Paudie Coffey (Fine Gael)

I welcome the Minister of State to the House to debate this very important issue. It not only concerns affordable housing but also housing in general.

When concluding, the Minister of State claimed we are now in radically different circumstances than those we were 18 months ago or even 12 months ago. I certainly concur with this but remind him that his predecessor, Deputy Batt O'Keeffe, was very upbeat during a debate on housing in the House in October 2007. Indicators at the time showed there was an oversupply of houses. Statistics indicated there were over 50,000 vacant houses nationally, yet we were trying to continue with the policy of propagating the clearly unsustainable housing boom. There was a sense of denial on the part of the Government at that time. As we all know, the Exchequer was greatly dependent on the income from the boom. It was sustaining the public finances at the time.

For every house built during the housing boom, almost 50% of the value was appropriated by the Government, be it through VAT, capital gains tax on the land or stamp duty. Many people did not want to believe the policy was unsustainable because it was keeping the country going and because there was considerable employment in the construction sector. Nobody was willing to cry "Stop". We debated the matter in the House and the current Minister of State, Deputy Finneran, has stated clearly how circumstances have changed.

We are where we are and I hope serious lessons have been learned. The legacy of our policy is such that local authorities are left exposed to the cost of the provision of affordable houses, which are lying vacant and cannot be sold. Managing this stock presents a problem in addition to the credit crunch and the other financial pressures local authorities are experiencing. This must be considered against the backdrop of the vast number requiring social housing in local authority areas nationally.

It is clear we got our policy wrong. There are still people on social housing lists who cannot be housed by local authorities, yet there is a large stock of vacant houses, both public and private. With regard to the private houses, there are half-finished estates all over the country. Many of the property developers have probably absconded because they cannot make their repayments to the banks. Some of the banks in question are the casino banks with the toxic debts. This problem must be teased out. The truth will eventually come out in the wash.

Local authorities are left with affordable housing they cannot sell. "Affordable" means "inexpensive" or "low cost" and affordability is relative to market value at any given time. Therefore, a unit deemed affordable two years ago or even one year ago would be considered expensive today if sold at the same price. Products are accorded value through the interaction of supply and demand. Where there is over-supply, there is obviously a loss of revenue and false values. Managing the surplus stock presents a considerable challenge, not only to the Department but also to local authorities around the country.

Not all local authorities are equally exposed. Consider the 2007 figures for the commuter belt around Dublin, bearing in mind that these figures have now been updated. Kildare County Council had 189 affordable units, Fingal County Council had 390, South Dublin County Council had 299, Laois County Council had 142 and Wexford County Council had 143. The further one goes from Dublin, the number of affordable units decreases. Some local authorities are not as badly exposed as others while some around the commuter belt are very badly exposed. Moving the units presents a considerable problem for the Minister of State's Department and for the local authorities themselves. Contracts have been signed even for units not yet in the hands of local authorities but which will fall under their charge. The number will therefore increase, aggravating the problem. The financial exposure of local authorities will increase.

The latest circular issued to the directors of services in local authorities asks local authorities to become estate agents, to use ordinary layman's language. We are asking them to operate in markets where estate agents are not operating at all and in which some estate agents have gone out of business. We are asking housing departments in local authorities to engage in the sale and marketing of houses that have lost their buoyancy and sales potential. I honestly do not know how we will square this circle. It will affect the resources of local authorities because they will have to invest time and resources that they do not have. It will also affect local property markets in every town and village.

The market value of affordable stock must be reassessed. We need to find a new baseline for market values, but this is very slow in coming. This is evident in the banking crisis whereby considerable property-related debts, which some refer to as toxic debts, have no real market value just yet. The Leas-Chathaoirleach raised this on the Order of Business today and stated that, to find the real value of property, it must be put on the open market. We cannot manufacture values, as we seem to be trying to do with the affordable stock.

The circular to local authorities is asking them to offload the affordable stock in whatever way they can. Initially local authorities only considered first-time buyers, those on the housing lists and existing tenants. The criteria were very strict at first, and that was not so long ago. Then the local authorities became a little more flexible and began to consider the cases of applicants who had separated or divorced. Now, if I understand the Minister of State correctly, the direction from the Department is to sell the affordable units to anybody who will buy them. The bad news is that nobody is buying at present, in the public or private sector. This is for many reasons.

The Minister of State said in his speech that mortgage interest relief changes were beneficial. Will he clarify this? I understand from the budget that the mortgage interest reliefs are no longer to apply to those paying mortgages for over seven years. That alone will affect people's ability to repay mortgages and loans. The decline in income due to higher levies and other costs, such as that of child care, will have a bearing on one's ability to buy one's own home. I suspect that people will go back on the housing lists. At present, people struggle to repay their mortgages and this is evidenced in the statistics for residential repossession which has increased year on year in recent times. Banks are moving to repossess properties and for what I do not know, because they will be left with them and will not move them on. They do not achieve anything by doing this. The Minister of State, the Department and the Government should pay more attention to this area and assist people with houses to renegotiate their terms with their banks. At present, the banks seem to be very inflexible. I acknowledge the Government has moved to some degree and put a moratorium on the banks which it recapitalised. However, many other banks have no moratorium and on a daily basis they move to repossess houses. People who were already stretched are even more stretched after yesterday's budget. Will the Minister of State consider assisting people in this situation?

With regard to the financial exposure of local authorities, those around the Dublin commuter belt are more seriously exposed. I was provided with figures, and I stand to be corrected, which show that local authorities in Laois, which is in the midlands, are exposed to more than €28 million for affordable housing stock which they cannot sell. This is the amount of loans on their books. They were contracted to take this type of housing under either Part V or the affordable housing schemes. New incentives should be introduced or, as some people suggest, local authorities should just auction them. Perhaps they should be given to people on the social housing list. Something radical needs to be done rather than leaving local authorities with the bill and the ongoing costs of maintaining these houses. They cannot sustain them.

The Department gave five options to local authorities for consideration with regard to off-loading these houses, which is what they are trying to do. The first of these was to sell them as affordable houses. This has failed and in the current climate I would not hold out much hope of too many of them being moved. The private sector has seen huge reductions in prices where private developers are trying to sell houses. They are still struggling to sell them.

The Minister of State referred to the loan which local authorities can provide to potential buyers and he stated this has increased from €180,000 to €220,000. Some people might welcome this but I would caution that local authorities should have very strict credit controls with regard to these loans. We do not want to see local authorities taking on loans to people who could end up in trouble and unable to pay back the loans. This can become sub-prime lending because it is money which can be directed to people fairly easily. I urge that the strongest possible credit controls are put in place prior to any such loans being approved. They should be pressure tested on a financial basis. This is not with the intention of keeping people away from buying their own houses, it is to protect them from entering into the debt which we see throughout the country at present.

The focus should return to the provision of social housing. We have neglected this area in recent years and have depended on the private sector to provide houses. Perhaps we should examine turning some of these affordable houses into social units to take people off the housing lists. This is an avenue I would recommend. This will require funding from the Department because it must front up the money for every social unit provided by the State. I would support the idea of a number of affordable units becoming social units over a phased basis over the coming years because it would remove people from the housing lists, give people a home and release some of the exposure and burden on local authorities.

I welcome this debate and we should try to assist the Department in any way possible to house as many people as possible.