different view now but they might revert to what they did in the old days if the pressure is put on them to build quickly.
In any event, the point about the CPO proposal is that we have a window of opportunity to argue in court that there is a crisis and that the response of society to it is to seize all the property, the roofed space, that is available and use it to best advantage. Once one states that in broad terms, the minutiae or nitty-gritty of how it works and who benefits and does not benefit will be left to the Oireachtas. As to whether one can do that without paying full market value, the European Court would be loath to approve that unless it was in a situation where the value paid or the value of the property which was being acquired compulsorily was enhanced by some State action or some unexpected economic event. In that situation the value would be regarded as being something of a net value. At present, however, we have the reverse. The price they paid for these properties in the past three years is well below what they should have been paying to NAMA and IBRC. It is well below that, so we pay them back all of that money and wave goodbye to them.
I thank Mr. Honohan for attending. His material is very good and definitely stimulates thought. His point about outright purchase certainly makes sense. We all know that if we start building, we will continue to have problems for at least three years anyway. The outright purchase would deal with it more quickly.
Does Mr. Honohan think the argument for the public good in the Constitution would override the property rights if it were challenged? Given the neoliberal position of the established parties in Ireland, whereby there is a tendency to prioritise the interests of the private sector over the public interest, how would the witness approach dealing with that ideology and their mental approach to that? This is also very much driven by the European Union. For example, we are not allowed to borrow money at less than 1% to invest in infrastructure because the European Union tells us we must go through the private sector and the public private partnership, PPP, process under which one pays between 15 and 20 times more for the money. The cost of money for a PPP can be anything up to 15%, whereas we boast that we can borrow for less than 1%. Given that this ideology is well established in our political parties and is being driven by Europe as well, how would the witness foresee overcoming that obstacle?
With regard to the vulture funds, it is obvious that they bought at fire sale prices. Often they were sold properties for less than half of what it cost to build them. It was irrational to do that. Let us suppose we had the will to purchase many of those compulsorily back from the vulture funds. Does the witness know if there is an international example of how much they would be paid above what they paid? Obviously they would like to get what they think the property is worth today, but is there an international example of how much we could get it back for above what they paid for it? For example, could it be linked to inflation? Could they be paid just what it cost them in the price of money since they bought the property, to compensate them and not leave them at a loss but creating a situation where they would not have a gain?
My last question is completely different and probably not directly linked to what we are discussing here. When Mr. Honohan was talking earlier about how courts deal with what comes down the tracks to them and very often the lack of responsibility on the part of the State, he talked about giving them challenges without guidelines. Regarding how the Commercial Court has behaved in the past few years, does he think it has behaved in a totally independent fashion in how it has dealt with major loans?
Mr. Edmund Honohan:
Again, a number of different questions arise. Private finance initiatives, PFIs, are the English equivalent of public private partnerships, PPPs, and they were John Major's idea. Deputy Wallace is saying that Europe says that if we want the 1% deal, we have to do it the PPP way. Somebody else described PPP as welfare for capitalists. There are huge profits to be made out of PPP and this country needs to turn its back on PPP. It needs to say that it was an interesting idea for the 1980s and now we want to take social control of what we are doing here. I do not feel Europe is entitled to refuse us the money at 1%. There may be EUROSTAT problems - there are EUROSTAT problems about everything nowadays - in terms of the fiscal rules, which most people are now breaking, but we need to assert the right of the Irish Government to attend to a national crisis in as economic and efficient a way as possible. The immediate seizure of the vacant properties is certainly an economic and efficient way.
There is an American proposal here, which I dug up:
It is a real estate crisis we are living with [...] The Plan grows from this simple fact. It is accordingly for municipalities, or joint powers authorities (JPAs) that they or their states establish to enable coordination among multiple municipalities, to discharge their legally appointed function by customary, legally familiar means.
This is American law. The terminology is different, but the concept is the same. It is the idea that in order to call a halt to the decimation of American states because of sub-prime lending and so forth, it was necessary, or it would be desirable, to acquire all the loans on a co-operative basis and then renegotiate all the terms on a restructured and sustainable basis. As regards the actual price that might be paid, it does not seem to me that there is any advantage in trying to work out a formula by which they get an extra 5% or something like that.
