Mick Wallace (Wexford, Independent) | Oireachtas source

I commend Deputy Joan Collins on tabling this motion. Many of the problems highlighted in it have not gone away. The motion is about poor banking behaviour, deregulation and the failure of the State to control the banking system in any way. That has led to a situation in which we are now facing an increased number of repossessions. It is a crazy scenario.

Of course, we are all well aware that the deregulation should never have happened in the first place. However, the ideology that drove deregulation, neoliberalism, is sadly still alive and well, which poses a problem for the future. The Government still cannot tell the banks what to do. The State refused to have any measure of control over the banks in the good times, and even when the State owned the banks, it was still very reluctant to tell them what to do. That is a massive problem.

The principle behind repossessions does not make sense. It is fair enough if somebody can afford to pay a mortgage and will not pay it, but if a person cannot afford to pay a mortgage there is little common sense in throwing them out of the house. It costs more in the long term. There is no logic in throwing people out of their homes, especially if they cannot afford to pay the mortgage. Ninety-nine percent of people would pay their mortgages if they could, because they wish to remain in their homes.

The fact that we are still unable to tell the banks what to do means that they will be able to do what they wish. The banks do not look at the building a person lives in as a home. To them it is a financial asset on which money is owed, and if they do not get the money they wish to take action. They claim that repossession is a last resort. However, it is not the State that is deciding what a last resort means. Sadly, it is the banks, so they do what they like. That is the reason there is an increased number of repossessions now.

Repossessions were not nearly as plentiful three and four years ago. In the first place, the banks were so far under water they did not know their backsides from their elbows. Second, when people were living in homes that were seriously underwater and had no equity in them, the banks were reluctant to move on them. Obviously, the change in the legislation has facilitated their actions now, but it also has become more attractive for the banks to repossess because there is more equity in these homes. In cases in which people cannot pay their mortgage, it is becoming more attractive to the bank to sell the property, because prices have increased. One was nearly safer when one was in more trouble, because one's so-called asset, one's home, was less attractive to the bank.

This situation is going to get worse before it gets better, not just in the short term but in the long term. In my lifetime - and I have been in the industry for most of my life - there has never been a real housing strategy in this country. It has always been market- and developer-led. Planning is market- and developer-led and, sadly, the State has been too often led by the nose by the developer as well. I am not just referring to the present.

The problem has been prevalent for the past 30 years. If the State wishes to change how things are done, it has a great deal of work to do. First and foremost, a complete change of ideology is required.

The Central Bank has proposed that loans be limited to three and a half times the salary of mortgage applicants and that applicants be required to produce a deposit of 20% of the price of the property. This has created a new game, which is fine as it will mean with fewer people meeting these criteria, the number of people getting into trouble with their mortgages is likely to decline. However, it will also mean that almost half of young people will never be able to afford to own a home. This is not the end of the world. In the rest of Europe, there is much less emphasis on owning one's home because it is much cheaper to rent. The Italians, for example, are happy to rent, with home owners in Italy making up only 25% of the market and people renting making up the remaining 75%. One can rent cheaply in Italy, for example, in Turin it is possible to rent a nice apartment for €300 per month. If one were to try to do that in Dublin, it would not work out very well.

If fewer people are able to afford to buy a home, it will be crucial that the State turns its back on the current approach of throwing people at the mercy of the private rental market. This is not the correct approach. In the past 30 years, only minimal efforts have been made to build social houses and these have been concentrated in poor areas. As we know, people who live in poor housing tend to be poor and have poor life opportunities. Very often, this comes back to bite the State through various social problems.

If we proceed with the proposal that banks be required to provide loans of not more than three and a half times a person's salary and demand a deposit of 20%, we will also have to rethink completely our approach to social housing by building good quality social housing for up to half the population. Social housing will be required in all areas and we will have to move away from ghettoisation and poor quality social housing. An entirely new approach to the issue is needed and the sooner a Government adopts such an approach, the better.

See this speech in context