Thursday, 18 April 2019
Ceisteanna ó Cheannairí - Leaders' Questions
I again advise Members that the Standing Orders of the House provide a particular amount of time for each question and each answer. I ask Members to adhere to Standing Orders.
Last week, I raised the issue of the so-called cuckoo funds, which are basically large corporate funds in receipt of tax incentives that are buying out complete housing and apartment developments before they can go on general sale or, in the case of a development I mentioned last week, even where booking deposits have been made. The deposits in question were subsequently returned. In this morning's edition of the Irish Independent, Charlie Weston reports about Leopardstown in south County Dublin, where a development of 295 units will be sold completely to one of the funds. The Tánaiste was not entirely uncomfortable with the practice last week when he spoke about redesigning the rental market. I saw the Minister for Finance out this morning cheerleading for the funds, so it is pretty clear that Fine Gael is on the side of the cuckoos in respect of this matter.
If the Tánaiste needs reminding, this is a practice that has removed from the market thousands of units, and equivalently thousands of houses, which could have been available to first-time buyers in 2018. Three thousand units might have been available to hard-working families who are struggling to get on the housing ladder and 3,000 units might have made a commute a lot shorter for hard-working people who are being forced to live farther from where they work, yet 3,000 people - and potentially 3,000 families - are being elbowed out of the housing market by corporate landlords with Government encouragement.
We are all aware that supply in the housing market is far below the desired level. There are not enough affordable houses being built. Not enough local authority houses are being built, yet, where housing is being built, the funds are sweeping in with the Government's encouragement to take them away from people who want to get on the housing ladder. The United Nations has excoriated this policy. It has spoken about the financialisation of housing in a damning report by one of its agencies. Ireland has been chosen as one of six countries where this practice is rampant.
Two hundred and ninety-five units in Leopardstown are affected, as are units in Dundrum and Citywest. Nearly every week, there seems to be another development. Is it not time to shout "Stop"? Is it not time to limit the ability of the funds to buy entire developments? Does the Government have any plans to review and restrict the taxation incentives that are available to the funds to use their corporate muscle to elbow out people who want to get into the housing market?
The Government is absolutely committed to increasing the supply of all types of homes, including social, affordable and private housing. We believe in homeownership and want everybody to have the opportunity to own his or her own home. Institutional investment in the private rental sector is just one aspect of increasing supply. Although such investment is growing, institutional landlords comprise a very small minority of landlords overall. Fewer than 5% of landlords own over 100 units. The vast majority of landlords, or just over 70%, own just one property, as I outlined to the Deputy last week.
Official statistics of the purchasing activity of institutional investors will be available from the CSO in the summer but in 2017, the latest year for which we have data, combined purchasing activity of property funds, real estate firms and REITs accounted for a net 1% of transactions. Crucially, institutional investment is adding to supply. This year, it is expected that the vast majority of professional landlord investments will be through forward-purchase arrangements, i.e., the forward-purchase of yet-to-build stock. Much of this is new supply that would not be delivered without the availability of this capital. Increasing the supply of urban apartments is essential if we are to reach our national planning framework targets and meet our commitment to more sustainable living generally in our cities. The number of apartments granted planning permission in 2008 was up by 130% in 2016. Large-scale investors are likely to be a driving force behind such a welcome increase in the supply of apartments.
I share the Deputy's concern regarding the fact that we need to watch this market closely. I share his view that we need to consider the taxation approach to increasing investment, particularly in apartments. To try to paint this as a matter of institutional investors versus others who want to buy their own homes on an individual basis, however, shows a misunderstanding of what we need to do collectively to try to increase supply across all areas. The latter is what we are trying to do. Without institutional investment, there are many apartment developments that simply would not be happening or would not be financed. We need more available rental properties. This is part of the way of doing it.
I assure the Tánaiste that there is no mix-up. Some 3,000 apartments and houses built last year could have been acquired by families and first-time buyers but were instead acquired by funds. The Tánaiste knows we have a housing crisis. A time of crisis is not a time to be re-engineering the housing market.
These funds are buying the apartments and, to use the Tánaiste's phrase, they are "adding to supply" on the basis of the very cosy tax arrangements available to them. If the Government put tax or cosy arrangements in place for people who want to build homes for families, they would redirect their investment towards homes as opposed to investing in corporate units and thereby adding to corporate profits.
