Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

While I support the amendment, the proposal is much different from that which I advocated on Committee Stage. To produce a report on the impact of a scheme on house prices one year after it has been introduced is to do things arseways. The Government should have made the analysis of the impact of the measure on property prices before its introduction. The Minister informed us that he had liaised and that his officials had engaged with all of the banks in which the State had a stakeholding. I asked the chief executive officer of Bank of Ireland, Mr. Richie Boucher, about this matter when he and his colleagues appeared before the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach. Mr. Boucher indicated that he knew nothing about such engagement, although he also stated he would ascertain after the meeting if departmental officials had spoken to other individuals in the bank and revert to the committee on the matter. It was interesting to have the Government inform us that it had consulted the Governor of the Central Bank on this flagship scheme when the Central Bank stated it had been consulted on only one aspect of it. Mr. Boucher and his officials knew nothing about Government consultations with Bank of Ireland when they appeared before the joint committee, despite assertions to the contrary by the Government. We will see what the other banks have to state on the matter.

That, however, is background noise as the real issue is the evidence which shows that the measure will push up house prices. Developers are not building because they claim they cannot achieve the expected profit margins of between 10% and 15%. Builders need to have a profit margin and would clearly not be in business if they were operating at a loss. The Government has introduced a scheme knowing fine well that its effect will be to push up property prices, resulting in developers achieving the profit margins they seek. It has presented the scheme as some form of support for homeowners and others who want to get onto the property ladder. That is the lie at the heart of the scheme.

As I stated, if it is the case that the purpose of the help-to-rent scheme is to ensure it is profitable for developers to build houses, there are two other ways of achieving this objective, the first of which is to increase house prices which would cause profit margins to increase, while the second is to reduce building costs, which is what we must do.

Everybody knows this is a supply side issue. The Government's attitude is that by bringing in this measure, demand will increase and, therefore, supply will follow. When we put this to Bank of Ireland, it was interesting Richie Boucher responded that not only does the bank deal with mortgage borrowers, it is the financier of the developers as well. It gets to see it from both sides. Bank of Ireland made it clear there is demand. The issue is supply and the profitability of the developers.

The Minister's scheme should not go ahead and there is enough evidence to suggest that it should not. It should be frozen. Fianna Fáil has criticised the scheme. For the record, the only amendment it put forward which directly affected the scheme was to expand it. Like the universal social charge and water charges, the party wants to have it both ways. There is no evidence that the scheme will work. Instead, the evidence is pointing in the other direction, namely that it will drive up house prices. Already in the past year, house prices have increased at a rapid rate.

Today, it is expected the Governor of the Central Bank will come out with new changes to the macro prudential rules for mortgage lending. Again, the Government claims one of the reasons behind this scheme is to help first-time buyers gather in the deposit required. There is no awareness in the public discourse about the limits, however. People are of the view that 20% of the deposit to buy a house is required but there is no scenario where one would need 20%. It goes to 20% after €220,000. The overall rate would actually never hit 20% as it is always less than that.

The Government instead should focus on the exceptions to this. Up to 15% of all lending is outside or can be outside the hard loan-to-value limits. On top of that, 20% of all lending can be outside of the loan-to-income limits. Accordingly, 35% of the value of all new mortgage lending in this State does not have to comply with the hard loan-to-value or loan-to-income limits. We are focused on the loan-to-value end which is 15%. The Government claims it wants to create demand for first-time buyers. We had evidence from Bank of Ireland, which was before the finance committee last week, and Permanent TSB this week, that of the 15% exemptions in mortgage lending, only one third of them are going to first-time buyers. If the Government wants to support first-time buyers getting into the property market and to get mortgages - there are questions as to whether it is as widespread as the Government believes - we should be encouraging the Central Bank to introduce tweaks which would mean that the 15% exemptions would not be for people buying their second, third or fourth home. Instead, it should be focused on those who want to get on to the property ladder. At the moment, the rules are that it is 15%. We do not care how the banks decide to divvy it up. What we have, however, is evidence from the two institutions which have been before the finance committee - I expect the same from AIB - that one third of exemptions are going to first-time buyers while two thirds are going to non-first-time buyers.

This scheme is wrong. It is reported the Central Bank will introduce tweaks to the macro prudential rules by increasing the exemptions from 15% to 20%. We will have to wait until this evening to see if that is the case. The rights and wrongs of this measure are for another debate. However, it has already been speculated that such a move in itself will push up house prices. When the Minister introduces this measure, it will exaggerate the issue. From March of this year, we have seen a steady increase in the number of mortgage approvals from our financial institutions. Mortgage approvals are running at a rate of twice mortgage drawdowns. The point is that access to credit generally is not the problem but that there is not enough supply. Twice as many people who have been granted mortgages from financial institutions are actually deciding to draw the mortgage down to buy a property. That is the question we need to be asking. We do not need to increase that number by three times or four times but to make sure that those who have been approved are drawing down their loans and buying properties. The way one deals with that is through supply.

How does one address the core of this issue? In our view it is done through reducing the cost and incentivising the vacant site tax. There is no reason why that tax is not brought forward to 2017. There are other areas which need to be examined. Deputy Michael McGrath touched on this with his amendment, which was ruled out of order. It appropriately proposed to take on board the housing committee's unanimous agreement across the political divide to have an assessment done as to the cost of building a house in this State. There are different figures from different agencies and groups which give different breakdowns. This is a matter with which the Housing Agency should be tasked. For some reason, the Minister for Housing, Planning, Community and Local Government has turned his nose up at this recommendation, a recommendation which was supported by Members of his own political party on the committee.

If it were introduced, data would then become available as to where the real problems lie. Then the challenge to the State and Members would be to see if we can reduce the cost of building houses. Reducing the cost would have a twofold effect, namely profit margins for developers would be in the realms where they would start to build and the cost of purchasing a home for the average individual would be brought down to a reasonable level. In turn, this would mean the amount of credit they would have to take out from a financial institution would be less.

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