Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance) | Oireachtas source

-----but this only seems to be more of the same. It looks like another misguided, futile attempt to get the private sector to solve the emergency that it created. I cannot see it any other way.

It would seem to indicate a complete incapacity on the part of the Government to understand the reasons for the previous property bubble and crash that led us to the current housing crisis, and because of that failure to learn the lessons of the past, it seems part of a suite of policies that are destined to repeat the same mistakes all over again. Frankly, we are hurtling towards a repeat of what happened only ten years ago because of the Government's obsessive dependency on the private sector to try and solve the housing crisis.

Why do I say that about this Bill? First, let me point to a certain irony here. What we are doing is setting up a small State bank to lend to private developers because the banks that we bailed out at terrible cost because they were systemically important will not lend to these developers. This begs the question, why did we bail the banks out when they now will not lend to do something as elementary as provide housing for people? If the banks are not capable of doing that, the most elementary thing a bank should be able to do, then what the hell are the banks for and why did we bail them out? Having bailed them out and suffered a terrible cost for it, because the banks will not now do what they are supposed to do, we will compound the madness of all this by setting up our own bank to lend to the people they are afraid to lend to. That is bonkers. Either the banks are right not to lend to these people because it is too risky, in which case what the hell are we lending to them for and taking on that risk ourselves when the banks are afraid to take it on, or it was a completely pointless exercise bailing out the banks because they are unwilling to take a risk that they should be willing to take. Either way, there is something wrong.

Even if we set that irony aside, we are setting up a bank to lend to these private developers and I suppose the logic is that this will in some way contribute towards the resolution of the housing crisis. If we follow through what is logically likely to happen, however, we are now to finance the private sector to build houses that nobody will be able to afford and the only beneficiaries will be the big investors who have bought up the land who will sell it to these small builders that the Minister of State is talking about. That is what will happen. The site values are already referred.

We mentioned Cherrywood out in Dún Laoghaire. Hines bought all this zoned development land at a song from NAMA - mistake number one. That is water under the bridge. The Government has passed a whole load of policies that have inflated the value of that land to the benefit of Hines. Hines will not actually build the houses. Hines will sell parcels of Cherrywood to the small builders whom the Minister of State was talking about at the inflated site values that have been referred to, and those small builders, who it is to be presumed will be financed by House Building Finance Ireland, HBFI, will pay over the odds to Hines for those parcels of land, and because the sites they bought from Hines, the speculators and investors, will be so expensive, those small builders will have no choice but to sell the houses at prices that are unaffordable, and we will be financing that.

At some point, just like the last time, somebody will realise that the emperor has no clothes. If we build all these houses, the prices will be unaffordable and the market for very expensive houses at some point will just dry up. In fact, it is drying up much sooner than it did on the previous occasion because then the gap between people's incomes and what they were able to pay for houses with overinflated prices was bridged by the banks on the basis of reckless lending. They were lending to people to whom they should not have been lending for the purchase of houses, the prices of which were grossly inflated. Now the banks will not do that and we will hit the wall sooner. In Cherrywood, they were going to sell the houses back to the local authority at €450,000. That is what they wanted to sell the Part V bit to. Will they be selling the stuff on the private market at €500,000 or €550,000? There are few who can afford that. They will build houses that nobody can afford and at some point they will realise that they cannot sell them.

This is already happening. I mentioned the other day that Cairn Homes is building property in my area. There is a place called Albany where they are selling properties for between €725,000 and €925,000, and the Minister of State will not be surprised to hear they cannot sell all of them. Cairn Homes has also built a place called Marianella in Rathgar. It looks nice in the brochure, but if one looks at the prices, they start at €650,000 for a one-bedroom apartment and move up to €925,000. Not surprisingly, not too many are selling.

I do not give a damn about the investors who put money into Cairn or who is behind them, although they are cashing out now by selling shares and paying themselves bonuses. The top executives split €4.1 million between them in the past year. They flogged off a load of shares. They are cashing out already. I do not know what investors are in behind them but we will subsidise these guys with Local Infrastructure Housing Activation Fund, LIHAF, funding, increasing the value of the sites that they own.

In the case of Hines, although maybe not Cairn, they will then give these sites at inflated prices to the little builder the Minister of State is talking about, who will then have to sell at an inflated price that nobody can afford. It will hit the wall.

I thank the research officials in the Library and Research Service for the digest they provided me with and it provides a real lesson in the fictional nature of market economics that is taught at school, is accepted as common sense and is repeated ad nauseamby the Government to justify schemes such as the HBFI and LIHAF and generally underpins the Government's approach to dealing with the current housing crisis. What has the catchcry been? Supply, we need supply. Therefore anything that gets supply going will resolve the crisis because if there is enough supply, the price will fall. That is what is taught in classical economics in the universities but the graph produced by the digest usefully points out that it is not true at all. In the classic economical graph, price goes in one direction and supply goes in the other. They are supposed to meet in the middle and form an equilibrium. As supply is low, price is high, and as supply is ratcheted up, price comes down and they meet somewhere nicely in the middle. That is the theory the Government is operating on but this graph does not look a bit like that. The graph of what actually happened shows that as supply went up from 2000 to 2008, price went up exactly concurrent to it. Supply went up and price went up and then the whole thing collapsed but they went up together which is exactly the opposite of what the Government's theory and the classical economic theory says should happen and it is now happening again.

