Aideen Hayden (Labour)

To date, measures to assist Irish homeowners have been what I would term stopgap measures, which are accepted to have given temporary relief to homeowners. However, mortgage-related measures such as deferred interest repayments, interest-only periods and time extensions do not fundamentally alter the levels of debt in which people find themselves. The fact is that temporary relief will do nothing to halt this growing problem and will only kick the can forward. The proportion of households in arrears of 90 days or more on their mortgages rose to 7.62% in April from 6.65% in February. Also, while a total of 80,000 residential mortgages are either in arrears of over 90 days or have been subject to adjusted terms after negotiations with mortgage providers, the worst indicator is the proportion of restructured mortgages - 40% - that are not performing and are now in further arrears. This a problem that will continue to get worse unless we step in and do something about it.

There are currently more than 17,000 households in receipt of mortgage interest supplement from the State, at a cost of €70 million, and this is likely to rise. We can take no comfort from the relatively low level of house repossessions, given bank moratoriums and the time it takes for cases to come to court. The reality remains that unless something significant is done to assist homeowners in untenable situations, we face a tsunami of repossessions over the coming years as the ultimate conclusion of the process is reached. There is no point in ignoring the truth, which is that repossession cases are now stacking up like planes over Heathrow, and they will eventually come down to land.

In the face of this crisis, the final report of the mortgage arrears and personal debt group in November 2010, the Cooney report, was very disappointing. This report was an opportunity to put forward innovative recommendations that would provide long-lasting, real solutions for those who are in arrears and struggling to pay their mortgages. Instead, what we got was a range of proposals that tinker at the margins of the problem but go nowhere near addressing the challenges head on. It was truly disappointing to see that any element of debt forgiveness was ruled out point-blank by the group. The possibility that a local authority might lease a repossessed home from a lending institution, ensuring former homeowners could remain in their homes, was also excluded. The proposed measures focused instead on the old chestnuts of deferred payments and moratoriums on repossessions.

I am aware that Members of this House have proposed that the law be amended to enable private pension funds to be released for the purpose of clearing mortgage debt, a proposal worthy of consideration. However, it is important to bear in mind the age profile of those most affected by the current debt crisis and to note that they are the group least likely to have built up pension fund entitlements.

There are many excellent proposals in the programme for Government which will help alleviate the situation of distressed homeowners. For example, the establishment of the proposed personal debt management agency will be important in ensuring that borrowers get independent advice and that agreements are in the best interests of the borrower as well as the bank. However, when it comes to protecting the family home, the programme for Government accepts that the recommendations of the Cooney report are inadequate to address the scale of the current crisis and that the proposals in the programme are not exhaustive for dealing with the crisis of housing debt we face as a nation.

It is in light of this that I am urging the Government to consider a scheme whereby the State would purchase equity stakes in the homes of distressed owners who are unable to afford their current mortgage repayments and who have insufficient equity in their family homes to enable them to trade down. The homeowners would remain in their houses and pay affordable mortgages based on their incomes to their local authorities or to a housing agency designated by the State, based on a reduced equity stake in their homes. Such a scheme should facilitate homeowners to increase their stakes in their homes and increase their mortgage payments over time as their financial circumstances improve. This debt-to-shared-equity scheme could be based on the provisions of the incremental purchase scheme and on the principles set out in the Housing (Miscellaneous Provisions) Act 2009. The incremental purchase scheme, designed to assist eligible households in stepping upwards to home ownership, could be adapted to enable current homeowners to step downwards and purchase back the remaining equity as their circumstances improve.

A further scheme should be established, subject to certain criteria such as the value, size and location of dwellings, whereby the State may purchase homes of distressed owners who are in negative equity and unable to afford current mortgage repayments at a significant discount from the financial institutions concerned. Let us not forget that it was the financial institutions that were complicit in giving loans of unrealistic value to the homeowners of today. The homeowners would in time be able to repurchase their houses based on existing affordable housing or tenant purchase schemes.

Similar mortgage-to-rent and mortgage-to-shared-equity schemes have been established by the Scottish Government in response to the plight of distressed homeowners there. The homeowners' support fund supports these schemes and is designed to help owners who are experiencing difficulties paying any loans secured on their family homes. Applications to the fund are on a first-come, first-served basis. The amount of the fund is determined in advance based on the likely take-up by distressed homeowners and the amount of funds available to the State. It is not a blank cheque. Such a fund could be set up by the Irish Government, beginning with a pilot scheme. Furthermore, such a fund, if set up by the Irish Government, might attract international support, perhaps from our EU neighbours, as well as from members of the diaspora who are anxious to help in the current crisis. Moreover, these measures would be cost-effective, bearing in mind the cost of rehousing families who eventually lose their homes as a consequence of foreclosure. The Irish Government currently pays €70 million to support the mortgage interest scheme and €500 million - half a billion euro - to those claiming rent supplement, and these figures will rise. This scheme would prevent eventual repossession, alleviate human misery and bring confidence to the housing market.

It is important that any scheme is focused on those in most need, and full financial disclosure should be required in order to be eligible for State assistance. However, it is crucial that the terms of the scheme are not so narrow as to assist only a small number of households. This has been a criticism in independent reviews of the Scottish scheme. Over the coming years, the numbers in mortgage arrears will rise further. While it is not part of today's motion, debt forgiveness for unsustainable mortgages must also be considered.

It is important to remember that first-time buyers who purchased at or close to the housing market peak are most likely to experience negative equity and mortgage arrears. Very often, these are households with young families. It is easy for those who bought their homes many years ago to be critical and talk of bad decisions and moral hazard. The fact is that the cost of an average family home exceeded ten times the average industrial wage in 2007. More fortunate Irish householders bought at a time when that ratio was three to four times their salaries, with many benefits that householders no longer enjoy, such as the first-time buyer's grant - which at one time represented almost a quarter of the value of a family home - and generous mortgage interest relief on the balance. We must be under no illusions: it is the young people of Ireland who bought in the last decade who are paying the price for this disaster. We must be careful to avoid the intergenerational strife that will ensue if we do not help them to keep their homes.

For those who argue against any interference with the housing market, it is important to bear in mind that the threat of mortgage failure affects the whole property market, the banking system and the wider economy. The current practice of relying on a moratorium on repossessions only perpetuates a zombie housing market. We must allow a line to be drawn so that our people and our economy can move on.

How can we handle this debt crisis? How we handle it will affect this country for years to come. For all the reasons I have outlined, to prevent human misery, to save money, to put faith back into the housing market, I urge Senators to accept this motion. Every statistic on a bank balance sheet represents a real family. It is the burden of sleepless nights, family breakdown, children in distress and the fear of homelessness that is the real cost being paid by families. We must take measures to relieve families of these worries and help them look forward to a better future.