Wednesday, 31 January 2018
Home Loan Scheme
61. To ask the Minister for Housing, Planning, and Local Government the way in which the proposed home loan schemes and affordable purchase scheme will impact on the present housing crisis in view of the average industrial earnings of most persons; and if he will make a statement on the matter. [4581/18]
62. To ask the Minister for Housing, Planning, and Local Government further to Question No. 235 of 17 January 2018 and the announcement of the introduction of the new Rebuilding Ireland home loan scheme, his plans to amend this loan scheme to include persons who are not first-time buyers due to changed circumstances (details supplied). [4340/18]
85. To ask the Minister for Housing, Planning, and Local Government if under the Rebuilding Ireland home loan scheme, particular targets for the uptake of the scheme will be set for particular geographic areas of the country; and if he will make a statement on the matter. [4566/18]
96. To ask the Minister for Housing, Planning, and Local Government if he will report on the implementation of the Rebuilding Ireland home loan scheme; the estimated number of mortgage loans to be availed of; and if he will make a statement on the matter. [4571/18]
117. To ask the Minister for Housing, Planning, and Local Government if a review of the Rebuilding Ireland home loan scheme to improve its affordability will be considered; and if he will make a statement on the matter. [4573/18]
118. To ask the Minister for Housing, Planning, and Local Government his views on whether the new local authority mortgage scheme will lead to an increase in house prices, particularly in the bracket of €250,000 to €400,000; the number of mortgages he expects to be delivered through the scheme; and if he will make a statement on the matter. [4576/18]
To carry on with the discussion we had earlier, the Minister is not acknowledging the facts. Cherrywood is a strategic development zone. The Luas was extended to Cherrywood to develop the city. I am telling the Minister that we have no percentage in terms of affordable housing units in these schemes and have no figure on what constitutes affordable housing. The offer made by Hines, the company the Minister flogged the site to, is way in excess of anything that any of the announced schemes will assist people in purchasing. We are not getting any affordable housing that is actually affordable on one of the biggest development sites in the State on a site that is funded by the local infrastructure housing activation fund, LIHAF, and which we flogged for a song via NAMA. What is the Minister talking about?
I propose to take Questions Nos. 61, 62, 85, 92, 96, 117 and 118 together.
Last week, I announced a package of initiatives, to help alleviate affordability pressures faced by households, particularly in areas of high housing demand and high accommodation costs. A central element of the measures involved is the introduction of a new Rebuilding Ireland home loan. Following a review of the two existing local authority home loan schemes, this new loan offering will replace the previous loans and will be available with effect from tomorrow, 1 February 2018. The new loan will enable creditworthy first-time buyers to access sustainable mortgage lending to purchase new or second-hand properties within a suitable price range. The low rate of fixed interest associated with the Rebuilding Ireland home loan provides first-time buyers with access to mortgage finance that they may not have otherwise been able to afford at a higher interest rate. To extend the Rebuilding Ireland home loan to those who are not first-time buyers would mean that first-time buyers would have to compete for the limited funding available with those who have previously owned a home and who may have already benefited from some form of State support in purchasing their first home.
The Housing Finance Agency, HFA, has raised €200 million from a variety of sources on a fixed rate basis for periods out to 30 years maturity. Based on the pricing achieved, local authorities can offer a first tranche of fixed rate annuity finance to eligible borrowers at rates of 2.0% and 2.25% per annum, for 25 and 30 years, respectively, up to an aggregate maximum of €200 million. What this means essentially is that a person or couple can purchase a home while ensuring that they can still keep their monthly repayments to one third of their net disposable income with no risk of their mortgage rate rising and therefore no threat to their ability to afford their repayments, giving them certainty and security. By placing ceilings on the value of properties that may be purchased and by aligning the terms of the loan with the loan-to-value elements of the Central Bank prudential lending rules, any possible inflationary impact on the market is limited.
The funding is not allocated to individual local authorities but rather will be drawn down by local authorities from the HFA to match-fund their lending to approved loan applicants. Further tranches of loan finance can be secured by the HFA as necessary. As is currently the case, my Department will continue to publish information on the overall number and value of local authority loans on its website.
The website www.rebuildingirelandhomeloan.iehas been live since 21 January and contains full information on the loan, including eligibility criteria, interest rates, a borrower information booklet, a calculator and details on how to apply for the loan, including the application form. A call centre has also been put in place to deal with queries.