Is it not time to re-examine the taxation model and decide to put money into increasing the supply of homes as opposed to corporate units that add to corporate profit? The latter is what is happening. Some 3,000 units are involved. There were 295 in Leopardstown that would have been available to families. This is also the case in Dundrum and Citywest. They could have been bought by first-time buyers but they have been bought by corporate funds. There is no difference in the supply.
It does not function well and we are changing it. We are increasing security of tenure for tenants. We have effectively introduced rental caps in areas where there is real pressure. We are introducing institutional landlords that manage much larger portfolios so we can achieve consistency in standards in our rental markets. We must increase the supply of affordable housing, social housing and homes to purchase. All of that has to happen at the same time.
-----he will see that the percentage of homes purchased last year and the year before, since the introduction of increased supports for first-time buyers, has risen dramatically. Therefore, builders are building homes for first-time buyers again. They were not two years ago. It was part of the broken housing market that we are fixing piece by piece.
In recent years, banks have been selling loans, including owner-occupier and buy-to-let mortgages, wholesale to vulture funds at knock-down prices. Figures provided by the Department of Finance to the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach last week reveal that over €24 billion worth of loans have been sold to vulture funds at an average discount of 52%. While facilitating the sale of loans to vulture funds, the Government has designed a tax system that gives massive tax breaks to these funds, incentivising them to buy even more loan that the banks are more than happy to offload to them. The Government has provided the same tax incentives to other investment funds, some call them cuckoo funds, that are buying up property, pushing up house prices and squeezing first-time buyers out of the market. Vulture and cuckoo funds pay no corporation tax, no income tax and no capital gains tax in most cases. They do that because that was introduced in the Finance Bill with the support of Fianna Fáil, which is now crying foul. The only tax they pay is a dividend withholding tax which Sinn Féin championed, but they are still too many ways in which these funds can reduce or avoid paying that.
Last year, Ulster Bank sold a portfolio of loans known as Project Scariff worth €1.6 billion to a vulture fund called Promontoria Scariff. That portfolio consisted of approximately 3,600 owner-occupier loans and mortgages secured to 2,900 buy-to-let properties that are all in arrears. A company called Cabot Financial Ireland is now administering these loans on behalf of the vulture funds and has written to all buy-to-let mortgage holders who are behind in their payments demanding that all arrears be cleared within 30 days or a fixed asset receiver will be appointed. They are taking the assets in order to sell them. Clearing arrears in 30 days is impossible for the vast majority of these borrowers. This means those involved are taking the assets whether there is negative or positive equity. For those in positive equity, they will quickly see this disappear as receiver and legal fees are clocked up. The funds are not facilitating any arrangements with borrowers. Borrowers have stated that they will sell the properties with positive equity but are being told that they must clear the arrears in 30 days or a fixed asset receiver will be appointed. All of the tenants in these properties will be given notices to quit.
That to which I refer is a direct consequence of the Government's policy and the Minister’s rolling out of the red carpet to vulture funds, and pretending that it does not matter if a loan is sold to a vulture fund. Legally, these funds can do exactly what they are doing when they write these letters. The Central Bank is aware that the letters have been issued. It is time to clip the wings of these vulture funds once and for all. Given the actions of Cabot Financial and Promontoria Scariff, does the Tánaiste not agree?
I cannot discuss the cases of individual companies and letters that are being sent out without having seen them. The Central Bank rules that apply to our pillar banks also apply to other institutions that acquire loan books from the latter. The Central Bank has an important role to play in ensuring that there is a regulatory model that balances broader societal priorities with a financial environment that allows funds and banks to operate. That is what the Central Bank must do. The pillar banks are required to do what they are doing in terms of strengthening their balance sheets. However, we must ensure that when loan books are transferred from pillar banks to other funds, the Central Bank remains strong in terms of its role in ensuring that there is a regulated market which takes into account societal concerns and the concerns of tenants or property owners. It has to get the balance right. The Government and the Department of Finance work closely with the Central Bank in that regard.
It is obvious the Tánaiste does not have a clue what is happening or what the role of the Central Bank is and what it can or cannot do. There is absolutely nothing that the Central Bank can do to stop vulture funds from issuing letters to mortgage holders telling them to clear their arrears within 30 days or receivers will be appointed because there is no law to prevent that. The banks could also do that but they do not do so because they rely on customers' deposits and loans and have long-term interests here. Promontoria Scariff does not give two hoots, it only wants to make as much profit as it can and get out of here as quickly as possible. That is why it is organising strategic defaults among these customers. There are tenants living in these properties who do not know what is happening but they will soon find out when they are issued with fixed notices informing them to get out of their homes because the funds are not taking any solutions on board. These funds are not dealing with any arrangements. This is happening because the Government is allowing it to happen. It has allowed State-owned banks to sell family homes and buy-to-let mortgages to the vulture funds that do not give a damn about anything beyond making the quickest buck they can make. It is time to stand up and call this what it is. The Minister for Finance knows about this, as does the Central Bank. I have given them all the details. The reason I have named them now is because the owners of these properties and their tenants know that the only thing that can stop this is shaming Cabot, Promontoria Scariff and Cerberus for what they are doing to tenants, landlords and property holders in this State.
