Dara Murphy (Cork North Central, Fine Gael) | Oireachtas source

I move amendment No. 1:

To delete all words after “Dáil Éireann” and substitute the following:"acknowledges that:

— the construction sector and the housing market were very heavily affected by the economic downturn and the bursting of the property bubble; and

— a poorly regulated banking sector, with lax lending standards combined with pro-cyclical and inappropriate fiscal policies adopted by the previous Government, led to a property bubble, the consequences of which are still evident throughout the country;

recognises the importance of ensuring a strong and sustainable construction sector and housing market that meets the needs of the economy and society;

notes that:

— in 2014 a total of 11,016 homes were completed in comparison to 93,019 units completed at the peak of the housing bubble; and

— at the peak of the housing bubble in 2007 over 270,000 persons were directly employed in the sector and that by 2012 this figure was below 100,000;

further acknowledges that new housing supply - both social and private housing - is a key issue that needs to be, and is being, addressed;

notes:

— in this context, that the Government’s Construction 2020 Strategy for a Renewed Construction Sector is focused on addressing constraints that are inhibiting new housing supply, including as regards planning, mortgage and development finance, infrastructure and public investment, standards and regulation and education and skills;

— in addition, the recent announcement of the Government’s Social Housing Strategy 2020 and the Government’s commitment therein to deliver 35,000 new social housing units over the period to 2020;

— the additional €2.2 billion in funding announced for social housing in budget 2015 and the publication of the Social Housing Strategy 2020 in November 2014, which builds on the provisions contained in budget 2015 and sets out clear, measurable actions and targets to increase the supply of social housing, reform delivery arrangements and meet the housing needs of all households on the housing list;

— that the Central Bank has recently issued macro-prudential proposals in relation to residential mortgage lending and will shortly make decisions in relation to these in accordance with its independent mandate in such matters; and

— the encouraging signs of a recovery in the construction sector and the housing market;

and

agrees that a whole-of-Government approach to the implementation of Construction 2020 and the Social Housing Strategy 2020 will deliver a sustainable housing market that meets the needs of our society."

I assure Deputies that housing, property and construction are to the fore in this Government's priorities and, to this end, I very much welcome the opportunity to debate these issues in the House. Attention to this topic has been marked recently. Indeed, I note that a similar Private Members' Bill was put forward in this House last September.

This motion is timely, however, particularly in view of the announcement made by the Central Bank approximately two hours ago in respect of the new regulations relating to mortgage lending.

As the Central Bank outlined in the statement it issued earlier, the key objectives of the regulations are to increase the resilience of the banking sector and reduce the risk of bank credit and housing price spirals developing in future. The latter is a welcome ambition. In developing the new rules, it was important to strike the right balance between achieving this objective and the ability of first-time buyers to save deposits to purchase their first homes. This balance is both important and sometimes difficult to achieve. The Governor of the Central Bank, Professor Patrick Honohan, consulted the Minister for Finance earlier today in respect of the bank's macro-prudential proposals on residential mortgage lending. This consultation was required under section 48 of the Central Bank (Supervision and Enforcement) Act 2013. Following the meeting, the Minister for Finance agreed that the revised regulations would be laid before the Houses of the Oireachtas as required under section 51 of the 2013 Act. Further details relating to the specifics of the regulations, many of which Deputy Michael McGrath read into the record, are available on the Central Bank's website.