In addition to the new home loan, I announced the introduction of a new affordable purchase scheme which will be governed by the relevant provisions of the Housing (Miscellaneous Provisions) Act 2009. I will be commencing these provisions and making associated regulations outlining the criteria for the scheme in the coming weeks. Under the scheme, affordable homes will be delivered by local authorities, primarily using sites from their landbank to leverage the construction of homes for sale at affordable price points. This means that local authorities will now have more options for the development of their sites for mixed tenure social and affordable housing. The first such homes are being procured by Dublin City Council at O'Devaney Gardens and I have asked all local authority chief executives to submit, by mid-February, an outline of their respective affordable housing programmes from their lands, with a particular emphasis on Dublin, Cork and Galway, where the affordability challenge is greatest.
The Minister has not answered the question. We were told earlier that the 40% target for affordable housing on sites by the local infrastructure housing activation fund, LIHAF, was abandoned because it would affect commercial viability, that is, the profits of the developers. Affordability was abandoned. Neither the Minister nor Dún Laoghaire-Rathdown County Council can tell me what percentage of affordable housing we will get back from LIHAF on, I repeat, one of the biggest development sites in the State, nor can the Minister tell us what the price of so-called affordable housing will be. Let me remind him and correct him on what he said earlier. Two people earning €75,000 between them can, including a deposit, borrow €288,000.
Two people on €40,000 would not qualify for the Minister's scheme. That is €80,000. It is over the threshold so they would not qualify. Two people just inside the threshold can borrow €288,000. Average house prices in Dublin are €350,000. I have just quoted what Hines is offering, which is two bedroom homes at €358,000 and three bedroom homes at €442,000, so this scheme will not allow those people to buy houses that we are supporting with State subsidies.
The figure of 40% in the original circular was not going to work in terms of getting the sites opened up in time. Instead we have a commitment for affordable houses, in terms of a reduction across every unit on the site or a carve out of a certain number of homes that will roll into the affordable purchase scheme I announced last week. The eligibility criteria applicable to that is an income of €75,000 for a couple or €50,000 maximum income for a single applicant. Using the LIHAF funding, that means that we will have more than 4,000 social and affordable homes across those 29 sites that have already been agreed. There will be an additional 5,000 more homes with a LIHAF cost reduction, and another 7,000-plus which will be sold at market prices. If we look at the 18,000 homes in their totality across the 29 sites that have been agreed, 50% of those homes are going to come in at less than €320,000, which is very significant in terms of what we are getting for the State investment. If we were not making this investment, it is possible that none of the 18,000 homes would be built until after 2021. We are bringing forward the development of these sites by essentially paying the development levies and getting these sites opened up using important strategic infrastructure. As a result we are getting homes built that will be for sale on the private market, but also a significant number of homes for social and affordable housing.
I have different issues in terms of the Rebuilding Ireland home loans. I welcome the package in principle, and I wish to acknowledge the local authorities and the number of people they have helped get on the housing ladder over recent years. I want to talk about people who had mortgages but for various reasons lost them. A good example would be a person who lost his or her mortgage because of the financial crisis. People had big mortgages then. Family separations or people who are still on an income rate which is too low for the banks are other examples. Can we make a special case for people who are prepared to go back into the housing market and own their own house? Can those people be considered under this package? These people have the income but cannot go back to the banks.
They would have a good credit rating. It is ironic that developers who became bankrupt and went across the water for a few years were able to come back with a clean sheet, while the people in question will be carrying a black tag over their heads with the credit rating agencies for the rest of their lives. Could an option be included in the scheme to provide for an exemption to enable them to get a loan from their local authority?
I thank the Deputy for his question. I also thank him for welcoming the Rebuilding Ireland home loan scheme. We had staff prepared to deal with queries in a call centre for two weeks but after the first day of operation of the loan scheme we had to double the number because of the level of interest among the people telephoning the helpline to ask questions about how they could apply and whether they qualified for the scheme. There is a great deal of interest in it and we expect a considerable take-up. The first tranche of funding for the scheme is €200 million. As we draw down from it, until there is €50 million left in it, the Housing Finance Agency will go back to the market to build a second bundle, a second fund, which will then be released as part of a second tranche which is likely to be at a higher fixed rate but only slightly than, say, the 2% rate for 25 years. A person who has undergone a family separation or divorce is eligible under the scheme. If someone is in receipt of State payments, they can be considered as part of his or her income contribution, but a person must have a primary source of income that is not a State payment. We are reviewing the scheme in so far as the first tranche of funding is concerned. We are logging all of the different queries to the call centre and the different issues people are raising as to what they can and cannot do. The scheme will be demand driven in terms of the number who apply and are successful. As the funding is drawn down we will see what might need to be changed for the second tranche, the second phase of the scheme, in terms of the eligibility criteria.