The Deputy stated that the same rules apply to the pillar banks as apply to funds that take over loan books. The issue is not separate from one to the other, the issue is the rules and the law in this area. The Central Bank, as far as I am aware, has not asked the Government to look at changing that law. It is obviously something that requires ongoing discussion between the Department of Finance and the Central Bank to ensure that we get the balance right between ensuring that we have a property market that functions, a financial sector and banking system that works and that there is broader protection for society in general, home owners and renters.
There are currently 3,784 children who are homeless. That figure is constantly changing. Every week, families exit homelessness. However, the problem under this Government is that a greater number enter homelessness annually than leave. Homelessness is an experience that has affected tens of thousands of people over the last decade. It has a deep scarring affect on society. Today's report by the Ombudsman for Children, Dr. Niall Muldoon, gives voice to the experience of children living in family hubs that the Government has provided as temporary accommodation. The Ombudsman for Children stresses the deep emotional impact that this is having on children who have expressed feelings of guilt, shame and anger because of their living circumstances. This is despite the fact that these circumstances are totally outside their control.
My colleague, Deputy Jan O'Sullivan, has acknowledged that family hubs were designed to do better than what was there, namely, hotels and bed and breakfast accommodation, because at least they provide cooking and laundry facilities and a play space for children. However, this report points to a range of restrictions that seem inexplicable, completely unnecessary and punitive. People in family hubs cannot have guests. Why is that? Children in family hubs must be accompanied at all times by their parents. Families are living in single rooms with a lack of privacy. Is it such a security or safety issue in these locations that those draconian measures are required? Family hubs fall far short of the standards we expect for normal decent housing. Families are staying in them for much longer than they should. If we have family hubs, pending a housing supply adequate to meet need, why do we put punitive regimes in place in these hubs?
Why are people's basic freedoms, such as being allowed to have guests or having the normal degree of personal privacy, denied?
The central issue here is that standards of conduct are being imposed on them. What is the basis for that? Can it be justified and what is the Department's justification, or is it simply the State telling people how to behave? This is an echo of the poorhouses of old and the State restricting the basic freedoms of people in a way that can only, objectively, as the Ombudsman has said, be seen as punitive.
People who are homeless have done nothing wrong. They are simply people who due to a set of circumstances find themselves unable to afford to house themselves. Can the Tánaiste clarify what exactly are the rules imposed on families in these hubs? To what extent do the rules go beyond the normal tenant rules that we would have for local authority tenants? If there is a different, why?
First, I thank Deputy Howlin for the way in which he raised this question because it is easy to be emotive when one is talking about children who are homeless for understandable reasons.
I was the Minister who made a decision to invest heavily in family hubs out of necessity at the time. We had, and still have, far too many children and families in hotels and bed and breakfast accommodation. I felt we could do something better than that as a temporary measure for people while they are in a transition from the crisis of homelessness to permanent social housing or some other rental accommodation or other form of permanent accommodation.
We have invested well over €100 million in trying to put tailor-made infrastructure in place to support families as best we can in what are effectively family hostel-type accommodation where we try to cater for the broader needs of families, whether that is through homework clubs, play space, separate cooking facilities and separate washing facilities. We have counselling services in some of the hubs to help people make the transition more quickly into social housing, in terms of application forms and all the other things that need to be done.
I have visited many of these family hubs. Of course, they are not ideal for permanent accommodation, but they are not meant to be. They are meant to be a temporary arrangement that can support families, as best we can. We need to ensure that we, in what we say here and outside, do not contribute to the stigma, shame, concern, frustration and anger that many young people feel by having to be in such a hub, hotel, or bed and breakfast accommodation. We need to focus on making sure that we transition families and children out of this type of accommodation as quickly as possible. We have a target turnaround time of six months for family hubs. Families transition far quicker out of hubs than out of hotels, and there are reasons for that.
