Sean Barrett (Independent)

I welcome the Minister, Deputy Burton, and the Minister of State, Deputy O'Sullivan. As we try to put the pieces together in the country from the position we inherited 14 months ago, this measure will take a great deal of thought. We can go through all the mistakes that we made including the massive infusion of private capital into a stock of housing that, according to The Economist list, gave us the highest rise in house prices anywhere and far in excess of those in Spain and so on. That was fuelled by the view that a house was a fantastic source of tax free capital gains rather than just a place in which to live, which is what we are concerned with here, and I support the motion and the views of the various speakers. That has to be considered. There should have been a cut-off point when somebody could buy a house in Killiney for €15 million and sell it for €16 million. That was the easiest €1 million euro they would ever make tax free. That created the property bubble.

We must address also the irresponsible practices in the banking sector, the maximum loan to value ratio and the maximum loan to income ratio. The banks, by putting approximately 4% of the extra inflow of money into either agriculture or industry, created the property bubble from which we are all suffering.

Anthony Downs of the Brookings Institution in Washington once wrote a paper entitled, "Too Much Capital for Housing", in which he stated that supply is elastic and if we continue to put capital in, as the Irish banks did, we end up with the situation we had in Dublin where the average house price, in the ten years up to the financial collapse, rose by 500%. That results in negative equity for the people who bought in the expectation that that would continue, another problem with which the Government is trying to wrestle.

There must be much stricter rules for banking in the future, in terms of lending and saving, and we must not allow those capital gains to become a substitute for work, which we needed to address.

Our colleagues in Sinn Féin mentioned the local authority stock. It has been run down and is below demand but I recall that after he became Taoiseach, the late Garret FitzGerald chaired a committee on local authority housing in Dublin - I believe it was when Gay Mitchell was Lord Mayor - and he found it was more expensive at that time than housing in the open market. The rents were extremely difficult to collect and the maintenance costs were extremely high, much higher than those experienced by the Housing Executive in Northern Ireland. My Northern Ireland students asked me if I thought the Housing Executive is a model of efficiency and I replied that it is not, but it compares with Dublin Corporation, which is what Garrett FitzGerald was examining at that time. Concerns were also expressed about building conglomerations of local authority houses in such large numbers, which created fears of ghettoisation, and we tried to build them in smaller quantities.

In terms of getting out of this crisis, I referred to reforms in the private sector but if we had reform in terms of local authority housing so that it would again become value for money, I am sure the Ministers present would be delighted to engage in that but it was not done in the past. Garrett FitzGerald, by inclination, would not discriminate against local authority housing but he felt that the economics at the time had moved against it. That might have been because of the power of the construction industry and the way it influenced local government in terms of rezoning in that it saw itself as a servant of the construction industry and not as a servant of the people whom these Ministers seek to serve.

I agree with Senator Bradford that we must get house prices down, and they should continue to come down because if house prices are low it benefits those on low incomes. There should not be any Government interest in seeking to restore the rampant growth of house prices we had in the past.

It is time to put pressure on the National Asset Management Agency to sell the ghost estates. We had a discussion about that with the former Minister of State, Deputy Penrose, before he left office. Many of the ghost estates look fine from the outside and it would take very little work to restore them. If the local authorities do not have the money, why not sell them? They should not be left to go to rack and ruin. I ask the Minister if their owners should face prosecution for allowing properties to become derelict. A huge investment was made but it is worth far less now and therefore we should try to get those into the market.

Overall, we must get unemployment back down below the 14.9% announced today but housing, along with banking, are the two areas in which massive mistakes were made and it will require a new policy to address them. I assure the Minister, and as she can see from this constructive debate, that the Seanad will assist her because it is vital that we do not go back to the position where we were pricing local authorities out of the ability to build housing and pricing the market sector way beyond anybody's ability to afford it unless they got the massive capital gains to which I referred, which pushed up the price even further. A house is just a place in which to live. It is not a boost for the construction industry or the banking industry and getting those out of the picture would be a start in terms of avoiding the terrible mistakes made over a decade or more ago.