Eoin Ó Broin (Dublin Mid West, Sinn Fein) | Oireachtas source

Increasingly our debates in the Chamber on housing are becoming acrimonious. It is because the gap is growing ever wider between the Government's delivery in meeting housing needs and the rhetoric of Rebuilding Ireland.

When Home Building Finance Ireland was announced in last year's budget I was taken by the idea that if done right it has the potential to be a positive contribution towards tackling our affordable housing crisis. Crucially, if it was to be done right it would require a number of changes and modifications to the proposal as it is currently outlined. The logic of the Bill is the crisis in affordable housing. The Minister of State, Deputy D'Arcy and the other speakers are absolutely right - the lack of affordable homes is a real problem. A growing number of people, called the "locked out generation", are struggling with and finding it impossible to cope with excessively high rents and the requirement to save for very large deposits. They are unable to secure appropriate levels of mortgages, even from the Rebuilding Ireland home loan scheme, on the basis of the most recent figures. In some cases they are forced to live back with their parents for extended periods of time to meet those saving requirements. I think that everybody agrees this is a growing problem that needs State intervention. It is important to say that in the last two years not a single affordable home has been delivered as a result of any direct Government scheme. This is a fact. The only affordable houses to have been delivered are in Ballymun and Poppintree. They were built as a result of a community initiative with Dublin City Council, without the active support or intervention of Government.

Deputy Michael McGrath is absolutely right. This fund was announced almost one year ago. By the time the legislation is passed, and before it starts to do any lending, we will probably have passed budget 2019 with the problem still remaining. We were also told that the Local Infrastructure Housing Activation Fund, LIHAF, was about increasing the supply and delivering affordability but it is only now being drawn down. It is not delivering any level of affordability, particularly in the large urban areas of Dublin and Cork. The very small amount of money that was announced in last year's budget, €25 million, to assist local authorities to deliver Ó Cualann-type projects such as the one in Ballymun has not only not been spent but the scheme surrounding it has not been decided or agreed. While the Minister has decided to roll it into an announcement for next year, when it will be €75 million, we are still none the wiser as to how it could be spent. According to the Minister for Housing, Planning and Local Government, Deputy Eoghan Murphy, we are to expect some developments in this regard in the next week or two. The most disappointing aspect is that there is still no core, affordable housing scheme in place for local authorities to try to develop housing into the future.

I put it to the Minister of State that the mantra of increased supply delivering affordability is not the case. Supply is absolutely crucial and we need to increase it. There are many examples, however, from here and from other jurisdictions, from during the current housing crisis and from our own experience during the Celtic tiger, that there can be dramatic increases in prices alongside dramatic increases in supply.

Therefore, if we are serious about tackling the affordability crisis and are to use taxpayers' money to do so, we must increase supply in a way that delivers genuine affordability. As proposed, the Bill is not clear on how it will do that. If the Minister is willing to work with the Opposition, we can find solutions.

It is important to understand what affects house prices. Providing more bricks and mortar does not do it in and of itself, as house prices are also a function of the supply and price of credit to builders and buyers and the supply and price of land. The important debate in the House yesterday on Deputy Wallace's Bill allowed us to consider this part of the housing crisis. When listening to the Ministers, Deputies Eoghan Murphy and Donohoe, I often get the sense that the Government fails to understand this. Until it grasps what drives house prices in the private market, it will not be able to design adequate policy interventions that ensure supply is increased in a way that provides genuinely affordable units.

The narrow focus on incentivising private sector supply is not only expensive to the taxpayer, but is proving counterproductive. For example, perhaps 60% or more of the households accessing the help-to-buy scheme do not need it and are buying homes far beyond affordability. In fact, they should not be getting any taxpayer support. The scheme could be beneficial were it properly targeted, but there is evidence to suggest it is leading to house price inflation. There is €200 million of taxpayers' money in the local infrastructure housing activation fund, LIHAF, with a further €50 million to be provided, but it is not delivering affordability. Fast-tracked planning and reduced apartment standards and sizes do not increase supply and, in many cases, drive up prices. The House has often debated the exceptionally generous tax breaks for real estate investment funds, Irish collective asset management vehicles, ICAVs, and so on with little evidence of them being of any benefit in resolving the housing crisis. Indeed, there is much evidence to the contrary.

While the Minister of State is right about a section of the building industry having difficulty getting finance, it is not as if there is not a wash of international investment in Irish property. We have seen that in the large amounts of capital entering the State to buy distressed assets from the portfolios of IBRC and NAMA in the commercial sector and increasingly in the residential sector, especially student accommodation. That capital is entering the State on profitable terms.

I accept that there are difficulties for a cohort of builders, particularly small and medium-sized indigenous builders who are trying to enter the market for small to medium-sized developments. Under certain terms and conditions, the idea of a State-funded lending facility could be beneficial for those builders. I use the word "builders" deliberately because builders, not developers or land speculators, should benefit from access to this finance.

I will outline the conditions that need to apply for any such lending facility to work. It should only be available to those builders who need it. Even if the fund charges a commercial return, it would not be tolerable for the €750 million of taxpayers' money to go to developers who do not need it and can already access mezzanine or standard bank financing. One of my main criticisms of the LIHAF is that a large number of its recipients do not need a single cent of it. The likes of Hines and Cairn Homes could easily access funds for those pieces of infrastructure without having to rely on taxpayers' money. There must be mechanisms to ensure that those who are accessing it need it and would otherwise not be able to build homes.