On the face of it, the home loan scheme appears to be attractive. It must be welcomed as a great number of people trapped in the €40,000 to €70,000 income bracket are under great pressure in trying to buy their own home. The scheme offers them an opportunity to do so. The Minister has acknowledged that the funding will be limited to approximately 1,000 applicants who will be able to avail of the first tranche of funding for the scheme. He has identified that the affordability gap is greater in Cork, Galway and Dublin. Is it envisaged that once the scheme is open, there will be a scramble to be in the first 1,000 loan applications which will be snapped up immediately in these areas or will it be steered throughout the country to allow for more balanced regional development? Will the applications be dealt with on a first come first served basis? The Minister mentioned a second tranche of funding for the scheme. When will it come to pass? Will it come on stream as soon as the first tranche is used, or has the Minister set a timeline for it? We need to obtain clarification in that regard? There is pent up demand for the scheme. It appears that it could help, but it will be very limited in providing funding for the provision of 1,000 homes only.
I thank the Deputy for his question. This was something we considered when we were designing the loan scheme, namely, whether bundles or targets would be given to each local authority, but we thought it might interfere with some of the decisions the credit policy committees would have to make on loan applications in trying to meet their targets or draw down what might be seen as a limited amount in the particular local authority area. It is not confined solely to Dublin, Cork and Galway or certain parts of the country. It is up to every local authority to administer the scheme based on the number of applications it receives. We are not going to wait for the fund to run out before we build up a second fund to allow a continuation of the scheme with whatever changes we might deem to be necessary based on how the first phase of the scheme had operated. The Deputy is right in pointing out that the fund of €200 million for the scheme will I hope result in the achievement of 1,000 mortgages for families and individuals. When the level of the fund is at approximately €50 million, the Housing Finance Agency will build a second fund. The total for local authority mortgages amounts to just under €1 billion. The total mortgage market in Ireland is about €99 billion. The sum of €200 million is small and limited in the scheme of things, but there is scope to build it, depending on the level of demand. The scheme will be demand driven. We are depending on the local authorities to administer it efficiently. The Housing Agency and the Housing Finance Agency will act as a backstop to help in reviewing difficult cases, engage in due diligence and everything else. There is a timeline built in for each of the credit committees to make its decisions, but there will be a turnaround time of four to six weeks for applicants.
The way we supply housing in Ireland is a disaster. It is incredibly expensive. For all practical purposes, too many aspects are unregulated. Most of the measures the Government introduces amount to a further subsidising of the industry, which does not help to bring down prices. When he appeared before the housing committee, Mr. Dick Brady told us that the council had land in Dublin which the State owned on which to build 45,000 units. If there is a site with the capacity to provide 100 houses or apartments, why does the Government not approach the builders and ask which of them will provide 20% of them as social housing and 30% as affordable housing - they could keep the remaining 50% as private housing - and what the would cost be? Is it prepared to do business? It will not challenge the way the industry is operating, unless it has a direct proactive place in it. From what I can see, it does not have the appetite for it, which beggars belief. As I said to the Minister previously, things are going to get worse before they get better.
I understand the Deputy's interest and recognise his knowledge in this area, but he complains about the cost of house-building and also about the lack of regulation. As someone who comes from the sector, he knows that the more regulation there is the greater the cost burden on builders.
I do not understand the contradiction in the point made by the Deputy. He should not look at any one measure in isolation. The Rebuilding Ireland home loan and affordable purchase schemes are only part of the affordability measures we have introduced. To date, we have introduced the An Bord Pleanála fast-track process to remove time and costs from the process for developers. It is proving successful so far. Thousands of applications are already before the board and many thousands are waiting to come before it with sites to provide more than 100 homes or more than 200 bed spaces. We also have the local infrastructure housing activation fund, LIHAF, which Deputy Richard Boyd Barrett and I discussed earlier. It provides for the use of €200 million in the first phase and €50 million in the second phase from a direct Exchequer funded fund to have up to 21,000 homes built on sites across the country. We have a national turnkey campaign to do exactly what the Deputy spoke about - going to builders and developers to say to them that if they build on a site, we will be willing to buy a certain percentage from them as social and affordable housing in order to have a mix of housing. If the Deputy looks at the public land on the Rebuilding Ireland land map which is available online, he will note that one third of it has been allocated for social housing. We know that on the remaining two thirds we can build social and affordable housing, as well as private housing, to have a mix as we look to the future. That is work the Minister of State, Deputy Damien English, and I are doing with the new building unit in the Department and the new land management group.