Seanad debates

Wednesday, 31 October 2007

2:00 pm

Photo of Batt O'KeeffeBatt O'Keeffe (Minister of State with special responsibility for Housing, Urban Renewal and Developing Areas, Department of Environment, Heritage and Local Government; Cork North West, Fianna Fail)
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I welcome the opportunity to address the House on developments in the housing market and to hear the views of Members on a topic that is of great importance not only to my area of responsibility but to the overall economy.

The past year or so has seen significant changes in the housing market. A key point I want to make is that recent trends in aspects such as house prices and housing output involve, essentially, a return to a more normal and sustainable pattern and will not necessarily have negative results as some media comments might suggest.

Why then one might ask is there so much talk about a housing market slump and pleas for the Government to reduce or abolish stamp duty? Part of the answer is media hype, but many commentators have also made the mistake of comparing current data with the exceptionally inflated levels to which house prices, lending and sales had risen in 2006 rather than with more realistic longer-term trends. Not surprisingly, particular interests that had become accustomed to very high returns from an inflated market are feeling some discomfort, which is being voiced in pleadings for Government concessions on stamp duty. I will return to this later, but first I would like to present some facts and comparisons that provide a valid assessment of the current state of the housing market.

Regarding house prices, the official figures for the second quarter of 2007 — based on returns from all lending institutions — show that average second-hand house prices nationally fell by under 2% since the start of the year and that the new house price average increased by around 6%. The Permanent TSB-ESRI index in August indicated an overall reduction of 3.3% in average house prices nationally since the start of 2007. Sherry Fitzgerald estate agents recently reported that the average price of a second-hand property nationally had reduced by 4.5% in the year to date.

A recent report by the Internet site Daft.ie showed a reduction of around 2% in asking prices of houses generally since July but a very slight increase in the past 12 months. MyHome.ie recently reported asking prices overall down 0.7% in the third quarter of 2007 on the preceding quarter and 1.4% below their peak 12 months earlier.

Perhaps the most important fact — which many commentators have missed — is that average new house prices nationally in the middle of this year were still 27% above what they were at the start of 2005 and second-hand house prices were 20% higher than the 2005 comparison. Similarly, the Permanent TSB index at August 2007 was about 18% higher than at the start of 2005. After some 12 months of a cooling in the housing market and endless prophecies of doom, there is no evidence to date of a collapse in house prices. Instead, the statistics show a long-term trend that is strong but healthier now than last year.

In regard to the volume of sales in the market, Members will have seen numerous claims along the lines that "nothing is selling". Returns to my Department from the mortgage lending institutions do not support this. For example, during the first nine months of 2007, more than 66,000 mortgage loans were paid out and almost 76,000 new mortgages approved. These figures include around 33,000 payments and 32,000 approvals for newly built dwellings. Adding purchases funded without mortgages or through commercial loans, it is evident that, although the volume of transactions has certainly reduced, the housing market is still very active and far from collapse.

As with house prices, it is instructive to compare this year's lending figures with the trend prior to the explosion of lending in 2005. The volume of loan approvals in the first nine months of 2007 was less than 5% lower than in the first nine months of 2004. This suggests that the level of activity in the market is largely returning to a more normal long-term pattern.

The other key housing market indicator is the level of new house completions. New house output to the end of September totalled more than 56,000 units, on target for an outturn in the region of the projection in the DKM construction industry review and outlook of up to 77,000 units this year. If achieved, that would be one of the highest levels of output ever. House building activity remains very strong, producing more than five times the rate of output of our nearest neighbour, the UK; our rate of output is 18 per 1,000 population compared with about four per 1,000 in the UK.

Commentators predict further reduction in output in 2008, with forecasts generally ranging from 60,000 to 65,000 units. That would represent a significant reduction on the 2005 and 2006 levels when output over the two years combined reached almost 175,000 units. That rate was well above international levels and not sustainable on an ongoing basis. However, as in the case of house prices and loan volumes, the anticipated future output trend is not out of line with the longer-term pattern and what is likely to be a sustainable level of output, especially if allowance is made for the likelihood of a degree of over-curtailment by developers in the short term. For example, it would be higher than anything achieved prior to 2003 and in line with estimates of around 600,000 residential units over nine years underlying the Government's policy statement earlier this year.

What conclusions can be drawn from recent trends? Some prophets of doom will claim, even if the housing market has not yet crashed, that it will do so in the future. There are no certainties. Economic performance will be the key determinant of the future development of the housing market and circumstances can change, but aside from the possibility of some significant economic setback, for example, in a global context, the prospects look positive.

Several months ago, I commented in an article on the housing market that a transition to a more balanced and mature market in output, purchasing, lending and prices was under way. The data I have quoted from a range of sources lend clear support to this analysis. To assess accurately the current state of the housing market, it is necessary to see recent changes in the perspective of developments during 2005 and 2006.

The 18 months up to the third quarter of 2006 saw dramatic house price escalation. Underlying demand for housing was already high owing to strong economic performance and the high intake of workers following EU enlargement. The impact of these fundamental factors on demand and prices was greatly magnified by a large expansion in mortgage lending since 2005, with 100% mortgages, 35 and 40-year terms and interest-only mortgages. The buying frenzy was further fuelled by hype about buyers being excluded from the property ladder. With the glut of credit in the market and many buyers bringing forward purchases to avail of 100% loans, it was not surprising that overheating occurred.

Unprecedented levels of house prices combined with a doubling of interest rates seriously damaged affordability, leading inevitably to a weakening in the volume of purchases and in prices. What happened over the past 12 months has, essentially, been an unwinding from unsustainable price levels and a rolling back of the irrational escalation that occurred during the previous 18 months. Recent reported cuts in asking prices towards the higher end of the market merely show how inflated some segments of the market had become.

The ESRI's latest quarterly economic commentary predicted the annual average price of a new house in 2007 is likely to be 3% lower than in 2006. This would suggest that house prices generally at the end of the year could be expected to be in or around where they would have been had the market continued on a path of moderation in the 2005 to 2006 period.

Amid hype and speculation about market slumps, crashes or hard landings, many commentators seem to have lost sight of the fact that moderation in house prices has given first-time buyers a welcome chance of owning a house without resorting to excessive levels of mortgage debt. It is now a buyers' market, which is good news for both first-time buyers and people trading up.

Those who comment in negative terms about house price moderation should reflect on where a continuation of the price escalation that prevailed up to a year ago might have led. I question comments about the value of people's homes being affected by market softening or uncertainty. Such comments seem to imply that house purchase is some sort of speculative venture or, possibly, a source of paper wealth to fund consumer spending. The promotion of 100% loans and interest-only mortgages also reflected an expectation of continuing house price escalation, with house purchase seen as a means of building up equity from a zero starting point. There has now been a welcome retreat from these practices and recent events in financial markets globally should further discourage such attitudes from becoming embedded in the housing market.

House purchase is fundamentally about getting a place to live. The fact that house prices are no longer escalating does not create uncertainty for home owners, nor does the reduction in the average price index diminish the intrinsic value of any household's home. Similarly, a person's home is not put at risk simply because average prices may have levelled off or even if they reduce somewhat. The concept of negative equity is not relevant to most home owners. Recent research shows the majority of first-time buyers do not intend moving from their homes in the short term. Most buyers are not, therefore, likely to be affected, even if there is a short-term fall in house prices. Even those trading up are better off in a climate of price moderation because the net additional cost will not be as great as it would be if there was still rampant house price inflation.