This is a temporary arrangement while we put in place the necessary capacity, in particular, in terms of social housing, to ensure that we do not have family homelessness in Ireland any longer in the not too distant future. In the meantime, we must have infrastructure that is designed to do as much as we can for children and families who are in this crisis-vulnerable situation and, therefore, I would defend the policy of family hubs.
By the way, I would not disagree with some of the recommendations that have been made here. I would have no problem with independent inspection, for example. We already have a national quality standards framework for homeless services that is applied across Dublin which, I understand, will be extended across the country.
We need to make sure that there is a consistency of service delivery across the family hubs. They are currently operated by Focus Ireland, Crosscare, Good Shepherd, Peter McVerry Trust, Respond, The Salvation Army and Sophia housing, all of which are good organisations that the State is partnering with here to constantly improve services.
Ending homelessness is the social imperative of our time and it can only be resolved when supply is adequate to need. Until we reach that point, and we must provide every resource we possibly can to achieving that objective, family hubs will be there.
I appreciate the amount of money the Government has spent on them. They are, as I have acknowledged, an improvement on bed and breakfast accommodation, but the fundamental question I asked in response to the Ombudsman for Children's report is, why are we, as a State, imposing standards of conduct on residents in family hubs, and what are those standards? Are they allowed guests? Are they allowed to have their children move around freely in them? Is there adequate freedom of action for people in those hubs, and if not, why not, or is the report inaccurate when it reports such matters? Surely the objective should simply be that the standards would be the same as for tenants in any local authority house.
I have not been to all the hubs but I have been to some of them. I understand that the children's Ombudsman did not visit all of them. I think he visited eight and interviewed 80 children, which is quite comprehensive.
We are guided by the NGOs which provide the services, through local authorities, in these individual family hubs. In some of them, the families themselves determine the rules on how the hubs operate but, of course, one must have child protection and security measures in place also. In terms of rules and the contracts in place, not every hub is the same. Indeed, the infrastructure in different hubs is also somewhat different, depending on the property being used and how it has been adapted, etc. Space issues are different and facilities are different within different hubs but we are trying to make sure that there is at least a commonality and a benchmarking of standards across all of them.
As I said, there is nothing to hide here in terms of what we have invested in, but these are temporary measures. We want to make sure that they are as good as they can be as temporary emergency accommodation for families but, ultimately, the answer here is more social housing.
By the way, the direct answer to Deputy Howlin's question is that visitors are allowed into many of the family hubs.
I will read a newspaper quote to the Tánaiste. Ms Cherie Ellorig, a Filipino woman who lives in an apartment in Exchange Hall, just around the corner from Tallaght Hospital where she is a nurse, states:
I got my notice [to quit] in the first week of March and it was so shocking. For weeks after I got the letter I was so stressed. I can't concentrate on my work. I can't eat or sleep. I’ve lost nearly 3 kg in the last couple of weeks.
Another woman, Natalia, whose husband is a night porter in the same hospital, has two children. She stated:
They're not aware of what's going on ... I'm trying to keep things as normal as possible for them, even though we are very stressed.
I got an eviction notice on February 28th telling me I have to move out by October 10th. I don't know what to do.
Cherie and Natalia are part of a group of at least 12 families in Exchange Hall who are facing eviction. They are good tenants. They pay their rents and have built a real community together, but they are still facing eviction. The reason is greed - pure and simple - and the Government allows that greed, the drive for maximisation of profits by landlords, to come before the rights of people to a home. The landlords, Rennicks and McPeake, want to sell two floors with vacant possession so that they can maximise the selling price.
If they are evicted, what does the Tánaiste expect them to do? One resident, Ian, told me last night that even though he is almost 40, he would have to move back in with his mother. He says that those who do not have families here, will not be so lucky. They will not have that option and some of them could be made homeless.
As the Tánaiste will be aware, it is not the only group of tenants who are facing a crisis situation. Eviction from private rented accommodation is the number one cause of homelessness.
The Exchange Hall tenants, inspired by the victory of the Leeside residents in Cork, have got organised and will be opposing any eviction. They are taking a case to the RTB but it is not clear whether they will come under the Tyrrelstown amendment because of the way that the ownership of the properties is organised.
Does the Tánaiste agree that they should not have to campaign in order to keep their homes? Does he agree that landlords should not be able to use sale as a reason for eviction regardless of how many evictions are taking place at one time and that, as in Germany, The Netherlands, Sweden and Denmark, they should be required to sell with tenants in situas proposed by our Anti-Evictions Bill 2018, passed through Second Stage, but which it seems the Government is seeking to block by withholding a money message?