I note the Deputy's comments to the effect that there are many elements to the motion before the House. We can all agree that the previous housing model in this country was unsustainable. Predicated on ever-rising house prices, housing supply expanded to the extent that when the tide went out, we were left with the legacy of ghost estates, a collapse in construction employment and thousands were left with a variety of negative equity and mortgage arrears problems. On the financing side, mortgages were made available on terms which helped to inflate house prices, and the model in use for financing development was partly responsible for the problems that arose in our banking sector. It is for this reason I find it difficult to reconcile the comments made by Deputy Ó Cuív earlier with the policies he implemented when serving as a Minister in the previous Government. It is widely accepted that certain tax breaks for housing resulted in an unaffordable subsidisation of house purchases which expanded well beyond the underlying level of demand. This misallocation of resources meant that less was achieved than would have been otherwise possible and our economy and society were left more vulnerable to the subsequent economic downturn. The latter then led to an increased dependence on the State for social housing supports. Waiting lists for social housing rose from 43,000 in 2005 to a peak of 98,000 in 2011. As the economy and employment improved, the waiting lists fell to 90,000 in 2013. The position with regard to rent supplement was similar. In 2005 some 60,000 were in receipt of this supplement. This rose to a peak of 97,000 in 2010 and fell back to 71,500 in 2013.

The Government has recognised that recent price and rent developments in the housing market reflect the interaction of a recovery in the economy and in employment, with a consequent shortage of supply of new housing, especially in Dublin and some other urban centres such as Cork. With economic recovery, there is an increased level of housing demand as a result of the growth in the number of people at work. According to the Central Statistics Office, in the third quarter of 2014, GDP was 3.5% higher than in the same period last year. The rate of employment was 27,700 or 1.5% higher during the same period. This was the eighth successive quarter of annual growth and the level of employment is more than 80,000 above the low point reached in mid-2012. In addition to these factors, population growth has continued while some of those who had postponed purchasing in recent years have begun to enter the housing market. To date, supply has not responded commensurately to this increased demand and, as a result, prices and rents have risen. The level of housing supply - owner-occupied, social and privately rented - especially in Dublin, is below what is required. Rising rents and prices are a concern for the families that are finding it difficult to access suitable homes, but they also represent a risk to our competitiveness as an economy and our attractiveness as a place in which to live, do business and raise a family.

Boosting supply is set to remain a key priority for the Government in the coming period. This is co-ordinated under Construction 2020, the Government's strategy for a renewed construction sector. This strategy sets the goal of an appropriately sized construction and housing sector which is sustainable, well-financed and competitive. It addresses the key prerequisites for a property market in terms of demand and supply. On the demand side, the essential requirement is the existence of sufficient numbers of purchasers or renters and ensuring that this demand is supported by viable finance. Hence, for prospective buyers, access to finance to fund the acquisition of a house or commercial building is essential. The strategy works on the basis that there will be a need for, on average, 25,000 new dwellings per year for the next 15 years or so. On the supply side, prerequisites include the availability of a supply of suitably zoned land with appropriate planning permissions and backed by appropriate planning and building regulations; adequate industry capacity, including both expertise on the part of developers and affordable access to skilled labour; and the availability of appropriate equity and-or debt capital. The strategy includes actions to ensure that the required sources of land, labour, capital and expertise will be available to meet medium-term demand.

The strategy involves ensuring that any critical bottlenecks that might impede the sector in meeting residential and non-residential demand are addressed. It is about realigning demand and supply while promoting stability. Its detailed programme of work includes 75 time-bound actions, encompassing areas as diverse as planning, financing, regulation and public investment. Significant progress has been made to date, including the establishment of a dedicated task force on housing supply in Dublin, which has examined housing demand and supply across the four local authorities, initially focusing on measuring short term viable supply; the drawing up of a roadmap for the development of the national housing framework; the publication of a new social housing strategy setting out a comprehensive approach to the delivery of social housing to 2020; the development of proposals for major reform of the planning process to include revision of Part V requirements for developers, incorporating a reduction to 10%, retrospective application of reduced development levies, a vacant site levy and so-called use it or lose it planning permissions; and the establishment of a high-level working group which is leading an examination of, and reporting on, the availability of development finance. In addition to the latter, the Ireland Strategic Investment Fund, ISIF, under the auspices of the NTMA, is exploring ways, through its commercial mandate, to support financing projects that will enhance the supply of housing. To underpin further the whole-of-government approach to this matter, in July the Minister of State at the Department of the Environment, Community and Local Government, Deputy Coffey, was given responsibility for driving construction work forward. In addition, a dedicated Cabinet committee ensures that focus is maintained at the highest level of Government. It is supported in this regard by an implementation group of Secretaries General. The strategy puts forward a multi-pronged, holistic approach aimed at developing a world-class construction sector which is competitive, innovative and sustainable, and capable of supporting a recovering economy. The plan represents a multifaceted, joined-up approach to addressing all issues relating to the sector.