Affordability of repayments is the key issue for most prospective and recent buyers and the doubling of mortgage interest relief in the last budget — to €16,000 for married or widowed persons — has been very beneficial to them. The agreed programme for Government contains a commitment to provide, in budget 2008, for further increase in mortgage interest relief, bringing the ceiling as high as €20,000 for couples and widowed persons. These measures, together with indications of a levelling off in interest rates, provide a considerable measure of assurance to existing mortgage holders and make house purchase more attainable for prospective first-time buyers.

House price moderation may not be such good news for those who charge fees for their services as a percentage of the overall house price or for institutions whose annual growth figures were boosted by the cycle of bigger loans, higher prices, and further increased lending. Auctioneers now need to sell the market more vigorously and get across the message that there is now better value to be had. Builders will no longer find units flying off the plans. They will not find people queuing outside their building sites. Instead of focusing on how they can shore up prices, one hopes they will concentrate on providing good value through greater price resistance in relation to land, inter alia. Mortgage lenders need to follow a prudent but reasonable approach rather than simply trying to boost growth figures in the short term. At the same time, it would be unhelpful if any over-reaction by lending institutions were to contribute to cyclical weakening in housing output, just as it helped to fuel price escalation in the over-heated market of 2005-06.

Owners trading up or down should realise that, by reducing unrealistic price expectations, they can gain at the other end of the transaction. I expect auctioneers to play their part in delivering this message even if lower transaction prices will inevitably mean lower commission in the shorter term.

Housing output is running at a lower rate than was expected at the start of the year. Last January, the CIF was reported as expecting more than 90,000 units to be constructed in 2007, which would lead me to question the basis for recent forecasts from the same source that housing output next year could be well below what most reputable commentators are predicting. Output this year is still likely to come in at a very respectable level. It also should be noted that while output generally is down, it is quite strong in some key centres, with increases, for example, in Cork city, Dún Laoghaire-Rathdown and south Dublin, while some other areas of high demand are also performing above the national average.

The industry needs to manage the adjustment in output in a measured, orderly way, avoiding a possible cycle of under-production and supply-demand imbalance. It is important to distinguish short-term demand in the housing market, which is very susceptible to factors such as interest rate changes and price expectations, from longer-term underlying demand determined primarily by economic and demographic factors. Recent reduction in house building probably has been influenced to a great extent by short-term factors, whereas the prospects regarding underlying demand for housing remain very strong. Underlying demand should continue to be underpinned by economic and demographic factors and by reducing household size and scope to increase further a housing stock that is still below EU norms.

The demographic trends are worth emphasising. Projections for the purposes of the national spatial strategy indicate an additional 1 million in population within 15 years. Census figures indicate that the population of those aged between 25 and 34 — the key household formation group — grew by more than 100,000 in the four years, 2002-06, an increase of 17%. I am also informed that there is currently a new baby boom under way, at levels last seen in the late 1970s.

Photo of Jerry ButtimerJerry Buttimer (Fine Gael)
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Is the Minister of State taking credit for that too?

Photo of Batt O'KeeffeBatt O'Keeffe (Minister of State with special responsibility for Housing, Urban Renewal and Developing Areas, Department of Environment, Heritage and Local Government; Cork North West, Fianna Fail)
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I am past that now.

Photo of Jerry ButtimerJerry Buttimer (Fine Gael)
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Fianna Fáil is in favour of new babies.

Photo of Paudie CoffeyPaudie Coffey (Fine Gael)
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Children's allowances are going up.

Photo of Batt O'KeeffeBatt O'Keeffe (Minister of State with special responsibility for Housing, Urban Renewal and Developing Areas, Department of Environment, Heritage and Local Government; Cork North West, Fianna Fail)
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These are the next generation of Irish workers who may further boost demand for housing in the longer-term. There are also a number of positive factors in the more immediate context. The prospects for income growth remain positive. Increased mortgage relief, first-time buyer stamp duty exemption, greater accessibility to the market as result of easing prices and the prospect that we may now be at or near the top of the ECB interest rate cycle, will all have a beneficial impact. In fact, I understand that at present ten-year fixed interest mortgages of 5.5% are available. Returns from investment in residential property have also improved. Some commentators point out that strong demand in the private rental market, and what a major firm of estate agents referred to recently as "continued resilience of investor demand", also confirm the strength of underlying housing demand.

Those who predict a house price crash usually point to the scale of price increases in the past ten years. However, this has been matched by unprecedented economic growth, with a doubling of employment and very strong increase in net after-tax income. As a result, housing affordability as measured by the Department's affordability index remained favourable despite price increases up to 2005 but disimproved sharply due to price and interest rate escalation in 2005 and particularly in 2006. The position has, however, improved again this year due to price moderation, income increases and doubling of mortgage relief. Nationally, the figure is comfortably within acceptable affordability norms relative to net income.

The possible wider economic implications of reduced house construction activity have received much attention. As the Minister for Finance has said, the recent forecast of economic growth of 3.25% in 2008 is impressive by international standards and at a level of which many of our EU partners would be glad. Housing activity contributes about €10 billion to the economy or just over 7% of all economic activity. However, this must be put in perspective. Manufacturing and services activities combined — both of which are traded internationally and are growing well — make up more than 80% of economic activity overall. I was interested to hear a statement by the Small Firms Association in recent days welcoming what it sees as a rebalancing of economic activity, with less dependence on house construction. Growth in other areas, both non-residential construction, boosted by national development plan expenditure, and other sectors, will help to compensate to a significant degree for reduction in house building activity.

In so far as my Department's functions are concerned, infrastructural and planning requirements are in place to enable housing output to continue at a strong level. There is a large stock of residential planning permissions in existence and permissions granted in the second quarter of 2007 rose by 26% nationally on the same quarter in 2006, with much higher increases in Dublin and the greater Dublin area.

The housing sector will be strongly supported by investment of €21 billion under the national development plan, including €18 billion to support the expanded social and affordable housing programmes — and will meet the housing needs of some 140,000 households over the life of the plan. Record levels of activity are being achieved on the local authority housing programme in 2007 and overall output of social and affordable housing, at some 4,350 for the first half of 2007, is up 24% on the same time last year, while Part V delivery has increased by 51%. Government policy in relation to the entire housing sector is being developed and implemented within the framework of the housing policy statement Delivering Homes, Sustaining Communities, published earlier this year.

I am disappointed to hear pleas from some construction and auctioneering sources for a Government bail out in the form of further stamp duty cuts. Budgetary policy, including stamp duty is, of course, a matter for the Minister for Finance and I have no intention of engaging in any speculation in that regard, as it would be neither appropriate nor responsible to do so. However, I want to take issue with some of the assertions that have been made about the impact of stamp duty on the housing market.

Stamp duty on property transactions has existed for many years. In addition to providing a valuable source of Exchequer funding, it enables the Government to maintain a wide and low direct tax base and it also helps keep other taxation at a relatively low level in comparison with other jurisdictions. The rates of duty for second-hand purchases have been unchanged since 2001 and did not restrain the market surge in 2005 and 2006. Recent cooling in the housing market did not originate from comments about stamp duty changes last autumn, as some claim, but rather from the decline in affordability due to house price escalation and the doubling of interest rates. The first indication of a turn in the market came with a significant drop in mortgage approvals during the period July 2006 to September 2006, in which the number of approvals dropped to 25,000 from 35,000 in the previous quarter.

