Thursday, 7 March 2019
Saincheisteanna Tráthúla - Topical Issue Debate
Home Building Finance Ireland
This week many homeowners and management companies of defective buildings, who were led down a path by the Government in relation to securing loan funding for the remediation of latent defects caused by rogue developers during the boom years, found that the path set out by the Government led straight into a brick wall. The Minister for Finance indicated in an answer to a parliamentary question in December that the Home Building Finance Ireland, HBFI, scheme would be in a position to consider applications from this month by apartment owners and management companies to undertake remedial works on latent defects, but it turns out that it is closed to assisting homeowners who face the appalling prospect of having to undertake work on their own coin just to make their homes safe.
Department of Finance correspondence to a Government Minister from November of last year states that “there is nothing contained in the HBFI legislation that would prevent such a funding application being considered.” Now, however, it seems there is. The HBFI is not able to imagine a situation where a remediation application would be funded, due to the possibility of further estimated costs once remediation is commenced if further issues present, and the inability of most management companies to provide security beyond personal guarantees from apartment owners. I put it to the Minister of State, Deputy English, that apartment owners have been led up a blind alley by the Government. Will the Minister of State please tell the House what happened here? Did the Government really not understand its own legislation well enough honestly to tell people affected by latent defects that there was not a snowball’s chance in hell that the HBFI fund would be of any use to them? Why would the Government direct them with this false hope?
While the affected apartment owners and management companies deserve an answer as to why the one direction pointed out to them turned out to be a dead end, they also deserve a comprehensive and accurate answer as to what the Government intends to do to assist them.
I first raised this issue in the Dáil with the former Taoiseach, Deputy Enda Kenny, more than two years ago. A Green Party motion has since been backed by the Dáil to "prepare and publish options for the financing and carrying out of remedial works to defective housing units, that will form the basis for a nationwide scheme, enshrined in legislation, for the orderly remediation of legacy defects in housing." There has also been the cross-party Safe As Houses? report that called for a redress scheme to assist homeowners with latent defects and for an information and advice service for those affected by non-compliance and regulatory failure.
The most straightforward part of the Safe As Houses? recommendation was the call to set up an advice service. After the fiasco of the Government's misinformation on the HBFI scheme it is clear that this type of service is needed more than ever.
Has the Government even looked at doing it? Does the Government intend to conduct a review, as called for by the Society of Chartered Surveyors Ireland, to ascertain how widespread and serious the problem of defective builds across the country is and, if not, why not? One cannot accurately assess potential reliefs without a comprehensive picture of the problem. Does the Government intend to investigate, or has it already investigated, the possibility of the provision of any sort of assistance for affected homeowners in the form of an advice service or the provision by some other means of accurate information for people dealing with defects; some form of tax relief, in particular given the reliefs given currently to builders and developers and those engaged in a wide range of other activities, in the form of VAT relief on remediation works, income tax relief or property tax relief; a low-interest State loan fund to assist those who cannot pay for remedial works, or a redress scheme for the orderly remediation of latent defects?
I thank Deputy Catherine Martin for raising this issue and acknowledge the distressing situation in which some owners and residents have found themselves, through no fault or their own, due to defects in buildings. It is an ongoing issue which we have debated here, as the Deputy said, over a long number of years. In general, building defects are matters for resolution between the contracting parties involved, namely, the homeowner, the builder and the developer and their respective insurers or structural guarantee and warranty schemes. While my Department has overall responsibility for establishing and maintaining an effective regulatory framework for building standards and building control, it has no general statutory role in resolving defects in privately-owned buildings, including dwellings, nor does it have a budget for such matters. While I acknowledge that calls for such a fund have been made, it is not possible for the State to take on responsibility or liability for all legacy issues nor would it send the right message to the industry regarding responsibility for compliance. In this regard, it is incumbent on the parties responsible for poor workmanship and the supply of defective materials to face up to their responsibilities and take appropriate action to provide remedies for affected homeowners.
The legislative position is very clear in terms of where responsibilities rest. Under the Building Control Acts 1990 to 2014, primary responsibility for compliance of works with the requirements of the building regulations rests with the owners, designers and builders of buildings. Enforcement of the building regulations is a matter for the 31 local building control authorities, which have extensive powers of inspection and enforcement under the Acts and which are independent in the use of their statutory powers. When a building is constructed and occupied, statutory responsibility for fire safety is assigned by section 18(2) of the Fire Services Act 1981 to the person having control of the building. In multi-unit developments, the person having control is generally the owner management company. Under the Multi-Unit Developments Act 2011, the owner management company must establish a scheme for annual service charges and a sinking fund for spending on refurbishment, improvement or maintenance of a non-recurring nature of the multi-unit development.
In response to the building failures that have emerged over the last decade, my Department has advanced a robust and focused building control reform agenda and will continue to ensure that these reforms have an impact. While that does not solve matters for the existing people, we are confident the proper regulatory framework is in place to prevent this happening with developments commenced after 2014. The difficulty the Deputy raises relates to who can deal with the problems arising in buildings constructed in previous years. The Deputy asked a number of questions, but her principal one was on the Home Building Finance Ireland, or HBFI, scheme. The scheme was established under the Home Building Finance Ireland Act 2018 as a supply-based measure to help address the shortage of new housing and falls within the remit of my colleague, the Minister for Finance. The Minister has been very clear that the HBFI was established on a commercial basis and that its activities must comply with state-aid rules. Any funding provided by the HBFI will be backed by appropriate security and normal banking terms. As such, conditions will apply and HBFI will not be in a position to offer cheap or subsidised credit. It is not about subsidised credit but a cost-neutral approach.