The official arbitrator is set up under the 1919 Act - it goes way back. He has all his little rules and actually I have been in several cases myself where I have been disappointed with the result from the official arbitrator where he has awarded less than I thought he was going to give for market value. In other words, it is very tight, and the official arbitrator would look very clearly at how much was actually paid for this property 18 months ago or two years ago and how much one could sell it for now as part of a portfolio.
I do not know whether Deputy Wallace has been following the controversy about the listing of properties in portfolio sales. There is some problem with the Property Registration Authority - it has 7,000 properties on a particular transfer and is now refusing to release that deed - but in each document it records the price for each property sold and the prices that are recorded are quite astonishing. I came across one case the other day where two apartments owned by an investor, one in Templeogue and one in Tallaght or somewhere like that, were being repossessed. The price for the one in Tallaght was €151,900 and the price for the one in Templeogue was €151,900. This is a completely artificial means of apportioning a huge, multimillion pound pay cheque. The figure is just plucked from the air; one cannot imagine the receiver and the American fund sitting down and one saying it will not pay more than €152,000 and the other saying it definitely has to receive €152,000 for the apartment in Templeogue. These are just figures that are plucked from the air and there is an element of artificiality about them.
That is where there may be the possibility of the arbitrator saying, "Now, come off it lads, how much is this really worth? What kind of condition is it in? Did you have a valuation done?" and so on. There is definitely the possibility of prolonged argument about how much the properties are worth but what is interesting about a CPO is that once one serves the notice to treat, that is, once one sends out the notice that one is going to acquire a property, one gets the keys but one does not have to pay until one has worked out the price and that could take two or three years.
I ask Mr. Honohan respond to my last question on the Commercial Court. Many people who have gone through the process do not feel that they have been treated fairly. Does Mr. Honohan think the Commercial Court has acted independently at all times in making its decisions?
Mr. Edmund Honohan:
It is not really for me to comment but it seems to me that the summary judgment process, about which I have written, is one which puts the lay litigant at an extreme disadvantage. I have actually communicated with the Irish Human Rights and Equality Commission on this. I have written to the commission and told it that it needs to address the rules of court which render the lay litigant ineffective. Lay litigants cannot effectively participate. They appear before me at the earliest stages, not in the Commercial Court but for ordinary debts of less than €1 million and ask me what I mean by an affidavit. They ask what an affidavit is and I have to tell them what is it. Then they go away and produce an affidavit which is rubbish, containing stuff that somebody in a pub told them to include. Then I say, "Tell me now what your story is. How did this come to pass? What did you borrow the money for?". We go on at length and eventually I will say, "That is very interesting. Put that in an affidavit". I do not think that happens in the Commercial Court. I do not think there is a debtor-friendly or lay litigant-friendly approach taken. One of the difficulties with debtor-friendly or lay litigant-friendly approaches - I have heard comments on this from both sides - is that a judge will say, "I did my best. I explained what the nature of the procedure was. I explained to him how he might develop a point here, there and everywhere. Then I turned around and ruled against him and I was told I was a bastard but I was doing my job - to try and explain where he was at and what he needed to do. So, eventually, I give up". This is what one judge told me. The impression given in the Commercial Court and elsewhere, including the High Court, is that big money talks.
Omnia praesumunturis a legal maxim we have whereby everything is presumed to have been correctly done. That is certainly a presumption which the courts applied to the banks' paperwork but I have found it not to be true.
Mr. Honohan's points are very thought-provoking and worth examining in full.
I live in a predominantly rural constituency in County Louth, although we have two large towns, Drogheda and Dundalk. There are very few vacant properties in the county. In fact, the biggest problem is that people cannot get a place anywhere, no matter what they are willing to pay. All of the properties are occupied. The key issue, therefore, in the context of what Mr. Honohan said about the public interest, is that the local authority and others need to build more houses but the Planning Acts can cause delays. Properties can be purchased from reluctant sellers by way of a compulsory purchase order. Would there be a problem with making changes to the planning regulations, in the public interest, to address the time-related issues, in terms of constitutional challenges? One of the biggest issues is that one can have the land and be ready to build but there are enormous, unnecessary delays. Would it be possible, as in the case of significant industrial developments, to have a branch of An Bord Pleanála which would fast-track the planning process for houses? Would it be possible to set up a one-stop-shop, with a six-week period for consultation, for example, but only in the public interest and for a limited period of time? Would that make sense or would it pass muster?