More important, a further reduction in stamp duty would not be likely to promote a significant increase in housing market activity. This is because a net increase in market demand can come from two sources only, namely, investors and first-time buyers. At the end of every chain of house purchase transactions, there must be a new buyer from one or other of these sources. Stamp duty has been already abolished for first-time buyers and not even the stamp duty militants in the media are proposing that investor duty be reduced. Returns to my Department show that there has been a slight increase this year in the proportion of investors acquiring properties, particularly second-hand dwellings. Any reduction in stamp duty would, of course, have to be made up from other sources, both existing and new.

The Government, by exempting all first-time buyers from stamp duty, has reduced the cost of purchasing a home for first-time buyers without any housing equity of their own while also restoring stability and certainty to the housing market. The case for any further reform or updating of the system as a means of boosting housing market activity is not convincing. Such a move would be tantamount to a subsidy for house prices and indirectly for professional fees.

Future developments can never be predicted with confidence — and the track record of economic pundits is probably worse than racing tipsters. However, the broadly positive prospects for the housing market are supported by some reputable independent sources, both domestic and international. For example, the IMF, while pointing out in its recent report on the Irish economy that a sharper correction in house prices could slow economic growth significantly, commented that the slowdown of the housing sector had been gradual so far and would help to rebalance growth and contain inflationary pressures. Moreover, a message highlighted at the outset of the IMF report was that Ireland's economic performance "remains very strong, supported by sound policies".

In this economic climate, we should urge people to understand that affordability is better, that we are at the top of the interest rate cycle, that stamp duty has been removed for first-time house purchasers and that one bargains instead of paying the price being asked. Until recently, buyers thronged through the doors of those selling houses but the latter must now learn again how to sell in a tough market. It is now time for auctioneers and builders to put the shoulder to the wheel. The past ten years have been outstanding for them and there is now a need to make an effort to persuade those who can afford to be in the housing market to take the opportunity to buy houses at a more affordable level than was the case heretofore.

Photo of Paudie CoffeyPaudie Coffey (Fine Gael)
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I welcome the Minister of State, Deputy Batt O'Keeffe, to the House and congratulate him on his appointment. I have not had the opportunity to do so until now. I thank the Leader for allowing time for this important debate on housing.

It is important that we consider seriously not only the impact of the housing market on the economy but also the impact of housing trends on people's lives. After all, housing is essentially about people and their necessity and basic right to have a roof over their heads. It is not just about generating money and keeping developers happy, as some would like to believe.

It is obvious that the construction sector has been a key driver of growth and employment in this country. In 2006, the sector accounted for around one quarter of value added in the economy and 13% of the labour force. New housing surged as a source of tax to represent approximately 12% of all taxes. Of the 530,000 new jobs created in the Irish economy between 1998 and 2006, more than one quarter were in the construction industry.

House building alone accounted for 15% of GNP in 2006, compared with 6% to 8% in most other advanced economies. The housing boom was financed by big increases in household borrowing, making Irish households on average among the most indebted in the world. This is a very serious and stark fact. Overall, half of the total stock of lending is linked to the property market and 75% of the increase in the year up to June 2007 was linked to the property market. More than half of the permanent units distinguished in the 2006 census were built since 1971. The period since 1996 accounts for 28% of the total housing stock.

To date, the housing and construction sector has essentially contributed to and bankrolled a large percentage of Exchequer funding through the collection of associated taxes such as stamp duty, VAT, capital gains tax, development levies and income tax. The Government has propagated a very high level of dependence on the housing and construction sector.

All is not so rosy in the garden at present. We may talk up the economy as much as we like — nobody wants it to crash — but we must realise that serious challenges lie ahead. Despite the warning signals from many economic commentators that the housing market was about to face new challenges, both the Taoiseach and the Tánaiste dismissed their legitimate concerns and labelled them as "prophets of doom", which term I noted in the address of the Minister of State. They sat on their hands hoping the good times would continue to roll on but now reality is beginning to bite and stagnation seems to be the order of the day in the housing market. Any auctioneer will tell one this.

The evidence, statistics and trends suggest that the Government now belatedly accepts there are serious consequences for the economy on the horizon and this is now reflected in the spending cuts proposed in the pre-budget Estimates that are now before the Oireachtas. Taxation from the housing boom camouflaged the sharp rise in day-to-day spending as a proportion of national income. Prices and housing output peaked in 2006 and have fallen since, reflecting a combination of rising interest rates, declining affordability, tighter credit conditions, excess supply and declining household and investor confidence. Largely as a result of the contraction in housing investment, in the recent pre-budget outlook the Department of Finance revised downwards projections for economic and employment growth.

These forecasts are largely consistent with independent forecasts, such as those of the Central Bank and ESRI, which both assume new housing construction of 65,000 units in 2008, which represents a decrease from 78,000 this year and 93,000 last year. The Construction Industry Federation forecasts that new housing will fall to 45,000, at most, in 2008. This is more consistent with the latest housing starts data. Every fall in new housing output in the order of 10,000 will knock an additional 1.2% off annual GNP growth. Davy forecasts 45,000 construction job cuts by the end of 2008. Independent commentators, rather than the Opposition, are making these comments and it is therefore time the Minister of State sat up and took notice. It now seems the Government's reputation for competent economic management was built on very shaky foundations. The debt-fuelled housing boom has now declined and the new challenges in the housing market must be faced up to.

How does all of this impact on people? In 2006 there was a housing unit vacancy rate of 15%. I refer to the total vacant houses and flats and holiday homes as a percentage of the total housing stock. Senator Larry Butler referred this morning to many local authority houses that are lying vacant. Who is in charge? Is it the managers and executives of local authorities or is it the Government, including the Ministers, who are elected to ensure people are served by the local authority managers and ultimately housed? The circumstances that obtain serve as another example of the Government's abdication of its responsibility to the ordinary people of this country.

I ask Senator Larry Butler to use his influence as a Government Senator to request the Minister for the Environment, Heritage and Local Government, Deputy John Gormley, and the Minister of State responsible for housing, Deputy Batt O'Keeffe, to exercise their powers to ensure county and city managers have the necessary resources to ensure house letting is fast-tracked and that the houses are inhabited immediately by those on the waiting list. It is not acceptable that these houses should remain vacant while individuals and families are on the list for years. It is not acceptable that these houses are vacant while individuals and families are on waiting lists for years.

Thousands of families are indebted to banks and there are real concerns regarding their ability to sustain mortgage repayments in the face of rising interest rates and a drop in property values. The number of home repossession cases coming before the courts is on the rise, which is a serious and stark indication that families are now feeling the pinch financially. In 2005, 65 mortgage suits were issued in the High Court and in 2006, the number increased to 74. In 2007, the figure is expected to increase further.

The provision of social and affordable housing is also way behind target and there is no consistency across the local authorities in terms of achieving their targets. Is it Government policy that local authorities will no longer engage in the direct provision of social and affordable housing through their own building programmes and will rely increasingly on private developers servicing the housing list through their Part V obligations under the Planning and Development Act? It is essential that local authorities be encouraged and properly resourced to build houses for those on the housing lists and not wait and depend on developers and builders to do so.

