Paddy Burke (Fine Gael)

I welcome the Minister of State, Deputy Finneran. While I also welcome this opportunity to say a few words on affordable housing, we cannot deal with it in isolation. One must link together all the other aspects of housing, including public housing, and must examine the overall context in respect of the present position regarding housing.

When the Fine Gael-Labour Government left office in 1987 in the middle of a recession, no one was waiting for a local authority house as sufficient housing was available. While that could be due to a number of reasons, including people emigrating to seek work, at the time there also was a vigorous campaign to provide public housing. We now face a situation in which each local authority has people waiting on housing lists but in which there are several different ways to accommodate them. These include affordable homes, rented property and the social leasing scheme for which the Minister of State recently announced €20 million, as well as areas in which the health boards assist in respect of private rented accommodation.

Undoubtedly, however, the Minister of State is in a corner in respect of affordable housing. It is a predicament for the Minister of State, his Department and the local authorities and the problem is how to get out of it. I note the Minister of State outlined that 40,000 new houses and 55,000 to 70,000 second-hand houses remain unsold. In other words, 110,000 homes are vacant and for sale in one form or other. This undoubtedly will depress the market and as no houses are being sold at present, the bottom price is unknown. I refer to a number of aspects of yesterday's budget including the levies imposed, the removal of mortgage interest relief and others in respect of the criteria used to assess a person for a loan. While I am not familiar with the exact criteria used, they include a calculation of something like 2.5 times the salary or combined salaries of the applicants. However, as people's gross and net income now will differ greatly, against what will new loan applications be assessed? Will they be assessed at 2.5 times net or gross pay, because the two amounts will differ considerably? This will depress the housing market further because people will only be able to secure a loan of a certain amount.

The Minister of State announced a significant increase in the limits for local authority housing loans from a maximum of €185,000 to €220,000. This means that a person on a low income can get up to €220,000, depending on his or her income. I believe that simply is an effort to maintain housing prices and that one must wait until the housing issue bottoms out. I presume this will entail the establishment of the national asset management agency as outlined by the Minister for Finance to buy the bad loans from the banks. I concur with Senator Coffey's comment that they should be put on the public market as otherwise we never will know the point at which the entire market will bottom out. We never will know the point at which land prices and house prices will bottom out. People will not buy until the market bottoms out and the sooner this happens the better for everyone. Moreover, this race to the bottom will entail a considerable degree of pain and negative equity for those who bought at the high end of the market. While I appreciate the Minister's actions in raising the limit from €185,000 to €220,000, in one sense it could lead people to getting higher mortgages to maintain the prices of affordable homes at a time when both the budget and the present number of houses for sale will have the opposite effect and will reduce prices considerably in the coming months.

Senator Coffey suggested that local authorities should auction some of their affordable homes and Senator Butler proposed that councils should lease them. This issue must be approached from several angles whereby the councils could lease out some homes and sell or perhaps auction others. Local authorities definitely will take a hit in this regard and consequently, ratepayers, that is, those who pay water and sewerage charges and rates, also will be obliged to stump up for this. Moreover, services also will be hit. The sooner local authorities learn what is going to happen in this regard the better. Nevertheless, as the Minister of State noted, it is a shame that houses are available but empty. Were local authorities to get some rent for them, it would be of assistance to them. Perhaps local authorities could rent them in the private sector while waiting for people to purchase homes. Although there may be several aspects to this issue, the Minister of State will be obliged to make some decisions.

While I compliment the Minister on the work he has done since taking over responsibility for housing, he is in a predicament in this regard. Either the local authorities or the Government will be obliged to take the hit and if it is to be the former, I hope it will not be passed on to those who pay water and sewerage charges and rates and that it will not affect essential services. There is great scope for cutting waste within local authorities and services should not be cut because this is a major issue. Housing also constitutes a significant part of a local authority's budget. Moreover, this will affect some local authorities more than others as some would have had more planning issues, housing developments and affordable homes than others. Although I do not know what will be the Minister of State's solution, he faces a predicament.

Could the €20 million leasing scheme announced by the Minister of State a number of months ago be included in this aspect of the affordable homes? As local authorities own the affordable housing stock, should this issue not be given first priority in respect of the €20 million he has raised for the leasing scheme? The Minister of State should examine this issue more closely. I do not believe that giving people additional money to buy such houses is the answer as that would lead them up the garden path. Such people would end up with higher mortgages and in negative equity within a year or two.

A friend of mine bought an affordable home in inner-city Dublin approximately three months ago. He paid a hefty price for it and although he knew what he was doing, he now regrets having concluded the deal because the house now is worth considerably less than was the case three or four months ago when he signed off on the deal. It is sad that a person who could not afford a home 12 months ago and who bought an affordable home now is in considerable negative equity in Dublin's inner city. Given the present position, I hope those who will buy some of the affordable homes on the books will not be in negative equity in three or six months' time.