Mr. Edmund Honohan:
I cannot see any difficulty with that. The situation with planning is that we could rewrite our planning laws overnight. We could introduce a derogation, for instance, for particular types of housing or particular sizes. Obviously, one would not be too keen on allowing a derogation from building regulations.
I think the big problem with Ballymun, which has been mentioned by Mr. Honohan, was that it was entirely inappropriate for families and particularly for children to be living in high-rise accommodation with no proper recreational areas. Is the import of what Mr. Honohan is saying that there is no constitutional barrier preventing the Government and the Oireachtas from deciding to fast-track social and affordable housing by significantly shortening and abridging the amount of time it takes to provide such housing?
I thank Mr. Honohan for his presentation. My question relates to buy-to-let properties and to those who are caught in the sandwich. Does Mr. Honohan believe there is any potential or possibility for legislation to safeguard the interests of tenants to allow them more time to find alternative forms of accommodation in the event of the properties they are living in being taken over?
Mr. Edmund Honohan:
The position with regard to the appointment of a receiver who takes the keys and tells the tenants in a buy-to-let property to get out is that the owner for whom the receiver is acting is in the same shoes as the landlord and therefore has certain obligations under the PRTB arrangements. I refer to minimum terms, etc. I do not see any reason there should not be a rider attached to the sale of a buy-to-let property that would entitle the tenant to the first option, to the maximum amount of time within which to find suitable alternative accommodation or to an application to court if this does not prove possible. There does not seem to me to be any difficulty with such an approach other than the possibility that the purchaser of the buy-to-let property, or the bank that is selling it, might argue that the value of the property is going to decrease because they are stuck with a tenant and it might take them 15 or 18 months to shift him on. That is the difficulty. Compensation might be sought in such circumstances. Any legislation seeking to restrict what we call the fee simple - the unencumbered right to sell a property - would be diminished if there were an obligation to provide directly or indirectly for the accommodation of a person.
When Mr. Honohan spoke earlier about the public interest in the context of the emergency that currently exists, he suggested that forthcoming legislation which would not be judged to inhibit that right could be introduced on a temporary basis until this crisis has passed.
Mr. Edmund Honohan:
American case law in this area is very keen on the idea of a temporary abrogation:
Housing is a necessary of life. All the elements of a public interest justifying some degree of public control are present.
I have already cited this particular case - Block v. Hirsch - and I can tell the Deputy a long story about it another time. It continues:
Machinery is provided to secure to the landlord a reasonable rent. It may be assumed that the interpretation of "reasonable" will deprive him in part at least of the power of profiting by the sudden influx of people to Washington caused by the needs of Government and the war, and, thus, of a right usually incident to fortunately situated property.
That was approved. The bottom line is that social requirements, social demands and the common good override the right to property.
We have four people presenting for questions. As time is pushing on, I might take two of them together. Deputy Canney will be followed by Deputy Durkan. I will allow two further Deputies to ask questions after that.
I would like to refer briefly to an issue that arises with local authorities and the private sector in the construction of houses. The planning process is followed by a procurement process and a construction process. The easiest part of that is the construction process, because one can set deadlines when one is building. Deputy O'Dowd spoke about planning. We are also tied up in huge procurement rules and regulations, both from the EU and from our own office of public procurement. Would it be possible to use the current crisis to expedite the whole process by removing many of these regulations in the short term?
For instance, Mr. Honohan referred to a six week period for planning. If the procurement process were to last for six weeks and the construction process a further 20 weeks, we would be producing the required units in approximately six months. Is there a legal impediment to setting aside the procurement rules or can this be done in an emergency?
I thank Mr. Honohan for coming before the committee and giving his views.
I am becoming a little concerned and confused as time passes. While modular housing may not be the answer in many cases, in a crisis one must be guided and bound by the urgency of that crisis and the extent to which we can continue to have families forced out of their homes or living in unsuitable accommodation and sometimes split up to avail of accommodation. In some cases, two, three or four families are sharing one dwelling, with some sharing one room. Such circumstances are totally unacceptable and whatever action is needed to address them must be taken. If housing cannot be provided quickly and we are not allowed to build modular housing, nothing will be done to address the problem. I do not want intensive developments such as that which was built in Ballymun to be built elsewhere. Members discussed this issue the other day. However, a short-term solution to the current problems can be found and it is the direct building of modular housing. The rest could follow.