The urban and town renewal schemes introduced by the previous Government were announced to much fanfare. The Government claimed they would change the face of Irish towns and urban areas. How effective were the urban and town renewal tax incentive schemes in delivering value-for-money housing and accommodation? I contend they were very ineffective and could cite several examples from my own county of Waterford.

The Minister of State referred to affordability. Housing is fast becoming unaffordable, in both the private and public housing sector, for those who need to house themselves. There is a clear link between interest rates and affordability. Lower interest rates reduce the cost of mortgages, thus increasing affordability and consequently demand for housing. Rising interest rates are putting home ownership out of the reach of many. Affordable houses sold as part of the Part V arrangements in local authorities are also becoming unaffordable because the qualifying thresholds are restrictive and people are falling between stools and unable to reach the so-called affordable cost of the house they so badly need.

The rental sector throws up some stark statistics. More than 50% of new houses purchased are bought by investors for rental. There is a strong rental market throughout the country but standards in rented accommodation must be examined and problems tackled head on. Local authorities have a strong role in monitoring rental accommodation but it appears they do not have adequate resources to carry out their functions and responsibilities. Only 36 cases were taken in 2006 against landlords who failed to meet housing standards. No single county council in the country took legal action against a landlord but nobody can claim that all the rented housing units under the remit of the councils are up to standard. Vulnerable tenants are suffering because of the lack of proper inspection plans for privately rented properties. Residents who live near these properties also must endure poorly kept and maintained properties.

The Minister of State did not refer to land use, zoning and public services and their impact on property prices. Lands that are zoned residential in many city and town development plans are set aside by developers who control the supply and cost of housing. This issue must be addressed because it relates directly to the high cost of property. Where lands are zoned and subsequently banked by developers, local authorities must take action so that housing is provided in a planned and sustainable manner for communities.

Development charges also contribute significantly to the cost of housing. Developers are being levied at an increased rate for the provision of essential infrastructure in local authority areas such as roads, water services and sewage treatment facilities. All these costs are being passed on by the developer to those purchasing houses. Ordinary people are funding through their mortgages the public services that should be provided by the State. We should not promote a system that hangs a financial millstone around the necks of young families. If we continue down this road, serious problems lie ahead.

Local authorities are abdicating their responsibilities as service providers and allowing the developers to charge those who are purchasing houses. We must take back control of the provision of public services.

4:00 pm

Photo of Larry ButlerLarry Butler (Fianna Fail)
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I welcome the Minister of State and this debate on housing. It is very important that we ensure our people have proper housing. As representatives of the Government, it is important we set out clearly what we intend to do over the next five years.

The Government has doubled its social housing commitment to €2 billion per annum, which is twice the level of six years ago. In 2006, the output from the local authority housing programme was at its highest level for 20 years, with 6,500 homes completed. The Government has ensured builders provide a portion of affordable and social houses when developing housing schemes. It established the affordable homes initiative to provide 10,000 affordable homes by using State lands. It also developed the affordable homes partnership to accelerate the delivery of affordable housing in the greater Dublin area. In short, the Government provided for the needs of 65,000 households through various social and affordable programmes during its last period in office.

In terms of the future of housing, the structure of the forthcoming budget will be important. Senator Coffey's point regarding the delivery of housing to our people was a valid one. In the forthcoming budget, the ceiling on mortgage interest relief for first-time buyers and those who bought their houses in the past seven years will be increased from €8,000 to €10,000 for single people and from €16,000 to €20,000 for couples and widowed persons.

The Government will expand the delivery of social and affordable housing options to meet the needs of 90,000 households. It will plan strategically for the needs of a changed population to reflect a more dynamic population which moves more often and includes new migrants. It will also work to support the elderly in their homes. A new focus will also be placed on quality in the provision of housing.

The remit of the affordable homes partnership will be extended. After only one year in operation, the partnership, which operates in the greater Dublin area, has proved very successful in engineering land swaps for affordable housing, identifying new lands for the provision of affordable housing, and in providing clear information to those interested in acquiring affordable housing units. The remit of the partnership will be extended nationwide to cover areas where affordability is a problem.

New urban design guidelines for building new housing developments will be introduced. The new housing guidelines launched last March are a comprehensive revision of the 1999 social housing design guidelines and have been produced following a consultation process with all stakeholders active in the area. The new guidelines focus on the process surrounding the delivery of quality housing for sustainable communities, improved settlement patterns and place-making in the context of promoting quality neighbourhoods.

The guidelines include sections dealing with site selection and urban design objectives in the provision of housing which aim to promote quality in design. The purpose of these guidelines is to assist in achieving the objectives for delivering homes and sustaining communities as contained in the Government statement on housing policy, which focuses on creating sustainable communities that are socially inclusive. This social inclusion would be brought about by promoting high standards of design and construction, higher standards of environmental performance and durability in housing construction, seeking to ensure residents of new housing schemes enjoy the benefits of first-rate living conditions in a healthy, accessible, visually attractive and easily managed and maintained environment.

In the past, we have fallen down in terms of looking at how we manage and provide facilities for people in estates. Mistakes have been made. We now have an opportunity to correct the design and layouts. Local authorities have been charged by both Houses of the Oireachtas, which provide finance, with responsibility to ensure better housing and conditions for people.

On the Order of Business, I mentioned that 5,200 houses in this country are empty. Taxpayers' money has been used. Senator Coffey said we have a responsibility. We take that responsibility seriously but the county manager also has a responsibility. Fine Gael councillors control most county councils, so Fine Gael and the Labour Party must take responsibility——

Photo of Paudie CoffeyPaudie Coffey (Fine Gael)
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Give them the resources.

Photo of Larry ButlerLarry Butler (Fianna Fail)
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——for empty houses.

Photo of Paudie CoffeyPaudie Coffey (Fine Gael)
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They have to be funded.

Photo of Pat MoylanPat Moylan (Fianna Fail)
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Senator Butler, without interruption.

Photo of Larry ButlerLarry Butler (Fianna Fail)
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Fine Gael must take responsibility.

Photo of Paudie CoffeyPaudie Coffey (Fine Gael)
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That is a red herring.

Photo of Larry ButlerLarry Butler (Fianna Fail)
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In Dublin alone, 2,725 houses are empty. A vital question one must ask is who controls the three local authorities in Dublin and whether the managers are doing their jobs.

Photo of Paudie CoffeyPaudie Coffey (Fine Gael)
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Why are the figures in the pre-budget outlook for social and affordable housing being cut?

Photo of Pat MoylanPat Moylan (Fianna Fail)
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Senator Butler without interruption.

Photo of Larry ButlerLarry Butler (Fianna Fail)
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I did not interrupt Senator Coffey, so I do not expect him to interrupt me. It is important to ask the Minister to audit the local authorities to ensure they get better value for taxpayers' money. We can argue about how we do that. Houses lying empty in Dublin alone cost €1.1 billion. It is my responsibility as a Senator and spokesman to ask the Minister to carry out an audit of each local authority to see how this can be addressed, especially when one considers that some people must wait up to ten years for housing. That is not fair. The county manager in each local authority has a responsibility to get better value for taxpayers' money which we allocate to local authorities.

