Noel Ahern (Dublin North West, Fianna Fail)

This Bill addresses the need to make statutory provision to allow housing and planning authorities to register as a charge a claw-back against individual properties provided by them under the various affordable housing schemes at a discount from market value. It is specifically required in the context of the entry into the affordable housing mortgage market of private lending institutions which will provide competition and consumer choice in this area. Additionally, it will facilitate the direct sale of affordable units by a developer or builder to eligible persons nominated by the housing or planning authority. This will speed up the sale of the unit and make the administration of the affordable schemes more efficient and cost-effective.

Recent years have witnessed an unprecedented demand for housing brought about by a number of economic and demographic changes, including rising disposable incomes, historically low interest rates and changing household formation patterns. These factors continue to place significant pressure on housing demand and house prices. The Government's strategy is to increase housing supply to meet demand and to improve affordability and access to affordable housing, particularly for first time buyers. This will help to bring moderation to house price increases.

The Government's approach to meeting housing needs is clearly working. Our success is evidenced by our outstanding house completions record. The year 2003 was the ninth record year for house completions, with 68,629 units completed, an increase in output of over 19% on 2002 and an increase of 10.5% in output in the greater Dublin area during the same period. This year is likely to be another record year. The latest figures indicate that more than 60,000 units were built in the first ten months of the year. We are building at a rate approaching 19 units per 1,000 population, an outstanding achievement. Increasing the supply of serviced land through targeted initiatives and the commitment of Exchequer funding has also been effective. There is a five year supply of serviced residential land nationally and sufficient land to meet the needs of Dublin for some eight years.

While the rate of house price increase remains problematic, it has moderated considerably since the late 1990s when price increases peaked at 40% in 1998. A number of market commentators, including the Central Bank, have predicted a greater balance in the housing market over the next few years, as increasing supply will have a dampening effect on house prices. Affordability has also been assisted by a range of factors, including high levels of economic growth which have facilitated lower tax levels and increased disposable income, increased employment, lower mortgage interest rates and low inflation.

Indicative data available to my Department show that first-time buyers continue to have a significant presence in the housing market. This is supported by the CSO quarterly national household survey for the third quarter of 2003 which indicates that almost 50% of house purchasers since 1996 were first-time buyers. The survey also pointed out that some 62% of homeowners surveyed had no mortgage or loan on their dwellings compared to 58.8% in the same quarter of 1998. While the survey indicates that the majority of these homeowners purchased before 1980, it states that approximately one quarter of purchasers since 1996 had no mortgage.

Budget 2005 also contained good news for first-time buyers with the highly significant change in the system of stamp duty, whereby the threshold at which stamp duty becomes payable by first-time buyers on second-hand properties has increased from €190,500 to €317,500. In addition, the percentage rates payable have also been reduced. Amending stamp duties for first-time buyers will improve accessibility to the second-hand housing market, reduce the dependence of the first-time buyer on the new house market and will ultimately impact on house price inflation in new homes at the starter end of the market.

The Government has responded actively to the increased level of housing need by expanding social and affordable housing output significantly. Notwithstanding the many demands on public expenditure, Government commitment to maintaining a strong social and affordable housing programme is resolute. In 2005, total Exchequer capital and current funding for housing will be approximately €1.3 billion. This is a record amount and an increase of 19.8% on the expected outturn for 2004. This increase consolidates the significant progress made in recent years, with over 13,000 households benefiting from investment under the broad range of programmes in 2005, compared to 8,500 in 1998. The total capital envelope over the period 2005 to 2009 is a massive €6 billion. To ensure that value for money is achieved for this investment, I have asked local authorities to put in place five-year action plans covering the full range of their housing programmes. These plans provide a means to ensure that these resources are used to best effect. The plans, which have been examined by my Department and discussed with authorities with a view to signing off on them by the end of the month, will allow for maximum output to be achieved through the effective planning of programmes and prioritisation in line with needs. Overall, our priority is to ensure that housing is delivered in a manner that breaks cycles of dependency and disadvantage.

