Seanad debates

Tuesday, 9 July 2013

Land and Conveyancing Law Reform Bill 2013: Second Stage

 

6:10 pm

Photo of Sean BarrettSean Barrett (Independent) | Oireachtas source

I welcome the Minister of State and thank Senators for their contributions. I am learning a great deal, as always, on housing from people such as Senators Aideen Hayden, Senator John Crown and Senator Marc MacSharry. The problem was that in a period when incomes doubled, the price of houses increased by 500%. Nobody partied, so far as I can see, except banks. As Senator John Crown said, people had to have some place in which to live and we steadily put that beyond their reach. Mortgages of two-and-a-half times the first income and one-and-a-half times the second income would not have bought any house that people wanted. That is what we are trying to clear up.

I am concerned that when the consumer wins in a court case it is called a loophole. That is the relationship between the law, banks and the citizen in Ireland. The briefing document states that the repossession rate, which the IMF said is too low, at 0.03%, could rise to between 3% and 5%. Therefore, that raises the spectre of ten to 15 times more repossessions than at present. Given that 95% of owner-occupied mortgages are in serious deficit and 30,000 buy-to-let mortgages are in the same position, that is a sizeable number of people facing some kind of evictions.

As Senator Aideen Hayden said, there should be protection for those who rent from buy-to-let mortgage holders. The landlord changes but there are stories to the effect that the new buyers of those mortgages will impose stricter conditions or, maybe, even require the tenants to be evicted. They have got to be protected. I would like the Bill, in its later versions, to put a Chinese wall between the family home and those who invested in buy-to-let mortgages. I hope the Bill will make that distinction clear.

The briefing note states that the purpose of the Bill is explicit. It has been noted by the IMF in its most recent view of Ireland prompting calls for a need to strengthen the efficiency of the repossession regime. It an oblique way of saying we need to put more out if we want to get to the 3% or 5% repossession rate rather than 0.03% as at present.

The risk of flooding the market is mentioned on page 17 of the briefing document, which was helpfully prepared by Oireachtas staff. That risk has been recognised by banks and alternative options are being considered. Therefore, we are trying to keep up the price of houses artificially so that they look better in banks' balance sheets because the Government does not want to put more capital into the banks. I see it as pretty well inevitable that the banks will have to be recapitalised again. Why are we organising this strange kind of fake market at the banks' behest? Immediate measures should be taken to sell off ghost estates rather than letting them fall apart. Somebody could buy them and they would make housing more affordable. That is one of the routes by which this economy will eventually recover from the dreaded recession for which the banks and property sector bear the prime responsibility.

In this period of madness, we have seen the destruction of building societies which were a quasi part of the co-operative movement. In the Educational Building Society, older teachers gave younger ones funds to buy houses and other building societies were also based on various sectors. We should look askance at such developments, including the destruction of the banking system and building societies, ever being allowed to happen again.

This side of the House proposed stricter penalties on banks when dealing with recent legislation on regulating banks. The Minister for Finance, Deputy Noonan, praised us for doing what he called the heavy lifting. The following day, however, the Minister of State, Deputy Brian Hayes, threw out everything we had said. Much stricter regulation of banks is needed to prevent a recurrence of this situation.

I am as unhappy as Senator Crown is about any measure that makes life easier for banks. We have an alternative Bill on the Order Paper to change to the Danish system of mortgage finance here. This is an unhappy occasion. I gather that the banks have appealed against the High Court verdict in the Dunne decision. They brought in some of the heavy guns in the legal profession and I gather that verdict is due on 12 September, although I do not know whether that will affect what we are saying here. It appears to be distinct from the appeal to the Supreme Court, which the Minister mentioned. We have a lot to do in order to remedy this situation and get a new system of housing finance, rather than just facilitating banks that wish to repossess houses, which were sold to mortgage holders at vastly inflated prices during the boom. We are all trying to correct that situation.

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