I agree with the Minister of State's comments that we should not interfere in the marketplace. The market will decide and it is not for politicians to interfere in the market because it distorts it. There is now competition in the marketplace. The construction of 100,000 houses per annum is unsustainable in a country as small as this. We have had a marvellous run and it is important to allow the market to adjust, which it is doing. A year or two ago young people were under a lot of pressure to get a house and they will now have an opportunity to do so, which is good.

Photo of David NorrisDavid Norris (Independent)
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I wish to share my time with Senator Doherty.

Photo of Pat MoylanPat Moylan (Fianna Fail)
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Is that agreed? Agreed. The Senators will have five minutes each.

Photo of David NorrisDavid Norris (Independent)
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I think he will be cut down to three minutes. We have to keep the Shinners in their place.

This shows lamentable signs of turning into a fairly dreary debate. One of the reasons is that we are losing sight of the human issue and that housing is the single biggest expenditure for young people, either single or married. Previous speakers referred to affordable housing. Where is it? What is affordable? We are now in this range where people are expected to have a joint income of approximately €75,000 to qualify for affordable housing. The situation has become bizarre.

I would like to put a pointer down to the Minister of State on the issue of affordable housing. I know about it because two people close to me were involved. One of them managed to get a house. My partner, who is a nurse, is in the scheme. People are never told when a draw is happening or the result. Let us have a bit of honesty and openness. Why do we not know this? Why do people who have gone to the trouble of filling out and submitting forms not know when a draw takes place so that they know whether they have a house or whether they should look on the open market? One of the problems is that the margin between so-called affordable housing and the open market is narrowing. That is a very worrying trend, as is the fact this Government and its predecessor have allowed the building speculators to get away with murder and to buy their way out of the commitments given in respect of affordable housing. That is a pretty disgraceful attitude.

The root issue is the price of houses. I am now getting on in years. I am 63 years old and the first house I bought was €3,500, and it was a bloody good house. It was a four bedroom house in a nice suburb of Dublin. I am astonished by the situation now. It has all the hallmarks of a South Sea bubble and I have seen it going up and up. I can assure Members that what goes up must come down. I have no doubt whatever that there will be a fall. Government intervention is necessary to ensure as many people as possible have a reasonably soft landing.

I blame the banks, which have gone out of their way to push loans on unsuspecting young people. Their advertisements are a disgrace. I have raised this issue before and would like the Minister of State to take it up in the context of broadcasting and the way they push advertisements for loans, money and this, that and the other. The health warnings are gabbled at a rate which makes them not understandable by the ordinary person. They are almost entirely inaudible. Those messages carry warnings because I have listened to them very carefully. As they are required to do so, they say one may actually lose one's house. I do not know if other Senators have referred to it but we are now in a situation where there is a queue in the courts in the city for repossessions by the banks. The irresponsibility of the banks is further underlined by a series of occasions where solicitors have made multiple borrowings on the same property. Tens of millions of euro have been lost because the banks and other financial institutions were so greedy they could not even wait to check the bona fides of people.

In the past week or two, there was a very worrying report from Standard & Poor's which highlighted the risk to economic growth posed by vulnerable construction and property sectors in several European countries. The worst two countries were Spain and Ireland. It pointed out the risk of a much deeper deterioration in the property market as being quite high in Ireland. It suggested that it could push the economic indictors down to a 1% growth target for the year, which is very worrying. That was picked up by Garret FitzGerald a distinguished economic commentator and former Taoiseach. He concurs with this figure and that our growth could be cut to 1% if the downturn develops on a scale similar to that following the housing collapse in Britain where there was negative equity. The same thing happened in Germany as part of the economic impact of reunification.

I refer to an interesting paper produced by Professor Morgan Kelly of the economics department of University College Dublin. The nub of his thesis is that, "looking at house price cycles across the OECD since 1970, we find a strong relationship between the size of the initial rise in price and its subsequent fall". That should be of concern to us because we have just had an enormous boom. If the fall is comparable, we may well be in difficulty.

Professor Kelly continues:

Were this relationship to hold for Ireland, it would predict falls of real house prices of 40 to 60 per cent over a period of 8 to 9 years. House price falls tend not to have serious macroeconomic consequences, but the unusually large size of the Irish house building industry suggests that any significant house price fall that does occur could impose a difficult adjustment on the economy.

He is taking a fairly positive view in suggesting that there is not necessarily an immediate and direct correlation between any house price collapse and the macroeconomic situation.

Professor Kelly believes that the economy's undue reliance on the building sector could make things difficult. He cites examples of international crises, mentioning that "the real price of Dutch houses fell by 50 per cent between 1979 and 1987, while the price of houses in Britain relative to real income also fell by 50 per cent between 1948 and 1957". He concludes that, "internationally, house prices boom and crash frequently, as economic theory predicts they should".

Professor Kelly then asks what triggers a house price collapse, which is a question the Minister of State has presumed to answer. The Minister of State has argued that we will be cushioned by the strength of other economic sectors. Professor Kelly mentions the damaging effect of being able to rent a house for less than the interest cost of a mortgage, for example. He also cites sentiment as a crucial factor. People get out of the market when they get fed up with it.

Photo of Pearse DohertyPearse Doherty (Sinn Fein)
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I dtús báire, ba mhaith liom buíochas a ghabháil leis an Seanadóir Norris fá choinne chuid dá am a roinnt liom. Tá a fhios agam go bhfuil go leor le rá aige ar an ábhar seo agus tá mé iontach buíoch dó.

Having listened intently to the Minister of State's comments, I have to say I disagree with his outlook on the Government's housing policy. It needs to change because it is fundamentally inequitable and unbalanced in a number of respects. There has been an excessive emphasis on the financial gains to be made from housing at the expense of its social role, which is central to the well-being of the nation. The private property speculator, developer and rental sectors are being hugely subsidised by the State at the taxpayer's expense. The decrease in social and affordable housing is pushing people into the private rental sector, where they lack security of tenure, compelling them to engage in dangerously excessive mortgaging so they can buy, requiring them to live with their extended families in crowded accommodation, or in the worst case scenario forcing them onto the streets.

The Government has reneged on its commitment to eradicate homelessness by 2010. This problem is being exacerbated by increased rents and inadequate social housing provision. There is a severe lack of emergency accommodation. The Simon Community in Cork has to turn people away every night. Adequate shelter is one of the most basic human needs and, consequently, one of the most important human rights. Homelessness is the most acute form of denial of housing rights encountered in our society. It is, to a large degree, a manifestation of social exclusion, poverty and the failure to supply an adequate amount of secure and appropriate social housing. In this Celtic tiger economy, we should not accept any level of homelessness.

Sinn Féin believes in the development of an equitable, balanced and fairly regulated housing market led by the social or public sector. This requires a strategic approach which should be co-ordinated on an all-Ireland basis. It involves the expansion of the social sector until it can meet the needs of those on the housing waiting list and offer a valuable and attractive alternative to private home ownership. Measures are also needed to tackle excessive land cost and speculation if we are to contribute to the stabilisation of house price inflation.

