Willie Penrose (Longford-Westmeath, Labour) | Oireachtas source

While the Minister, Deputy Kelly, is unavoidably absent, the Minister of State, Deputy Kevin Humphreys, has intimate knowledge of this problem with social housing issues and arrears. Young Irish families throughout the country have suffered the disastrous effects of what has been a perfect financial storm. First, there was a massive banking collapse and the deepest recession in living memory, which was savage by any standards. It has ruined many lives and businesses and has wrought terrible devastation. Uniquely to Ireland's situation, we have a pooled currency, which means the natural process of inflation eating away at debt was not available to help the people. People borrowed in euro and must repay in the same currency, which has the lowest inflation rates in the world. To make matters worse, we have had the harshest laws in the western world in respect of debt. The result was and is that hundreds of thousands of people had no way out other than emigration or begging for mercy from banks and creditors. This begging has gone on for almost eight years now and still, the entire economy is shackled by unsustainable debts. This has not been not good for people or the banks and certainly has not been good for Ireland. All this was due to change in 2012 with the enactment of the new insolvency laws but only a tiny number of deals have been done. The process needs an injection of reality and it needs it quickly.

Two weeks ago, I introduced draft legislation before the Oireachtas proposing that the bankruptcy period be reduced to one year. There is a misconception abroad that the period is three years but one should consider section 157 of the Personal Insolvency Act 2012 and its insertion of section 85D(1), section 85D(2) and section 85D(3) into the Bankruptcy Act 1988. In law, at any time during the term of adjudication of three years, the credit institution can apply to the courts for an instalment order by way of variation for a period not greater than five years. As a result, if a person earns an additional €10, that enables banks to act. Consequently, it can go on for eight years and Members should not fool themselves in that regard. This is why I proposed that reduction.

I believe that after eight years, people have the right to move on. How it is justifiable to keep people tied up with debts they can never repay for so long? It does not happen in the jurisdictions of our nearest neighbours in England or Northern Ireland or in the United States. Moreover, I note the United Kingdom and United States were two of the economies that rebounded fastest from the recession. They have not collapsed, the sky has not fallen in because they have had in place a one-year bankruptcy rule. A quick bankruptcy term will give thousands of citizens a way in which to be free of unmanageable debt and will give them the opportunity to get on with their lives. More importantly, however, it will force the banks to do deals they should have done years ago. This will be good for everybody, including the banks. I also proposed that if the official assignee does not dispose of the family home in a bankruptcy case within three years of adjudication, ownership of such a home would revert back to the bankrupt. This is in line with the position in the North of Ireland and stops the official assignee from seeking money from people who simply wish to pay their mortgage and get on with their lives. The assignee has stated that he or she does not wish to sell the family home and that is proper. If people have all their unsecured debt written off and can pay even a restructured mortgage, then I believe they should be given every chance to get on with their lives.

However, what about the 50,000 people who have no solution? My colleague Ross Maguire has frequently stated the mortgage debt crisis in Ireland can be divided into three categories. The first category is comprised of the self-fixers, that is, those people who now are getting back on their feet as the economy improves. They have the time and the income to be able to meet their debts without need for outside intervention. The second category is comprised of people who need help. The insolvency system, driven on by a new bankruptcy term meaning that people can be out of bankruptcy within a single year, should mean that tens of thousands of citizens can be helped back to recovery. The banks have a role here to offer long-term and sustainable deals. However, there is a third category for which there is no obvious solution. I refer to the up to 50,000 homes where there is not enough income to sustain a mortgage and where the debt is too much to be repaid. As Minister of State with responsibility for housing, I introduced a mortgage-to-rent scheme that was designed for those people who could not afford either the mortgage or a restructured mortgage. The idea was that the owner would surrender the home to the bank, which the bank would then sell to a housing association, which in turn would lease it back to the former owner.

However, only a very small number of deals have been done under the scheme and quite simply, an industrial solution to the problem is needed.

Fiddling around at the edges cannot solve this problem because the scale is far too big. Two ways of doing this can be explored - first, through a refocused and recast mortgage-to-rent scheme involving local authorities or, second, through approved housing bodies. Both ways would ensure that families with unsustainable loans or mortgages remain in the home and continue to pay the appropriate rent. All those would have their mortgages deemed unsustainable under the mortgage arrears resolution process or MARP process, and would clearly have agreed to surrender the house.

It is also good for social stability and would ensure that no major disruption is inflicted through families having to move elsewhere. Family life, including schools, would be disrupted by relocation. Currently, the home must be in negative equity and a householder be deemed eligible for social housing in accordance with the Housing (Miscellaneous Provisions) Act 2009. There is also a limitation on the valuation of property in Dublin and across the country. It is clear that those conditions must be changed. The income threshold must be increased to a realistic level, by at least 20%, and likewise with the valuation threshold in order to accommodate the maximum number of people and protect people in their homes.

The mortgage-to-lease programme might also be a solution.

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