Government interventions have boosted the supply of affordable housing under targeted schemes for low and middle-income purchasers. More than 10,000 households have benefited under the shared ownership and affordable housing schemes since 1999. Substantial growth is anticipated in affordable housing over the coming years, as the Part V mechanism and the Sustaining Progress affordable housing initiative take effect.

In this regard, I welcome yesterday's announcement by the Taoiseach on the release of health board lands for the initiative. This brings to more than 70, the number of projects now planned on State lands which, together with projected affordable activity under Part V, means we will exceed the target of 10,000 units proposed by the parties to the Sustaining Progress pay agreement. The key focus for the next phase of the initiative will be to significantly increase the affordable housing output through a combination of proactive local authority management of those sites for which they have direct responsibility and alternative fast-tracking strategies, such as land swaps in exchange for early delivery of units. The Harcourt Terrace site is being piloted in this respect. It is expected that more than 11,000 units will be delivered from the various affordable housing schemes between 2005 and 2007.

The Bill has three sections. Section 1 deals with the sale of properties under the 1999 affordable housing scheme whereas section 2 deals with the sale of units or land under the Part V mechanism. Section 3 contains the usual provisions of a general nature dealing with the short title and citations.

Section 1 enables a housing authority to place a charge on an affordable housing property it is proposing to sell under the 1999 scheme. Up to now the charge was registered against the mortgage deed, which allowed the local authority, as lender, to enforce it. However, where the local authority is not the lender it would have to pursue the purchaser directly for payment of the claw-back. This would be both difficult and expensive. This amendment will allow the local authority to enforce the claw-back as necessary. Section 2 is a similar provision and will enable a planning authority to place a charge on a house or land provided under Part V of the Planning Acts.

I would like to explain briefly to the House how the claw-back operates in practice. Where affordable houses are sold at a discount from market value, a claw-back applies. The claw-back is an anti-profiteering mechanism and provides that where a dwelling purchased at a discount under the affordable housing schemes is resold before the expiration of 20 years from the date of purchase, a percentage of the proceeds of sale, based on the percentage discount received, shall be paid to the housing authority. The amount payable reduces by 10% for each complete year after ten years of occupation. Up to now, mortgage finance for affordable housing has been provided exclusively by local authorities through the Housing Finance Agency and this source of funding will continue. This is because the claw-back provision has not been acceptable to the private financial institutions as a first charge on the property and, consequently, has acted as a constraint up to now on lending by them.

However, my Department has been in discussions with representatives of a number of financial institutions and it has been agreed in principle that the mortgage should be registered as first charge on the property, with the claw-bank as second charge. This has allowed substantial progress to be made in agreeing arrangements for the provision of such finance by the commercial lending sector. However, a number of matters still remain to be resolved, including the need to give local authorities the power to apply the claw-back as a charge on an affordable property, which is being dealt with in this Bill. I am satisfied that when the final arrangements are agreed the State's investment in the affordable property will be fully protected.

The House may be aware that Bank of Ireland has already pre-announced a mortgage product it proposes to provide for affordable housing applicants when the discussions with my Department have been finalised. I also understand that the Educational Building Society is at an advanced stage of negotiations and that other financial institutions have also expressed an interest in entering this segment of the market. I welcome the competition, as it is important that consumers have choice when they are seeking mortgage finance.

It has long been a Government aim to ensure that private mortgage finance is available to all potential purchasers, particularly to those wishing to purchase under the various Government affordable schemes. Notwithstanding the constraints that have operated up to now, the Government considers it appropriate that private lending agencies would also be active in this market. In addition to the need for consumer choice, it is a particular requirement of the Sustaining Progress affordable housing initiative that its operation and delivery have no impact on general Government finances. Hence the need for private mortgage finance as opposed to the provision of public finance through the Housing Finance Agency. The provisions of this Bill are a necessary step in achieving our aims in this area.

I have pleasure in presenting the Bill to the House and I thank Members for their co-operation in processing it in a speedy manner. I look forward to hearing Senators' comments on the matter.