In 2005, more than 40,000 households in the Twenty-six Counties were on the waiting list for social housing. Almost 40% of them had spent over two years on the waiting list, while one in seven had been on the list for more than four years. Approximately 30,000 households in the Six Counties were on the waiting list in 2005. Although house-building activity in this jurisdiction increased in 2006, just 719 of the 21,894 houses which were built in the first three months of that year were local authority houses. That demonstrates that the Government's priority is to ensure the private sector makes a profit while those in need of social housing are left in dire straits.

The Government needs to change the direction of its housing policy. It cannot leave it at the whim of the market as it did when it provided for privatisation in the cases of Aer Lingus and the hospitals. The Government, and Fianna Fáil in particular, needs to adopt Sinn Féin's view that having a roof over one's head is a basic human right.

Photo of Déirdre de BúrcaDéirdre de Búrca (Green Party)
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I welcome the Minister of State to the House. The statements we have heard on developments in the housing market have been interesting. We must admit that the construction sector has been one of the most buoyant areas of the economy over the past ten or 15 years. The housing market has favoured developers and investors during that time. When one considers that the average house price increased by 153% over the past ten years while building costs increased by just 41%, it is clear there were significant profits to be made in the building sector.

The acknowledged slowdown in the housing market means it will be much more advantageous for buyers. That will be a positive development for ordinary citizens trying to buy houses because houses will be much more affordable for them. There has been a significant increase in the size of the housing stock that is coming on the market. Approximately 25,000 residential units were completed every year between 1991 and 1996. That figure increased to approximately 45,000 in the late 1990s, to 76,000 in 2003 and to 88,000 last year. Such a significant increase in housing output must help to solve the problems in the sector. The combined effect of the slowdown in the market and the increase in house completions will be to strike a better balance between supply and demand, which will act in the interests of buyers.

The Green Party believes the new conditions in the housing market offer the Government an opportunity to increase social housing output. The national development plan contains a commitment to complete 9,000 new social units each year. If the Government continues to do a good job in trying to meet these targets and achieves them, it will help to soften the landing in terms of house prices.

Photo of Paudie CoffeyPaudie Coffey (Fine Gael)
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The Green Party has changed its attitude in recent months.

Photo of Déirdre de BúrcaDéirdre de Búrca (Green Party)
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Those of us who have served on local authorities are aware that waiting lists for social housing and housing in general remain stubbornly high. The Simon Communities of Ireland reminded Members recently that 1,725 households live in unfit accommodation, 4,112 households live in overcrowded accommodation and 3,375 households are involuntarily sharing. There are good grounds for the Government to continue to place an emphasis on increasing social housing output, which would have positive consequences for the housing market in general.

The introduction of much higher building standards has been another positive development on the part of the Government. I pay credit to my party colleague, the Minister, Deputy Gormley, and his Cabinet colleagues in that regard. The improved building standards will have a positive impact on the new housing stock that comes on stream from this year. Under the new regulations, the demand for heat energy in all new houses will have to be reduced by 40%. The new guidelines will lead to much warmer houses that are much cheaper to run. In 2015, the rules will be revised upwards to provide for a 60% reduction in the demand for heat energy. This is a welcome development for those who will live in the new housing stock, especially those who will occupy social housing.

Urban renewal has also been mentioned during this debate. As part of our urban planning framework, we need to start improving the way we plan our town and village centres. We must look for smart growth as opposed to urban sprawl. There is a tendency for the centres of towns to fall into decline, including commercial decline. I do not believe there is a need for the zoning that is taking place on the outskirts of towns and where town boundaries are being pushed out as part of local area plans. The focus should be on smart growth in which town and village centres are developed. This usually means an increase in densities but good quality development will serve the interests of a town and its development. The use of master plans by local authorities will mean proper forecasting of the transport, education and community needs of the town. Many main towns have backlands which could be rezoned to consolidate the existing town centre. Town centres should be made more suitable for walking and cycling and there should be pedestrian links from one part of a town to another. Traffic congestion leads to town centres being full of exhaust fumes and not conducive as places where children can walk or cycle to school. Adequate civic and open spaces should also be provided in town centres, which would provide social and ecological benefits.

The issue of higher density seems to be the way to go for smarter growth. Apartment developments should be of high quality. I refer to studies undertaken recently by Dublin City Council that are very helpful in highlighting some of the issues in this regard. Part 1 of the report, Successful Apartment Living, made recommendations on the minimum size for apartments. We are all aware of the large quantity of new apartments which often leave a lot to be desired in terms of quality, both of construction and of size. These apartments are not built for family living. We are encouraging people to consider the rental option as an alternative to home ownership but it will be difficult if apartments are not being built to accommodate young families. It is unfortunate that apartments are still being built to cater for the stereotypical childless couple thus making it very difficult for families who must rent apartment accommodation to be able to survive and manage in them.

The reports by Dublin City Council are to be welcomed, the most recent of which reviewed 193 apartment schemes, consisting of almost 16,000 apartments. It found the majority of these schemes did not cater for residents from childhood to adulthood and retirement. The council also found the following: only three of the developments surveyed had designated outdoor play areas for children; there were crèche facilities in just nine developments and eight of these had been built since 2000; just over one quarter of all developments had open space suitable for use by children; one third of the schemes had no lifts, despite having multiple floors; disabled access was poor; and 75% of the complexes had poor fire safety facilities.

I will discuss with my colleague, the Minister for the Environment, Heritage and Local Government, Deputy Gormley, the introduction of a requirement on local authorities to ensure that the standard of design and management in apartment complexes being built as part of smart growth will be of high quality and suitable for family living.

The issue of homelessness has been mentioned by other Senators. We must recognise that there are 2,500 people who are homeless in the State. In Dublin the number of homeless people sleeping rough is estimated to be anywhere between 50 and 100 per night. The Government must promote sustained spending on programmes to tackle homelessness otherwise the numbers will increase due to pressure at the lower end of the market in both the rented and home-owning sectors.

Photo of Dominic HanniganDominic Hannigan (Labour)
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I welcome back to the Chamber the Minister of State. I appreciate the time given to a discussion of the housing market because the country is experiencing a housing crisis. An entire generation of people in their 20s and 30s is finding it increasingly difficult to enter the housing market.

Some Senators have spoken about the effect of interest rates on the ability of people to repay their mortgages and other Senators have raised the issues of stamp duty and of homelessness and the importance of catering for the less well-off members of society. Some Senators have referred to the downturn in the construction industry. I wish to highlight the issue of social and affordable housing.

Part V of the Planning and Development Act 2000 stipulates that 20% of homes in new developments are to be put aside for social and affordable housing. However, many developers are buying their way out of this clause and giving money to local authorities in lieu of the provision of these housing units. The result is fewer units of affordable housing are available for the people who need them most.

My party wants to see that loophole closed and we urge the Government to take action in this regard. We want an increase in the amount of social housing being built. I receive phone calls every week from people who are desperately in need of social housing. My office is aware of people who have been looking for housing for up to five years. I know of mothers who are forced to share not only a bedroom but their bed with their children because they cannot get a local authority house.

Senator Butler congratulates himself on the provision of an extra 6,500 units but this is not good enough. A total of 2,000 people are on the housing list in County Meath. I do not think his words of self-congratulation will do much for them.

