Sean Barrett (Independent) | Oireachtas source

I welcome the Minister of State. This is the most important issue facing us and we have to learn the lessons of the collapse. In this regard, the banking inquiry is coming to terms with some of the problems that arise on a daily basis.

We lost the building society movement. Historically, that was the way people were able to acquire houses and there was a very high rate of home ownership. The building societies, however, began to change their investment and invested in commercial properties, lending to the property sector, not to individuals who were hoping to buy a house. In this regard, I think of the Educational Building Society which broadly was philanthropic. With it teachers could buy a house on 2.5 times their income. We lost this and I do not know if it is possible to bring back the building society movement, but it did play a role. Because they are dependent on short-term finance, banks are particularly unsuited to meeting the long-term commitment required in the housing market. I hope, therefore, that we can interest pension funds in entering it. The banks created the bubble and caused the crash.

The aspiration people had - our parents and grandparents - of buying a house on 2.5 times their income is now beyond the reach of so many. Why are people in negative equity, with huge house prices and so on? Mr. Brendan Burgess appeared before the finance committee a while ago and estimated that regulations and the cost of planning and so on added about €67,000 to the cost an average house. Mr. Ronan Lyons, my colleague at TCD, has pointed to some of the planning rules being too strict in the context of apartments, although we do not want to go back to the days of the bedsit Senator Gerard P. Craughwell described. Let us not do things which in some contexts might seem worthwhile but which push up the price of houses.

I commend the intervention of the Central Bank on the issue of the 20% deposit, as it was the correct decision. The lower the deposit required the higher the rate of house price inflation. There is a massive rate of return on the equity of owners, which diverts money from normal savings towards property. A house is somewhere people live; it is not an investment. There should be a much stricter rate of capital gains tax on the equity gained from the appreciation in house prices. I have seen advertisements stating, "This house is a snip at €10 million". That probably means it could be sold for €12 million in 18 months time, making €2 million without any taxation. We do not want such people in the housing market. If capital gains tax could be introduced for flipping houses in such a way, it would take the pressure off.

I remember the headline on an article by Mr. Anthony Downs from the Brookings Institution in Washington, "Too much capital for housing". If there is an inelastic supply of housing and too much capital is pushed in, the impact is on price, not supply. We conducted that experiment at serious cost to so many young people who are in negative equity and in terms of the destruction of the banking system and the property sector. Massive damage was done.

On the rented sector, to which other speakers referred, particularly as regards buy-to-lets, we have to get across to investors that when they buy a loan book from a financial institution, they are buying a flow of incomes. Their case is against the landlord or the owner of a buy-to-let - "landlord" may be too pompous a title for those who bought an extra house for their pension and were not in the property sector in a professional capacity - not the tenants. We had good discussions with the former Minister, Deputy Alan Shatter, while he was still in office, to the effect that we needed a Bill of Rights for tenants. That is why there is a much bigger rented sector in very prosperous countries such as Germany and Switzerland where tenants feel they are protected by the law. The price people pay for the loan books reflects the property rights and entitlements of tenants. We should make it clear that as a Parliament we stand with the tenants. Investors are not allowed to expel tenants because it is the person who took out the mortgage who is broke and their action is against that person, not the tenants. Tenants need to have rights.

We should aim again to have finance available on 2.5 times a person's income, as was the case in the past. Although real incomes have increased, house prices have risen so much faster.

On the issue of social housing, there was an extremely good report produced by a committee chaired by the late Dr. Garret FitzGerald. We had problems with social housing. First, it cost too much. According to the Lord Mayor at the time, Mr. Gay Mitchell, maintenance costs were extremely high and it was very difficult to collect rents, even when people's incomes increased. About 20 years ago houses were sold off at a huge discount. As a consequence, we do not now have the stock of social housing we need to deal with the homelessness problem the Minister of State has been addressing. Reorientation is under way. A house is a place in which to live; it is not a vehicle to avail of tax breaks or make tax-free capital gains. If that is where we place the emphasis, debates such as this will prove to be very worthwhile. This House should assist the Minister of State and the Minister, Deputy Alan Kelly, in dealing with the problem. It is a privilege to be able to do this. The get-rich-quick by flipping houses strategy did serious damage to the economy and the banking system and deprived us of investment in other areas. Not repeating the mistakes of the past has to be our goal.