Part ownership, State ownership and private ownership were mentioned. The shared ownership-loan system, under which the rental part of the equity was the subject of an annual 4.4% increase, was a farce. This approach can only be described as imposing a penalty on those who had the temerity to provide a house for themselves because they happened to be in a particular income bracket.
On the control of land prices, we had the Kenny report, the McKinsey report and Myles Wright reports. Produced at different times, they all addressed the same issue, but for one reason or another, it was decided not to implement them, although one of them was partially implemented. Given the reluctance of the courts and the State to proceed in the direction advocated in the reports, what scope is available in this regard?
Mr. Honohan is correct that there has been a shift from the State to the private sector. At the time, some of us recognised that this shift which occurred ten or 12 years ago was patently wrong, but no one shouted "Stop". Local authority housing requirements came to be provided for by private housing entities or approved bodies as they are known. The purpose of this approach was to shift responsibility from local authorities. However, I do not accept that local authorities should become directly involved in housing provision. They should employ builders to build immediately, rather than in two, three or four years time because we do not have the luxury of waiting for things to happen. We must make them happen soon.
Mr. Edmund Honohan:
Public housing is the way forward. In 1932 a proposal was made for the establishment of a housing agency - not the local authorities - and it is recorded that Deputies had to prod the agency from time to time to get on with the job. Nevertheless, it was a housing agency rather like the Northern Ireland Housing Executive. If we are talking about cutting through the procurement mechanisms and getting shovel ready projects up and running, that seems to be the way to go. The history of local authorities is that they are, if one likes, unable to shift themselves from a mindset.
I referred to modular housing as a joke solution. It is not a joke solution, but it is when it costs €243,000 per unit. Let us build modular houses at €90,000 per unit. Before my time, we had stocks of coal in the Phoenix Park. These are emergency measures. When one builds modular housing, people understand these homes will be temporary. One does not build a proper house, describe it as modular and then tell the residents they will have to move on in six months.
The Kenny report was mentioned. What is the point about the Kenny report on building land? The proposal was not implemented. That is another judge who said let us go for this, let us be inventive and radical. I mentioned Miss Justice Laffoy and I mention Kenny. The judges are quite prepared to hear proposals and to go with them. In recent years they have been cutting back significantly on the degree to which they accept or wield any sort of authority on limiting the project in its nuts and bolts. That is what I have to say.
I am interested in what Mr. Honohan has said but much of it is out of my reach because it relates to the law. However, I will make my contribution on what I know as a public representative on the ground. I agree with Mr. Honohan about building Ballymun and St. Michael's estate and so on, but the fault in building them did not lie only with the residents. It was the way they were managed and abandoned by many of the councils and were not properly serviced. If we had them today as private rented accommodation, a person would probably not get one for €2,000 per month. They were spacious and well built and most of the facilities in them were really good. Unfortunately, for a number of reasons they failed to live up to the standards for which they were built. Mr. Honohan did not speak about the number of houses for sale in the different areas, although it was in his submission. The areas that are of interest to me are Drimnagh and Crumlin because that is the constituency in which I live. I am aware the local authority has bought many houses. It has de-tenanted areas such as St. Teresa's Gardens and Dolphin House and is continuing to buy units. Although it might acquire them for €180,000, clearing them out and refurbishing them can cost up to another €150,000. Therefore the cost is not €180,000 but a much higher figure.
I wish to ask two questions. What are Mr. Honohan's views on voluntary housing agencies? In regard to number of homeless people, we have a report from the Mercy Law Resource Centre, the Peter McVerry Trust and Circle Voluntary Housing Association. Mr. Honohan is correct in saying everybody has different figures. If we could get a clear indication from the councils on the exact figures, we might be able to find a proper solution. Why is Mr. Honohan so set against modular housing? Will he specify if it is because of the price? These modular houses are being built. We are talking about a life span of 60 years or more on them. How can he say that modular housing would be a transient unit? Many of the people who will go into modular houses would like to remain in them. I have spoken to many people on the issue of modular housing in my constituency who have said that if they had a roof over their heads for the next 30 or 40 years, they would be very happy. Is it down to the price or is there some other factor that makes Mr. Honohan - I will not say negative about them - reluctant to have them built?
