Paudie Coffey (Fine Gael)

I welcome the Minister of State, Deputy Batt O'Keeffe, to the House and congratulate him on his appointment. I have not had the opportunity to do so until now. I thank the Leader for allowing time for this important debate on housing.

It is important that we consider seriously not only the impact of the housing market on the economy but also the impact of housing trends on people's lives. After all, housing is essentially about people and their necessity and basic right to have a roof over their heads. It is not just about generating money and keeping developers happy, as some would like to believe.

It is obvious that the construction sector has been a key driver of growth and employment in this country. In 2006, the sector accounted for around one quarter of value added in the economy and 13% of the labour force. New housing surged as a source of tax to represent approximately 12% of all taxes. Of the 530,000 new jobs created in the Irish economy between 1998 and 2006, more than one quarter were in the construction industry.

House building alone accounted for 15% of GNP in 2006, compared with 6% to 8% in most other advanced economies. The housing boom was financed by big increases in household borrowing, making Irish households on average among the most indebted in the world. This is a very serious and stark fact. Overall, half of the total stock of lending is linked to the property market and 75% of the increase in the year up to June 2007 was linked to the property market. More than half of the permanent units distinguished in the 2006 census were built since 1971. The period since 1996 accounts for 28% of the total housing stock.

To date, the housing and construction sector has essentially contributed to and bankrolled a large percentage of Exchequer funding through the collection of associated taxes such as stamp duty, VAT, capital gains tax, development levies and income tax. The Government has propagated a very high level of dependence on the housing and construction sector.

All is not so rosy in the garden at present. We may talk up the economy as much as we like — nobody wants it to crash — but we must realise that serious challenges lie ahead. Despite the warning signals from many economic commentators that the housing market was about to face new challenges, both the Taoiseach and the Tánaiste dismissed their legitimate concerns and labelled them as "prophets of doom", which term I noted in the address of the Minister of State. They sat on their hands hoping the good times would continue to roll on but now reality is beginning to bite and stagnation seems to be the order of the day in the housing market. Any auctioneer will tell one this.

The evidence, statistics and trends suggest that the Government now belatedly accepts there are serious consequences for the economy on the horizon and this is now reflected in the spending cuts proposed in the pre-budget Estimates that are now before the Oireachtas. Taxation from the housing boom camouflaged the sharp rise in day-to-day spending as a proportion of national income. Prices and housing output peaked in 2006 and have fallen since, reflecting a combination of rising interest rates, declining affordability, tighter credit conditions, excess supply and declining household and investor confidence. Largely as a result of the contraction in housing investment, in the recent pre-budget outlook the Department of Finance revised downwards projections for economic and employment growth.

These forecasts are largely consistent with independent forecasts, such as those of the Central Bank and ESRI, which both assume new housing construction of 65,000 units in 2008, which represents a decrease from 78,000 this year and 93,000 last year. The Construction Industry Federation forecasts that new housing will fall to 45,000, at most, in 2008. This is more consistent with the latest housing starts data. Every fall in new housing output in the order of 10,000 will knock an additional 1.2% off annual GNP growth. Davy forecasts 45,000 construction job cuts by the end of 2008. Independent commentators, rather than the Opposition, are making these comments and it is therefore time the Minister of State sat up and took notice. It now seems the Government's reputation for competent economic management was built on very shaky foundations. The debt-fuelled housing boom has now declined and the new challenges in the housing market must be faced up to.

How does all of this impact on people? In 2006 there was a housing unit vacancy rate of 15%. I refer to the total vacant houses and flats and holiday homes as a percentage of the total housing stock. Senator Larry Butler referred this morning to many local authority houses that are lying vacant. Who is in charge? Is it the managers and executives of local authorities or is it the Government, including the Ministers, who are elected to ensure people are served by the local authority managers and ultimately housed? The circumstances that obtain serve as another example of the Government's abdication of its responsibility to the ordinary people of this country.

I ask Senator Larry Butler to use his influence as a Government Senator to request the Minister for the Environment, Heritage and Local Government, Deputy John Gormley, and the Minister of State responsible for housing, Deputy Batt O'Keeffe, to exercise their powers to ensure county and city managers have the necessary resources to ensure house letting is fast-tracked and that the houses are inhabited immediately by those on the waiting list. It is not acceptable that these houses should remain vacant while individuals and families are on the list for years. It is not acceptable that these houses are vacant while individuals and families are on waiting lists for years.

Thousands of families are indebted to banks and there are real concerns regarding their ability to sustain mortgage repayments in the face of rising interest rates and a drop in property values. The number of home repossession cases coming before the courts is on the rise, which is a serious and stark indication that families are now feeling the pinch financially. In 2005, 65 mortgage suits were issued in the High Court and in 2006, the number increased to 74. In 2007, the figure is expected to increase further.

The provision of social and affordable housing is also way behind target and there is no consistency across the local authorities in terms of achieving their targets. Is it Government policy that local authorities will no longer engage in the direct provision of social and affordable housing through their own building programmes and will rely increasingly on private developers servicing the housing list through their Part V obligations under the Planning and Development Act? It is essential that local authorities be encouraged and properly resourced to build houses for those on the housing lists and not wait and depend on developers and builders to do so.

The urban and town renewal schemes introduced by the previous Government were announced to much fanfare. The Government claimed they would change the face of Irish towns and urban areas. How effective were the urban and town renewal tax incentive schemes in delivering value-for-money housing and accommodation? I contend they were very ineffective and could cite several examples from my own county of Waterford.

The Minister of State referred to affordability. Housing is fast becoming unaffordable, in both the private and public housing sector, for those who need to house themselves. There is a clear link between interest rates and affordability. Lower interest rates reduce the cost of mortgages, thus increasing affordability and consequently demand for housing. Rising interest rates are putting home ownership out of the reach of many. Affordable houses sold as part of the Part V arrangements in local authorities are also becoming unaffordable because the qualifying thresholds are restrictive and people are falling between stools and unable to reach the so-called affordable cost of the house they so badly need.

The rental sector throws up some stark statistics. More than 50% of new houses purchased are bought by investors for rental. There is a strong rental market throughout the country but standards in rented accommodation must be examined and problems tackled head on. Local authorities have a strong role in monitoring rental accommodation but it appears they do not have adequate resources to carry out their functions and responsibilities. Only 36 cases were taken in 2006 against landlords who failed to meet housing standards. No single county council in the country took legal action against a landlord but nobody can claim that all the rented housing units under the remit of the councils are up to standard. Vulnerable tenants are suffering because of the lack of proper inspection plans for privately rented properties. Residents who live near these properties also must endure poorly kept and maintained properties.

The Minister of State did not refer to land use, zoning and public services and their impact on property prices. Lands that are zoned residential in many city and town development plans are set aside by developers who control the supply and cost of housing. This issue must be addressed because it relates directly to the high cost of property. Where lands are zoned and subsequently banked by developers, local authorities must take action so that housing is provided in a planned and sustainable manner for communities.

Development charges also contribute significantly to the cost of housing. Developers are being levied at an increased rate for the provision of essential infrastructure in local authority areas such as roads, water services and sewage treatment facilities. All these costs are being passed on by the developer to those purchasing houses. Ordinary people are funding through their mortgages the public services that should be provided by the State. We should not promote a system that hangs a financial millstone around the necks of young families. If we continue down this road, serious problems lie ahead.

Local authorities are abdicating their responsibilities as service providers and allowing the developers to charge those who are purchasing houses. We must take back control of the provision of public services.