My party has also suggested the consideration of ways to facilitate the refurbishment of older estates. The Alverno Heights estate in Laytown is in the constituency of Louth and was built 30 years ago. It is desperately in need of refurbishment but the Department has limited the amount of its contribution to the refurbishment of local authority estates from 100% of the cost down to 50%, with the remaining 50% to come from the local authority. At the same time, local authorities such as Meath County Council are not receiving the same amount of resources as other counties. Meath County Council receives percapita funding of 67% when compared with the national average. I find it difficult to work out how the Minister expects these local authorities to find the money to refurbish estates such as Alverno Heights without the Minister giving more resources to the county councils or paying the total cost of the works to be carried out.

The Labour Party has suggested a begin-to-buy scheme to help people who have just started working to start on the property ladder by part-buying a home in partnership with the local authority. It is expected that when they earn more in the future, they will be able to buy more of their home. Such schemes would help to increase the level of home ownership among this generation and I ask the Minister to consider introducing such a scheme.

Photo of Fiona O'MalleyFiona O'Malley (Progressive Democrats)
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When I became a Member of the previous Dáil, one of my colleagues referred to the tyranny of consistency, which is a problem when one is in Government and continues to be in Government. One must remain consistent and this is the one thing the Opposition fails to do.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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The Senator is consistent there as well.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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Allow the Senator to speak without interruption.

Photo of Fiona O'MalleyFiona O'Malley (Progressive Democrats)
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Time and again the Opposition gives out about rising house prices but when these begin to moderate, Senator Hannigan refers to a crisis. The Opposition cannot have it both ways. As previous speakers have indicated, moderation in house prices is probably a healthy thing because prices were——

Photo of Dominic HanniganDominic Hannigan (Labour)
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It is a question of the availability of housing, not just prices.

Photo of Fiona O'MalleyFiona O'Malley (Progressive Democrats)
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At least now there is some kind of moderation and houses become much more affordable.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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Does the Senator regard prices dropping as moderation?

Photo of Fiona O'MalleyFiona O'Malley (Progressive Democrats)
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I am ignoring the Senator's remarks so there is no point trying to take me off course. He might remain quiet while I make my brief contribution.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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I hope I am on the record of the House.

Photo of Fiona O'MalleyFiona O'Malley (Progressive Democrats)
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In preparation for this debate I took a look at Best of Times? The Social Impact of the Celtic Tiger in Ireland , which has a chapter devoted to housing and the housing boom. It states, "Despite its runaway appearance, the housing market in Ireland may be less precarious than in some other countries". It cites three reasons for this. The first is demographics. We have a growing population and an increasing one because of immigration. Second, rising affluence means more people have jobs and pay less tax and there is more disposable income. Third, there are lower interest rates. This third factor is no longer part of the equation as the price increases have declined somewhat. This is welcome.

Senators opposite said this has nothing to do with the availability of housing. Again I refer to this very worthwhile document. The impression given is that the housing system in Ireland is appalling and that nothing is happening for people. The document states that the housing system has also performed well in the sheer volume of new dwellings it has produced and the very large increase in the number of households this has facilitated. One forgets that. Year on year there have been record numbers and outputs. That is an irrefutable fact and one cannot deny that.

Photo of Dominic HanniganDominic Hannigan (Labour)
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What does that mean? Tell that to the 2,000 people who are waiting for houses in Meath.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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Senator O'Malley without interruption, please.

Photo of Fiona O'MalleyFiona O'Malley (Progressive Democrats)
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Home ownership has become a reality for far more people than ever before. The Senator may not like statistics. I recommend everybody read this document.

Photo of Paudie CoffeyPaudie Coffey (Fine Gael)
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The Senator had better speak to her constituents and represent them.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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Senator O'Malley without interruption, please. You are inviting——

Photo of Paudie CoffeyPaudie Coffey (Fine Gael)
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The Senator should give a copy of the document to Senator de Búrca.

Photo of Fiona O'MalleyFiona O'Malley (Progressive Democrats)
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I was quite surprised at the level of positivity it contained.

Photo of Paudie CoffeyPaudie Coffey (Fine Gael)
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Fairytales.

Photo of Fiona O'MalleyFiona O'Malley (Progressive Democrats)
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I will address some of the shortcomings as it might help Senators to settle.

Photo of Paudie CoffeyPaudie Coffey (Fine Gael)
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Will the Senator come back to reality?

Photo of Fiona O'MalleyFiona O'Malley (Progressive Democrats)
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The issue of homelessness has been dealt with in the strategy. The strategy, which is a ten-year one, is well under way. While a member of my local authority I chaired our strategic housing group. That was one area where we had a problem because in my local authority area we have a problem with homelessness, much of which has to do with the cost of housing and so on. Homelessness is not just about the absence of shelter or a home, it is a far more complex issue. The strategy that the Government is pursuing is laudable. It is an area in which we need to do more. We need to focus on eliminating homelessness and in this I join with other colleagues who have spoken earlier.

Photo of Paudie CoffeyPaudie Coffey (Fine Gael)
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The Senator is contradicting herself.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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Senator O'Malley without interruption, please.

Photo of Fiona O'MalleyFiona O'Malley (Progressive Democrats)
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Again it is the tyranny of consistency in that sense. No Government gets everything right but one needs to recognise what is right and what strategies work and not to talk down the market, as is being done, by calling it a crisis when there is a moderation in house price increases. I am sure the Minister would acknowledge we have work to do in the homeless sector.

I echo Senator de Búrca's comments about the new building standards. They are a credit to the new Minister who has introduced them and are extremely important in terms of building sustainable housing into the future. It is a pity they were not introduced earlier because at this time of record levels of output we have harnessed people with homes that are less energy efficient and that is regretted.

I take this opportunity to speak about a new heart for Dublin which is a proposal my party was interested in driving. It is about building new sustainable communities and particularly in Dublin high rise apartments. Senator de Búrca referred to the importance of sustainable communities. They are homes where people can live in apartments throughout their lives while rearing children and into older age. The new heart for Dublin proposal and the public land available in the docks area provide us with the opportunity to build a whole new quarter for Dublin. Rather than do as is being done in Galway, building housing estate after housing estate, and copying the mistakes of the past, we have the opportunity in Dublin to build a sustainable new city in the docklands area.

On the question of stamp duty, the Minister has been consistent. He has constantly told us he will not amend it. I accept the point that it generates much income and contributes to the running of the country. At the same time, when the stamp duty is equivalent to two or three times the average industrial wage we need to think twice about the level of it.

Photo of Paschal DonohoePaschal Donohoe (Fine Gael)
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I welcome the Minister to the House. I shall respond to the points made by previous speakers beginning with Senator O'Malley and her quotation of the book to which she referred. I am lucky in that I have had the opportunity to read it. What is striking not so much about the book but the commentary and reporting on it by many journalists and newspapers is that they criticise it for its excessively optimistic approach to many factors. What has been consistent on the commentary offered is how over-optimistic the writers of different chapters have been about the issues to which they refer.

For every point that somebody makes we could all produce a quote or a book to back it up. With regard to the book referred to, I could produce volumes if I had the time to do it, by organisations such as Threshold and the Simon Community. I could quote other publications of the Economic and Social Research Institute, which was involved in the production of the book, and publications from Focus Ireland that provide a completely different analysis of where we stand, an analysis that is more in keeping with the experiences my colleagues and I have in terms of representing our constituents who are involved in issues such as this.

