Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

Before I respond to the nature of the recommendation tabled by Senator Higgins, I have a couple of opening points about the State's involvement in the provision of homes. First, it is wrong to suggest that the Government is subcontracting out the need to meet housing needs to the private sector. This year, the State is spending €4.1 billion in either directly building homes itself, or enabling the delivery of more homes. If one takes even a short walk around Dublin city centre at the moment, one will see the homes that are being completed in, for example, Dominick Street, and Sean Foster Place. These are all city centre, local authority-built homes. It is vital, both in this discussion and in the ones that will happen later on in the Finance Bill, to recognise that the State is playing a leading role, not only in regulating the provision of homes but also by directly building homes, or indirectly by funding them.

As to the discussion on the help-to-buy scheme, I ask Senators to keep in mind the figure of 12.7% when evaluating the impact of this on the housing market. This figure of 12.7% is the total number of housing transactions that happened in 2020 that were partially funded by the help-to-buy scheme.I do not accept that a scheme that only influences less than 13% of all of the transactions for the purchase of homes within the country is of itself a significant cause of house price inflation.

Senator Higgins referred to us increasing credit. We have macroprudential rules that have constrained the availability of credit. What the Government has not done in response to the challenges that have been made more acute during the pandemic is look to increase credit or change the rules on borrowing. Leaving aside the fact that they are decisions made by the Central Bank, which is independent of us, what we have avoided is increases in credit that are driven by changes in rules or Government action. If higher levels of borrowing are happening, which is the case, in particular by those who are seeking to buy a home for the first time, it is still done in the context of the application of the macroprudential rules.

Section 5 provides for the help-to-buy scheme to continue to apply to applicants who sign a contract for the purchase of a new house or who make the first drawdown of the mortgage in the case of a self-build during 2022. With regard to the Senator's recommendation, it should be noted that housing policy is primarily a matter for the Minister for Housing, Local Government and Heritage, so I will limit my comments to tax measures.

As I have stated previously, the need to activate the delivery of additional new houses is an important priority for the Government. That is why the Government is committed, through Housing for All, to achieving progress, as a matter of the utmost priority, in the interests of the people of Ireland.

In relation to the Senator's points on prices and affordability, policymakers were aware at the time that the scheme was being developed that it was not without risk and that there was a danger that, against a background of constrained supply, the initiative could serve to increase prices for new homes and thus potentially undermine, to some extent at least, the affordability aspiration of the scheme. However subsequent formal reviews of the scheme did not bear out these fears. There have been two reviews, one in 2017 and one in 2018. The main findings were as follows: with regard to prices, while there may have been a very small increase in prices attributable to the introduction of the scheme, the primary driver of house prices remains the continued misalignment between demand and supply. With regard to affordability, the analysis also found that the availability of the scheme had reduced the time needed to save for a deposit and improved the overall affordability of housing for help-to-buy claimants.

With regard to supply, the evidence suggests that, following the introduction of the scheme, there was an increase in supply which can be attributed, at least partially, to the scheme. Furthermore, the analysis found a benefit-cost ratio of 1.28, indicating a moderate positive effect for the incentive.

The recent tax strategy group paper on help to buy concluded that should a decision be taken to extend the scheme, there would be a strong case for commissioning a further formal review of the efficiency and effectiveness of the scheme. The cost, the changing policy context in which the relief operates, and the advent of other non-tax Housing for All measures that have similar objectives, as well as the requirements of the tax expenditure guideline considerations, all support such a move. Accordingly, I announced in my budget speech that a further formal review of the scheme will take place in 2022. The review will be fundamental in nature, and it will inform decisions for budget 2023 and finance Bill 2022. Questions related to who will carry out the review, its terms of reference and a timeline for completion will be determined shortly.

The extension of the scheme for a further 12 months reflects the role it has played in facilitating greater numbers of first-time buyers to make their first step onto the property ladder, while also encouraging the delivery of new housing units by the construction sector. In addition, as I have noted previously, the extension of the help-to-buy scheme will allow time for other measures in the Housing for All strategy that will operate in the same policy space to be introduced in the period ahead. In the circumstances, therefore, I do not propose to agree to this recommendation.