Sean Barrett (Independent) | Oireachtas source

I welcome the Minister of State and endorse the statements of Senators Wilson, Keane and Hayden. I wish I had read the first pages of the Minister of State's speech approximately ten years ago because they capture very well what occurs when housing is used as a bubble and a means of acquiring tax-free capital gains and reducing income tax liabilities rather than a place in which to live. Let us return to a position in which houses are people's residences.

There are three ways of coping with housing, as the Minister of State said. The proportion of the total market represented by owner occupancy is now in decline, as is direct provision by local authorities. Let us consider the position on direct provision. As evident from a report commissioned by Mr. Gay Mitchell when he was Lord Mayor of Dublin - the reporting group was chaired by the late former Taoiseach Dr. Garret FitzGerald - the difference between the rents and the costs was considerable and there were concerns about the social consequences.

The local authority house building programme declined because of these factors. It was mentioned that tenants had a dependency culture, that maintenance costs were extremely high, that the restrictive practices in the building industry meant it was too expensive for the State to maintain the local authority housing stock and that there was a far higher call-out fee for Dublin Corporation compared to, say, the Northern Ireland Housing Executive. We then had the splurge of owner occupancy.

An article in The Economiston 15 September 2007 entitled, Houses built on sand, noted that Irish house prices in that decade had increased faster than anywhere else, a most unwanted gold medal. This reflected the banking policy at the time and the factors the Minister of State mentioned about the pursuit of housing as an asset rather than as a place in which to live. In the article it was estimated that the price of an average house in Dublin had increased from ¤104,000 in 1997 to ¤512,000 in 2006. It is probably now back to somewhere around ¤200,000, leaving a large number of people in negative equity. That surge in real estate lending figures after we joined the euro from ¤4.8 billion in the base year to ¤97.5 billion precipitated the price rise and, unfortunately, the Central Bank of Ireland and the Department of Finance were asleep and the bankers certainly needed better economic intelligence than what they showed. In many ways, the Minister of State's Department was a kind of downtown office for the construction industry. Once the building boom kept going, everybody was happy and there was no one to say it was not sustainable.

We have had to fall back on the private rented sector, for which we have better rules which the Minister of State described. On the massive boom after Ireland joined the euro, approximately 1.9% of the extra lending was directed at manufacturing or agriculture, while all of the rest of the money went into property-related activities, towards financial intermediation and personal lending. For example, it destroyed the building society movement, in addition to wrecking the banks and requiring a ¤64 billion bailout. The building society movement was a co-operative, philanthropic body to help people to buy houses. The Educational Building Society was an example of teachers helping one another to buy houses. This became probably one of the most corrupt parts of the system, as we know from the examples of the conduct of some of the people involved in running building societies which the Exchequer and the taxpayer are now trying to bail out.

The Minister of State should move to get ghost estates and NAMA properties onto the market. There are 80,000 empty houses which are deteriorating. In Longford NAMA had a set of houses knocked down. That is crazy in a society which will need these houses. I would welcome it if property prices fell. The wage costs caused by property increases would then decline, which would help to develop export-led growth, on which the Minister of State, the Minister for Jobs, Enterprise and Innovation and so on depend. It might mean the banks will need another rescue package, but why artificially make banks look good by keeping properties off the market? NAMA should be asked serious questions by people like the Minister of State and an evaluation should be made. We tried to persuade the former Minister of State, Deputy Willie Penrose, to move in that direction also when he held the portfolio. If we are to make Ireland competitive again, keeping houses off the market to make banks look better is not the way to proceed.

Renting represents much better value because of the decline in capital values, although it is tough on those who are in negative equity. However, it may suit some and it is a more flexible option. As several Senators said, we are getting back to the normal European pattern. In Germany the market is nearly 50:50, but we developed this house ownership model - almost a fetish - regardless of the cost and in the process did ourselves serious damage. I saw a headline in The Sunday Business Post last Sunday stating eight out of ten millionaires around the world had made their first million on a property based transaction. It might have worked for the individual millionaires, but it certainly does not work for a country and we have just conducted that experiment at huge cost to us all.

The Minister of State's rules for better conduct in renting are very welcome and she will find there is support for them in the House. They represent part of the cure for the economy in a disastrous era in banking and in the context of a property fetish beyond all reason. These data were published internationally. We should have known that what we were doing was unsustainable and have had brainier individuals in banks to realise this. The Minister of State's corrective measures are absolutely right and, as other Senators have said, she will have the support of the House in making a very necessary adjustment. It is a pity we did not start on this path five to seven years ago. I welcome the Minister of State's speech and the policy reforms and radicalism implied therein.