It is important to recognise the complexity of the funding of remediation works. These are high-risk projects which pose significant issues for lenders having regard to access to appropriate security. While the HBFI will be open to considering all residential development construction-related activity, it is the responsibility of applicants to ensure their applications for funding are commercially viable to allow the agency to comply with state-aid rules. I am advised by the HBFI that only a small number of calls and emails have been received on this type of funding to date and that no inquiry has progressed to a full application to date. People are welcome to progress to a full application but it must be on a commercial basis and security must be provided. Lending of that nature will probably not suit circumstances such as those outlined by the Deputy in respect of developments in need of remediation. It is not that they are prohibited from applying. No one has misled anyone in that respect. However, such an application might not be approved due to the requirements around commercial viability and securing the loan.
With respect, these homeowners need more than an acknowledgment of their stress. With regard to the Home Building Finance Ireland scheme, the Minister of State said the Minister for Finance had been very clear, which he was. I have his remarks. He said nothing contained in the HBFI legislation prevented a funding application like this being considered. In reply to my parliamentary question, the Minister, Deputy Donohoe, stated that the HBFI would be in a position to consider applications from apartment owners and management companies for such funding. The mixed messages here are cruel. Instead of giving people hope, the Government has given them a sense of hopelessness. They were given that hope and then the Government took it all away.
I referred to four possible ways in which the Government could assist homeowners but it has done nothing. At this stage, every time I stand up to speak in the House, the Minister present presumes I am going to ask about helping these homeowners. That is how often I have raised the issue. However, the Government has done nothing. It has not even put in place a phone helpline for people who are in need. They do not know to whom to turn. It is abundantly clear that two years down the road, the Government is intent on abandoning these homeowners. I received a letter today from a person whose family member has been hit with an unexpected bill of more than €16,000 to fix fire safety issues at an apartment building. The bill was accompanied by a stern notice that the matter should not be discussed even with friends because if the media got to know about the problem, the property would be rendered unsaleable. People are terrified and, to its shame, the Government is thriving on that terror. The Government depends on the fear those people have about speaking out publicly because doing so might mean they will not only have to pay for the defects but their properties will be rendered unsaleable. That means no political pressure on the Government and, therefore, no problem.
With respect, I hear every time this matter is raised about the Building Control (Amendment) Regulations 2014. Let us not talk about those any more because they are of no help to these people.
This is a pre-2014 issue. I ask the Minister of State to accept as a fundamental principle that this is not simply a matter of private contract. For many of these homeowners, there is no recourse to builders and developers who have long since gone bust. Does the Minister of State accept that this is a public safety issue? The Government cannot simply sit idly by.
Is it waiting for a tragedy to occur? Will it take a death? Fire alarms are going off in these buildings and people think their apartment complexes are going to burn down. They are living in fear and the Government must act.
With respect to Deputy Catherine Martin, I had to focus my reply on the main question she submitted for debate. I understand she has other questions to which she wants answer. That is fine. However, the Deputy asked perhaps ten questions and I do not have time to respond to all of that. I had to focus on the charge the Deputy made that the Government had misled people in relation to the funding model provided under the HBFI scheme, which is not the case. We were very clear that the HBFI was to be established as a commercial entity in full compliance with state-aid rules, with full lending terms and conditions to be approved by its board in due course. No other impression was ever given. That is the charge the Deputy makes today and that is what I will deal with. It is unfair to say we misled people when we did not. We understand the difficulties people are experiencing. We have all had situations in our constituencies where we have had to work with groups of people who found themselves in very difficult circumstances due to rogue workmanship at an earlier stage under previous Governments. We have tried to help where we possibly could. The Deputy should not accuse us of misleading anyone in relation to this fund. It was set up as a supply issue to help builders today to meet demand by building houses. To be clear, people can apply to the HBFI and each application will be examined on its merits and in the context of its particular circumstances. It is a matter for the HBFI to assess applications and, if appropriate, issue a term sheet having regard to state-aid rules and its commercial obligations. I ask the Deputy to bear in mind that, as with all lending, some security is required. That is a difficulty here.
I refer to the general approach to the issue. I referred to the changes we have made because the Deputy has asked repeatedly what we are doing as a Government. The first thing the Government had to do was put in place changes to ensure this could not happen again.
We put in place a system and, as the Minister of State in the Department, I have full confidence that this system can prevent a recurrence of what happened in the past. The situation the Deputy is raising will not happen again. That is the difference we have made. Experts in this area all over the world will tell the Deputy that the Irish system is one of the best. Self-certification works and even countries that do not have self-certification are considering going back to it because it has been proven over the last number of years that it is working. It is making a difference in the quality of the buildings. We are also working with the sector on changing the culture as well in respect of the workers.
The Deputy referred to calls for a fund to be established. The Minister, Deputy Eoghan Murphy, addressed this last Tuesday in the Dáil. If there was a magic way to intervene and help in this area without exposing the State to an unquantifiable amount of money, because there are over 200,000 apartments-----
The Minister has been clear that if somebody can come forward with a roadmap whereby we can intervene and help people, we will look at it. However, we must be very careful about the exposure of the taxpayer.