I welcome the views expressed by Mr. Honohan because they will clear the decks a little that as a State we can intervene and purchase property from vulture funds by means of compulsory purchase orders to get housing directly rather than building which would take a much longer period. There is also the issue of clearing the decks in terms of the planning laws to allow for six, 12 or 20 weeks for building in the longer term. That clears the decks and recognises that the committee can start playing a key role in trying to push the emergency element and then look at the longer-term issue.
My question relates to the European Convention on Human Rights in regard to housing. In the longer term does Mr. Honohan consider that having a housing right in the Constitution would benefit legislation into the future to help maintain a balance of public and private housing and impose a responsibility of the State to provide public housing? When selling commercial property, the State can sell the property with a tenant in situwhereas private landlords cannot do this in any shape or form. Would there be a problem if a regulation was introduced where a property could be sold with a tenant in situ?
Can that be done or is there a problem with that?
I have just one question in regard to compulsory purchase orders. Given that we have a housing emergency which brings the public interest and common good into play, do we have adequate legislation or is new legislation required to provide for compulsory purchase orders to override the property rights of owners? Is legislation strong enough or would new legislation have to be introduced?
I wish to make an observation first and then two quick points. I share Mr. Honohan's concerns in regard to modular housing and having spoken to a number of professionals across the spectrum, they too share those concerns. One of these concerns is in regard to the significant cost of delivery of these units compared to conventional type property and there are also concerns in regard to the lifespan of these units.
I have two questions, the first of which relates to tenants. We have a number of people currently in HAP or RAS schemes or on rent supplement. Sometimes these tenants are living in difficult conditions and are concerned that if they raise the issues or seek to have them addressed, their landlord or landlady will serve them with an eviction notice because there is such a queue of people seeking accommodation. As Mr. Honohan mentioned in his presentation, demand well outstrips supply. What is his view in regard to strengthening tenants rights to ensure that we have some level or standard regarding for what tenants are paying?
Second, I agree with previous Deputies on the need to fast-track planning. What are Mr. Honohan's views on fast-tracking planning for the greater need and in the national interest in regard to the current housing crisis? Is this also necessary for the procurement process? We are bogged down and everything is far too slow because of these two issues. I believe a partnership approach is required between local authorities, government and bank funding and the private sector which will build and deliver the units. What is Mr. Honohan's view in regard to the successful tenderer being able to access funds from government at a much lower rate than from the banks? This would help deliver local authority or social housing at a much cheaper cost. In addition, this would also help provide starter homes. Currently, couples on middle incomes cannot afford to buy because of the negative impact of higher borrowing rates which are added on to the cost of a house. What is Mr. Honohan's view on making capital available at a much lower rate, perhaps at 12% less than currently, in order to help deliver housing and reduce cost?
Mr. Edmund Honohan:
There is not an actual human right to housing. There is a human right to shelter, but amazingly one finds it is not very strong. Passing a referendum and providing a human right to housing is not a solution; it just shifts the cost burden. I do not believe it is necessary to have a constitutional referendum because the common good requirement is such that it can be argued - I have made the argument in regard to children - that society demands a paternal view of its role in regard to how to house people. It needs to accept it has failed in that role and that public housing is the way of the future and we may as well start now by acquiring a portfolio that is out there for grabs.
I should raise the issue of how this committee gets its legal advice, because while we are talking the same language here, there seem to be nuances about this issue that the committee does not understand and ones I do not understand about what members are saying.
In order to get legal advice one needs to find out who is going to give the advice which will stand up to scrutiny. I am only an ordinary senior counsel who has a public service job so I feel at liberty to comment on these things. However, I am not sure whether the legal advice that has been floating around regarding articles of the Constitution is one which stands up to scrutiny, and I wonder why that is. Perhaps there are forces at play that have shut down debate on these matters.
I thank Mr. Honohan for his attendance and some of his responses will provoke further thought and discussion in this committee's deliberations. We will suspend the session for a few moments as we bring in the next witnesses.