I will comment in more detail on a number of the matters being addressed by the Government. In November the Department of the Environment, Community and Local Government published the Social Housing Strategy 2020 - Support, Supply and Reform, which is to support the realisation of a new vision, namely, that to the greatest extent possible, every household in Ireland will have access to secure, good quality housing which is suited to its needs, which comes at an affordable price and which is located in sustainable communities.

The strategy is focused on three main areas. The first is the provision of a new social housing supply. In this regard, the aim is to provide 35,000 new social housing units, over a six-year period. This is to meet the additional social housing supply requirements, as determined by the Housing Agency. This housing will be delivered by local authorities and approved housing boards at an estimated cost of €3.8 billion. The second area is providing housing supports through the private rental sector. This will support up to 75,000 households via the housing assistance payment and rental accommodation scheme in an enhanced private rental sector. The third area is the reform creating more flexible and responsive social housing supports. This incorporates a suite of reform measures to improve overall social housing delivery, including a national rents framework, tenant purchase scheme, anti-social behaviour measures and a review of assessment and allocation policy.

The strategy is backed up by an action plan with detailed work streams, objectives and timelines. The governance structure has been developed to ensure delivery of the actions within the required timeframes.

In 2015, some 15,800 housing units are to be provided through a combination of new social housing units and the housing assistance payment. To date, meetings of both the project board and the Dublin Social Housing Delivery Task Force have taken place. These meetings agreed the process for setting targets for each local authority. Targets will be issued to each local authority very shortly and each will be required to outline delivery proposals, starting with 2015. Every local authority is meeting officials from the Department of the Environment, Community and Local Government over the coming weeks. Officials have been appointed to lead working groups on the various work streams under the strategy. These working groups will be required to deliver on a particular list of actions within the timeframes set out in the strategy.

As I mentioned, a well-functioning house-building sector needs to be able to access appropriate levels of development and other finance on a sustainable basis to support new supply. Under Construction 2020, the Department of Finance was charged with the implementation of a number of actions in the areas of development and equity finance.

To take this work forward, the Department of Finance established a high-level working group which brought together representatives of the main banks, the Irish Banking Federation, NAMA, the National Pensions Reserve Fund, the Construction Industry Federation and Property Industry Ireland. This work was also complemented by in-depth discussion of the issues with other key players in the sector, including equity providers, planning experts and academics.

What has been clearly established through this work is that while the banks are in a position to provide development finance for viable, shovel-ready projects, this finance is generally available for up to only 60% to 65% of the total development cost. The remaining 35% to 40% equity gap has to be met by developers themselves. While this may represent a challenge for some developers, including smaller-scale operators and others who find themselves in a weak balance sheet position, I believe this is a much more sustainable funding model than the one that characterised the boom years, which was dominated by bank-based financing. I do not believe I have to spell out to Deputies where that funding model brought us to. We have to remember that development, of its nature, is a risky undertaking and, as such, the appropriate way to fund it is through a combination of debt and equity finance.

The current position is that developers have to adapt to a new regime where the rules of the game have altered. As I have already said, while we should welcome this transition to a more sustainable model, I recognise that it brings some challenges for developers and builders. To help address these challenges and facilitate dialogue and mutual understanding between developers and equity providers, the Department of Finance, in conjunction with the Construction Industry Federation, is organising a networking event in the near future. Through this proactive approach, the Department aims to match market participants such that opportunities for new construction can be identified and pursued.

On the rental sector, a noteworthy change in the housing market is the large increase in the rental segment. The private rented sector is an increasingly important element of the housing market, with the proportion of households in the sector almost having doubled in the period 2006 to 2011, and approximately one in five households is now renting a home in the private sector.