More importantly, there must be a strict link between access to financing and the delivery of genuinely affordable homes. This is the crucial element of our intervention. In Dublin, this means homes for sale to working families priced at between €170,000 and €260,000. These people are earning modest incomes of between €45,000 and €75,000. They must be the target. They are being squeezed by the crisis in the private housing market. If the loan facility assists in developing affordable homes for them, it is worthy of taxpayers' money. I urge the Minister to engage with us prior to and during Committee Stage on determining whether there are ways of doing this that are consistent within the rules and obligations.

Deputy Michael McGrath is right, in that the 2016 report of the Society of Chartered Surveyors Ireland and its follow-up 2017 report on the viability gap for apartments tell us something important. The €330,000 figure that the Deputy cited was not the worst bit, though. Across 22 low to medium density developments in Dublin, the cost of making apartments viable ranged from €330,000 to €533,000. This tells us that the private sector, building private houses on private land with private finance, cannot provide affordable homes. The requisite market conditions do not exist. Reducing the cost of finance a little might help, but the society's report indicated that doing this would not decrease the price considerably. According to the report, the expensive cost of finance adds approximately €20,000 to overall cost of a €330,000 home. That figure cannot be reduced, but even if it could, the home would still not be affordable.

The only way to use this fund to deliver genuinely affordable homes for working families and individuals on modest incomes is through local authority-led schemes. Under the Ó Cualann model, for example, the local authority devises a master plan for a piece of public land and determines what is required in terms of social housing and genuinely affordable housing. As it does with social housing developments, the local authority tenders for a private builder and the builder builds the units. Instead of the State then buying those units back as it does in a traditional social housing development, it buys its portion - 30%, 40% or 50% - and the rest is sold into an affordable housing scheme nominated through the local authority, as was the case previously, at affordable prices. Crucially, however, there would be no possibility of those homes ever being sold into the private market. They would have to remain permanently in an affordable housing system. If the owners wanted to sell them at a future stage, they would need to sell them back into the affordable scheme to someone nominated by the local authority. There would be some index-linking to account for inflation, improvements to the property, etc.

This is what Ó Cualann did. A piece of council land was sold to it at a nominal price. The local authority looked after the site servicing outside the curtilage of the property. Ó Cualann got private bank financing at approximately 7% and built the units at market cost, which was between €120,000 and €140,000. When it added on its compliance costs and administrative fee, it was able to sell those units to people with private mortgage finance for €170,000 to €225,000. They are wonderful and good-quality houses with high energy efficiency levels and so on.

If this can be done on a small scale, can we find a way of constructing the HBFI to allow local authorities, approved housing bodies and private builders utilising public land and publicly serviced sites to deliver genuinely affordable units in good-quality, mixed income and mixed tenure estates? In this way, we would deliver what the land initiatives and public private partnerships cannot currently, namely, value for money for the taxpayer, affordable homes for working families and a good impact on our overall housing system.

Some might ask whether this model breaches state aid rules, fails the market corporation test and be off the balance sheet. We must tease out these issues. The Minister of State's officials have greater expertise than many of us might have individually. We would benefit from talking about that. The recently announced Rebuilding Ireland home loan scheme does not breach state aid rules because it lends to people who cannot access mortgage finance in the private market, having been refused or given insufficient offers. We must be able to find a way of constructing some or all of this loan facility for such people without breaching state aid rules.

Questions arise, and can be teased out on Committee Stage, about whether this would be an off-balance sheet facility. If AIB lending at commercial rates to Ó Cualann and Ó Cualann then selling on to someone with AIB, Ulster Bank or Bank of Ireland mortgage finance was considered off-balance sheet because it was a private commercial transaction, there must be a way of combining that with the local authority element of mixed income and mixed tenure estates and delivering good-quality housing.

We must learn from the lessons and weaknesses of the LIHAF. I have examined a number of developments. Deputy Boyd Barrett rightly talks about Cherrywood often. I talk about Adamstown in my constituency.

These are developments led by large building contractors and they are getting millions in taxpayers' money to get homes that they would have built anyway and that, on the basis of the information the Department has given us, will sell for a minimum of €320,000 to €350,000. I do not understand how anybody could justify in that instance giving a free amount of money to these developers. I know home building finance is different because there will be a commercial rate of return on the loans but we have to learn from that and ensure that we do not make the same mistake.

I recognise that there is a need for a loan facility such as this. I recognise that if it is constructed in the right way and used appropriately to deliver good quality, genuinely and permanently affordable housing, it could be a significant intervention. It can only deliver approximately 6,000 units over three years and I do not believe that any of that money will be drawn down this year, but we are looking at next year. If the Department and the Ministers were a little more cautious in their pronouncements, we would have a realistic expectation of how all this will work. We in the Opposition are genuine about trying to get this right and trying to ensure that there is a loan facility that could work in a completely different way to how some people think. We will sit down with the Minister of State in private briefings, on Committee Stage and when we come back here on Report Stage to craft it in such a way that it makes a real difference and allows builders to build those homes at genuinely affordable prices for people who need them. If we do that, this will be a different kind of debate to the housing debates we are currently having, because it will be something that we agree is good and will benefit working families with modest incomes.

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