Does the Tánaiste agree that their case, as well as the entire housing crisis which has been referred to a lot during this Leaders' Questions session, shows that the entire model of relying on the private market is a failure? Those seeking to build a movement here should look at what is happening in Berlin where tens of thousands of people have been on the streets demanding expropriation of the corporate landlords. They are building towards a referendum which will do just that. Has the Tánaiste ever considered that, instead of encouraging the so-called cuckoos, real estate investment trusts, REITs, and vulture funds by giving them favourable tax treatment, these properties should be nationalised and brought into the public housing stock?
We are increasing, and will continue to increase, public housing stock year after year. I hope we will add 10,000 social housing units this year and that will increase again next year. We will add an extra 50,000 social housing units over the five-year duration of the Rebuilding Ireland programme and the Government is committed to that.
This Government is sometimes painted by some in this House as only having an interest in the private rental market and private purchase sector and that is not true. We are investing billions of euros in social housing because it is needed. There are many who cannot afford private rental prices or to buy their own homes and they need State intervention, assistance and support and they will get that. We do not have enough at the moment and we are trying to correct that as quickly as possible.
People getting notice to quit and that, in turn, driving homelessness is an issue and the Deputy is right to point it out. Many of the families and individuals who come into homelessness have come from the private rental market because they either cannot afford the rent any longer or they face eviction notices. The Minister for Housing, Planning and Local Government, Deputy Eoghan Murphy, has responded to that and is introducing a series of amendments to legislation going through the House to add more protections for tenants, and to extend notice periods to give people more time.
I recognised there was an issue and introduced the Tyrrelstown amendment when I was Minister for Housing, Planning, Community and Local Government but we must try to balance that with the impact the wrong legislation would have on supply. This is not about prioritising landlords over tenants because we have clearly prioritised tenants over landlords. However, we need landlords and people investing in the private rental market. Without getting the balance right, we will introduce more legislation to protect tenants in a market with a shrinking housing stock. That is a fool's game and it will not work. We need property in the market and to ensure that we have a better regulated, more predictable and consistent rental market in which people can put longer-term tenancies in place. I am in favour of very long-term tenancies, if possible, but that also has to be done with a step-by-step approach, otherwise we would create shocks in the system that would result in a reduction, rather than an increase, in supply at a time it is badly needed.
The Tánaiste referred to shocks in the system but what about the shock to the families of Natalia, Ian, Cherie and the others I spoke about earlier? What kind of shock to their systems is acceptable? What does he suggest that they do?
The logic of this Government is laid bare by the Tánaiste's answer and by the front page of today's Irish Independent. That logic is that we need to incentivise massive corporations to get involved in the housing sector here because that will be the answer. Those corporations are incentivised by being allowed to have the highest rental yields in all of Europe.
Under pressure from a movement among Tyrrelstown residents, the Government decided that more than ten residents cannot be evicted at the same time, but does the Tánaiste think it is okay, for example, that eight such residents could be evicted? Let us take the case of the residents of Exchange Hall. If it is found that there are only eight tenants in properties owned by one landlord in that building, does the Tánaiste think evicting them is okay? The Government opposed amendments at the time which would have expanded the remit of the Tyrrelstown amendment.
The consequence of this reliance on the private market to deliver is that the Government is communicating that, ultimately, the right to profit of these vultures, REITs and cuckoos comes before the right of people to a home. The Tánaiste referred to 10,000 units of public housing but does not admit that a large portion of that is the State transferring public money into private hands through the HAP scheme and other means, which is the problem. The answer is public housing.
The Deputy is right that part of the answer is public housing. That is why we are investing billions in it. We have an over-reliance on the private rental market in the short term while we build up the social housing stock to deliver the kind of capacity that is needed. Our population is growing by over 70,000 per year at the moment and many families are under pressure in the private rental market, some of whom are facing the challenge of homelessness. We are changing that, primarily through driving housing supply.
The Deputy asked whether we should provide the protections contained in the Tyrrelstown amendment in cases in which fewer that ten properties are sold. One needs also to consider property rights in the Constitution and there was a lot of legal discussion on the amendment and how low we could make that number. I was in the middle of that discussion.
As I said earlier, 70% of landlords in Ireland only rent one property. If we create a situation whereby they are unable to sell that property, that raises the spectre of people not making properties available for rent at all. The consequences of that would make many of the issues we are discussing even more difficult and pressurised.