The most formative experience I have as a member of a local authority is dealing with housing. Senator O'Malley referred to the fact that she is a former member of a local authority. In the contributions I have heard from the Government side, particularly from the Minister, what was striking was that the issue of social and affordable housing is mentioned only once. Nowhere in the entire debate has the issue of rental housing been mentioned. If I am wrong I stand corrected because we are here to debate these matters. We need to talk about the people who are struggling to buy their own home whether in Dublin or elsewhere and those who are at the fringes of the housing market and caught up in the rental sector.

I wish to make two points in regard to the rental sector, an area that I only heard mentioned by speakers from this side of the House. Too many of our citizens are being taken advantage of within the rental sector by a small number of unscrupulous and rogue landlords. Some figures, to which Senator Coffey referred, indicate that last year the local authorities carried out inspections of 9,800 private rental properties. Of those they found there were significant quality issues in 20% of them, which means one in five houses in the rental sector was not in keeping with the minimum standards for decent living accommodation. Out of those 1,900 cases that were inspected legal action was taken against only 36 landlords. I can name 36 properties in my own constituency that have such issues.

We need to ensure that standards in the private rental sector are up to date. I understand this aspect will be examined later in the year. The local authorities are incentivised by central Government to do their job better in ensuring those standards are regulated. The people in those properties need our support for a better standard of living.

For God's sake let us provide an affordable housing scheme that is genuinely affordable. Whole swathes of our population on low and middle incomes cannot afford to buy a house and do not qualify for the affordable housing scheme either. The Minister of State can be consistent when he has had the privilege of being in Government for ten years. We need to deliver on this area. We do not need to talk about housing output all the time. We need to ensure the houses being produced are affordable and that people can get into them. That is the role of central Government through the local authorities. I look forward to the response of the Minister of State on those issues.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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I call an tAire Stáit.

Photo of Donie CassidyDonie Cassidy (Fianna Fail)
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May I extend this debate by five minutes with the permission of the House to allow Senator Harris make a short contribution on this very urgent topic?

Photo of Paddy BurkePaddy Burke (Fine Gael)
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Is that agreed? Agreed.

Photo of Eoghan HarrisEoghan Harris (Independent)
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I do not need five minutes. I congratulate the Minister of State, whom I have always admired very much as an independent, tough and clear-minded local politician, on the tough job he is doing. I ask him to think outside the box on his watch. One of the troubles of housing is that it has always been ideologically trammelled. We have had two great historical interventions. We had the great municipal buildings of the late 19th century into the 20th century. We then had Fianna Fáil's powerful intervention in Dublin involving the clearance of the slums and we have had the great local authority schemes. I am not convinced that social housing and affordable housing interventions represent the way to go. There is a danger of antagonising people who have struggled hard. There is no point in pretending that class antagonisms do not exist and trying to push them aside never works. It creates all sorts of problems. The trick always is to enable people to buy houses without social stigma. I ask the Minister of State to encourage new thinking to allow interventions by the State to help people on a confidential and means-tested basis to get into the housing market without creating tensions and flashpoints, and all the carry on with affordable housing, which is basically being abused by builders and developers.

The issue of stamp duty should be addressed firmly. Correctives in the market are all very well. However, the failure to reform stamp duty is dragging down the market. To give the market a boost and help the small and medium builders, I ask the Minister of State to consider seriously talking to the Tánaiste and Minister for Finance about VAT. VAT has become so sacred that nobody ever thinks it can be touched. A slight adjustment in VAT on building supplies to the building industry might give medium and smaller builders and the people who want to build for themselves the boost the industry badly needs.

Photo of Batt O'KeeffeBatt O'Keeffe (Minister of State with special responsibility for Housing, Urban Renewal and Developing Areas, Department of Environment, Heritage and Local Government; Cork North West, Fianna Fail)
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I am grateful to the House for allowing me time to make a presentation on housing. As public representatives we have a particular interest in it. I thank the Senators for their thoughtful contributions. I wish to reiterate a number of key points and to respond to a number of the issues raised.

Senator Coffey spoke about the CIF and targets. I wish to put this into perspective. The CIF issued targets for 2007 indicating that 90,000 residential units would be built in 2007. It got it wrong; it will be 77,000. I fear the 2008 target of 45,000 does not correspond with the targets that we envisage or with the targets of what I would call reputable economists. I am concerned that developers are cutting back and that it might be somewhat overdone. I would say to developers that for ten years they have done exceptionally well under the good management of the economy. There are signs of some developers being able to pull back at this stage.

I would say to young people and first-time house purchasers that a frenzy was created in 2005 and 2006 to get on the property ladder and people felt if they did not do so they would never have a chance. The result was inflated prices from two sources. At the same time the banks were offering 100% loans with all the other add-ons that were part and parcel of it, all of which led to an intolerable situation that has come back to haunt us. The last thing I want is for the prophets of doom to suggest this is not a good time to buy. The mortgage interest relief given in the last budget equated to three ECB interest rate adjustments. In addition stamp duty has been eliminated for first-time house purchasers and tax was reduced. Houses are now more affordable because prices have reduced. Therefore the climate is favourable for young people to purchase houses in the knowledge of the promise of further mortgage interest relief in the next budget.

It should be the norm for young people to bargain about the asking price. Good bargains are available for young people who want to buy houses at affordable levels. I want to ensure that in 18 months we do not have underdevelopment in housing with an imbalance in the market leading to price inflation coming back to haunt us again. The developers have a duty to young people from the profits generated over a ten-year period to ensure this imbalance and the apparent trend do not continue. They need to play their part in ensuring adequate output.

Senator Coffey also mentioned the number of vacant houses. The IMF report pointed out that the vacancy rate in Ireland is lower than the European norm. We have also made wonderful strides in the area of private rented accommodation. A great number of new housing units have been built. In 2002 30,000 private rented accommodation units were registered. By the end of 2006 that figure stood at 200,000, which is a marked increase. To increase the number of inspections carried out we have increased funding to the local authorities by 50% in this year. I will give 50% to cover those that are registered and I will give 50% in the first tranche to the objective they have placed which is the number of inspections they will carry out. At the end of the period, if they have met their target of inspections I will reward them with the rest of the funding. There is a dramatic improvement in the number of inspections carried out.

On investigation we discovered that 80% of rented accommodation was of good quality. I am not saying there are not rented units of inferior quality — of course there are. However, if a local authority housing officer comes across accommodation that is below standard, the PRTB exists to report that. Its duty is to ensure the standards are maintained and to take issue with any landlord who has inadequate accommodation, particularly those who are not registered. A tax incentive is available for those landlords whose property needs to be upgraded.

The factors relating to the output of housing will depend on the economy. Growth in the economy for 2008 is predicted to be 3.25%, one of the highest in Europe. All of the rudiments for the purchase of affordable houses are in place. The partnership, which has always been consistent with what we have done, should be adhered to in this instance.

Senator Donohoe stated I did not mention social, affordable or voluntary housing or RAS. However, I referred to the investment of €21 billion in this sector by the Government under the national development plan. It is envisaged 17,000 units will be delivered over a three-year period in that sector and, under the plan overall, it is hoped 140,000 social and affordable units will be delivered. The Government is committed to capital projects and to local authorities building homes. We would like to be as innovative as we can, whether that relates to social or affordable housing, and we are open to and will entertain other views to ensure social and affordable housing output continues to increase for our young people.