An efficiently functioning rental sector is an important contributor to providing a full range of housing options to people and families. The Government recognises that the rented sector is an integral part of our housing policy for the future and that a well-balanced housing sector requires a strong and vibrant rented sector which is appropriately regulated.

Growth in rents, particularly in Dublin, is a cause for concern, not just for the families that are finding it difficult to access suitable homes. It is also a cause of concern because of the way in which it puts our economic competitiveness at risk. However, as with house price growth generally, it is the resolution of the overall housing supply problem that is the key element in restoring stability to the rental market.

Nonetheless, a number of specific actions have been undertaken in regard to the rental sector. The Residential Tenancies (Amendment) (No. 2) Bill 2012, currently before the Oireachtas, builds on what has already been achieved by the Residential Tenancies Act and the Private Residential Tenancies Board in providing for the further development and regulation of the rental sector.

The rent supplement scheme provides support to approximately 71,500 eligible people living in private rented accommodation whose means are insufficient to meet their accommodation costs and who do not have accommodation available to them from any other source. Expenditure on the scheme in 2014 was approximately €339 million. At the end of December 2014, approximately 29,000 rent recipients were on the live register, representing 8.1% of the total on the live register.

Approximately €300 million has been committed for rent supplement for 2015, which represents a transfer of funding in excess of €20 million to the Department of the Environment, Community and Local Government to support the new housing assistance payment, and also the reduction of persons in receipt of rent supplement as a result of the fall in the number on the live register.

Rent supplement is a demand-led scheme and the Government will continue to ensure the necessary funding for the scheme is in place. The Department of Social Protection is a significant player in the private rented sector and, therefore, not only has responsibility for persons in rent supplement tenancies but also for the market as a whole, including those in private rented accommodation. There are concerns that raising rent limits is not the solution to the current market difficulties as it is likely to add to further rental inflation and affect not only rent supplement recipients but also many lower-income workers and students.

As a result of supply constraints in the private rental market and the difficulties faced by prospective tenants, the Department of Social Protection put measures in place to ensure the housing needs of rent supplement customers throughout the country who were a risk of homelessness were addressed by providing for increased flexibility within the administration of the rent supplement scheme.

Turning to the issue of housing in Dublin, where the demand pressures have been strongest, the Dublin Housing Supply and Co-ordination Task Force was established to examine the issue of housing in the city. The first report of the task force, submitted at the end of June 2014, concluded that across all four Dublin local authorities, 12,785 houses and 7,925 apartments then had planning permission, equating to three years of infrastructurally unconstrained supply. Second, a further 25,507 new homes are considered permissible on existing zoned lands, if landowners and developers wished to seek those permissions. Third, given a predicted housing requirement of approximately 7,500 new homes per annum, identified by the Housing Agency, the above figures indicate that there are permissions and lands to meet predicted requirements for approximately the next six years.

The first report also concluded that given good immediate availability of implementable planning permissions, consideration of other possible issues with an impact on supply was required, as evidenced by the low level of new planning applications for multi-unit developments.

It is fair to say that the general picture is one of solid improvement across the property and construction sectors, with the caveat that this is coming off a very low base level of activity. A preliminary estimate of 40,500 residential property transactions in 2014, representing an increase of over one third compared to 2013, provides a strong indication of recovery in the property market. However, despite the promising increase in house completions, the number continues to fall below estimates of demand, which we acknowledge.

This supply and demand mismatch is particularly pronounced in urban areas, such as Dublin, and is feeding into higher house prices, although there are tentative indications of a moderation in prices in Dublin based on the most recent figures. The Government is cognisant of this issue and as I highlighted, is working to resolve them through the Construction 2020 strategy and, more recently, through the Social Housing Strategy.

The Government has made substantial progress in addressing a wide variety of issues in the property and construction sector. Under the Dublin housing supply and co-ordination task force, we have established that there is at present planning permission for 20,000 units in Dublin, enough to provide three years' supply.

I have exceeded my time. There are a number of other points which I can leave to be included in the record.

See this speech in context