It is obvious why this is happening. It is because there is no way in the world that the big builder or the little builder will build to get prices to drop. Why on earth would they do that? It is mad to think they would do that. The builder will not build for prices to drop. The builder builds to get the maximum price possible. Even if they were benign in their outlook and had social objectives, they would not have a choice because the costs of building for the little builder, the costs of finance, especially if they are being lent to at commercial rates, will require them to get the maximum price. We are doing the same thing over and over again and it will lead to the same consequences.

I put it to the Minister of State that this is crazy. He says that it is a small effort to help the small builder. It is not at all. It is symptomatic of the suite of policies that are being pursued which are about facilitating private, for-profit interests to build but who have no interest in solving the housing crisis and are completely incapable of doing so. What should be done is to use this money to build council houses. It is not the job of the State to facilitate the profit-making of private investors or even private builders. Does that mean I do not give a damn about the small builder? No, it is not that at all. In fact, the small builders could get themselves in serious trouble from all of this because they will end up building stuff which they cannot sell at a certain point. The big investors will most likely cash out before that happens as the top guys in Cairn are doing now. At some point they will cash out and it will be the little guy who will be caught again, but this time it will be the State directly financing it. The last time we had to bail out the banks because they financed it but this time it will be us directly financing it when the thing hits the wall.

Would it not be far more sensible to build council houses directly ourselves? There is no risk there at all. A big profit is not made but the State is not in the business of making profit. It is in the business of providing housing that people can afford. The Minister of State himself has said that the State can build houses for between €175,000 and €210,000 and we have a massive bank of public, NAMA, local authority and zoned land with the capacity to provide 114,000 dwellings. Why would we not build public and affordable housing on a large scale on that land? That will not only have the benefit of housing people on the housing list, but will also bring down the price of property generally. It will have a dampening effect on a market that is completely out of control. It will benefit people who want to buy houses as well. That is what we need to do and everything else is a diversion from that.

It can even be seen in the delay from the announcement of this legislation to the fact that it is only coming in now. Why has it taken from October 2017 until now to get this Bill on the floor of the Dáil? In my opinion, the reason has to be because of all the intricacies of the market, lending and the rules that govern that, because there is an interaction between the public objective and the market, the rules governing it, not distorting it, and not being guilty of state aid. Once an interaction is made with the market, everything gets slowed down because the State is getting involved in a business it should not be getting involved in and it is having to pander to the interests of whatever sort in the private market. It cannot be seen to undermine the banks or to distort the private market and so it goes on and on.

It is debatable if any of this will even happen, but that delay is a waste of time when that money which was allocated in the previous budget could and should have been directed straight into the construction of public housing. Even at this stage I would advise the Minister of State to abandon this folly and do what is necessary to be done, namely, build public housing on public land with this money.

In my last few minutes I will comment on a very good report on the future of council housing. It is good in the sense of the information that is in it and makes some good recommendations about the need for smaller units, warning that selling off public housing is not a good idea, certainly not at this time. I want to put on record, and I am surprised that nobody else has to my knowledge, that I fundamentally disagree with two of the report's major conclusions. The first conclusion is that local authority housing should shift from rents being based on people's income to rents being based on the cost of building and maintaining the houses. That increase in rent that is being recommended that local authority tenants should pay should then be used as the source of finance to build new public housing. I disagree with that.

To absolutely break the link between rent and affordability at this time is the height of folly and it is a capitulation to certain logic of the market. I absolutely disagree with it. They produced some useful tables in the report which show that council housing and the rents we derive from them do not make a profit but they do more than wash their own face. In some cases the cost of maintenance is 50-60% or at the highest 70% of what is received back in rents but they still get enough back from rent to more than cover the cost, so why would we increase rents and break the link between income and rent? I absolutely disagree with that. Cost rental may be good for those who do not qualify for the social housing list, but to start increasing rents for those who are eligible for public housing in a way that is not connected to people's ability to pay is a big mistake.

The suggestion in the report that tenancies should not be allowed to be passed on through families is wrong. A change to that policy would break up communities. We should not seek to do that because we want to maintain cohesive communities. People in local authority housing should be able to pass on council houses to family members. While it is a good report, those two conclusions are wrong. The central point of the report is that we need to build a hell of a lot more council housing and I absolutely agree with that.

I will not call a vote on Second Stage because the issue of financing affordable housing and public housing needs to be discussed in detail and these issues need to be thrashed out. Unless there is a very radical change from the Government, which I do not believe will be forthcoming, we will vote against the Bill on Final Stage.

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