Seanad debates
Wednesday, 8 April 2009
Affordable Housing: Statements
12:00 pm
Michael Finneran (Roscommon-South Leitrim, Fianna Fail)
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The time which the House has set aside for statements on affordable housing gives me an opportunity to outline current issues and developments in this area and how we are responding to the impact on the affordable housing area of far-reaching changes in the housing market and the wider economy.
As in most countries, the Irish housing market has experienced a sharp downward shift. This change began here in late 2006 as the fall-out from excessive lending, frenzied buying and resulting house price escalation and loss of affordability led to a slump in demand, compounded by the impact of a series of interest rate increases. Meanwhile housing output continued at a high rate long after demand had slumped, a common feature of housing market cycles. All around the world, very clear lessons have been learned about how inappropriate lending leaves the housing sector vulnerable to external shock. That shock emerged in the form of a global wave of financial turbulence, which manifested itself, in particular, in very significant restrictions on the availability of credit and a significant global economic downturn. The result is a significant correction in house prices and declines in housing output and realised demand for home ownership.
Provisional house price statistics held by the Department, based on data compiled from lenders, show that, nationally, new house prices in the fourth quarter of 2008 had dropped back to levels last seen in the third quarter of 2005, with Dublin prices now back at fourth quarter of 2004 levels. Prices for second-hand houses, both nationally and for Dublin, are now comparable to prices in the first quarter of 2005.
Significant contraction is also evident in the key indicators of housing output. Housing completions peaked at 93,000 units in 2006, significantly ahead of what was widely recognised as the level required to meet demand in the medium term. Output had dropped back to 51,000 units last year and projections from a number of sources suggest that completions in 2009 are likely to be in the 20,000 to 25,000 range, since commencements and registrations are significantly down, by 71% and 82%, respectively. There is a considerable quantity of newly completed and unsold homes, estimated by industry sources to be in the order of 40,000. In addition, estimates of the number of second-hand properties for sale at the moment range from 55,000 to 70,000.
How the housing market evolves in the period ahead will depend in particular on factors such as economic performance, expectations in terms of housing and the availability of mortgage finance. One positive effect of the reductions in house prices is the availability of much better value in the market. For households wishing to become home owners, the price reductions, coupled with other factors, especially the significant reductions in mortgage interest rates and mortgage interest relief changes, have resulted in significant improvements in the affordability position of first-time buyers.
The standardised affordability ratio used by the Department for many years, which shows the percentage of household net monthly income required to service a mortgage, shows that prior to last week's European Central Bank reduction, for the country as a whole, the proportion of net income required to service an average mortgage nationally is at 2003 to 2004 levels, with the Dublin ratio now back at 1996 to 1997 levels.
The Government has taken a number of steps to ease the problem of credit shortage for first-time buyers, through the home choice loan scheme and the terms of the bank recapitalisation scheme. The home choice loan scheme, which is designed to facilitate but not incentivise house purchase, provides a line of credit to certain first-time buyers. Under the recapitalisation scheme, the participating banks have undertaken to make available an additional 30% capacity for lending to first-time buyers in 2009. It will be some months before the effects of either of these measures can be gauged in terms of their impact on facilitating the realisation of underlying demand.
Trends in the overall housing market are closely reflected in the affordable housing area and issues related to affordable housing must be viewed in that broader context. As a result of significant house price increases in recent years and difficulties encountered by prospective first-time buyers in accessing home ownership, especially in areas of high demand, the provision of affordable housing has been a significant priority for Government. It is an area that has evolved considerably in a comparatively short period, primarily through the introduction of the Part V mechanism which has been in effect since 2002, and that evolution continues in line with recent major changes in the housing market and the wider economy.
In the context of rapidly increasing house prices in certain areas, the Towards 2016 social partnership agreement set out an ambitious target to deliver 17,000 affordable homes over the three-year period 2007 to 2009. Local authorities responded strongly to that challenge, delivering more than 3,500 units in 2007 and an estimated 4,500 in 2008. I wish to put on record my appreciation of the positive response of local authorities in what was a relatively new element of their housing functions.
However, just a few years on from the Towards 2016 agreement, we now find ourselves in a different world. As I indicated, there has been a sharp downturn in the housing market generally, price reductions and expectations of further reductions, increased insecurity concerning employment and income levels, and a more restricted credit environment. In the affordable housing area, erosion of the differential between the affordable price and the market price is an added issue. These developments, coupled with the strong surge in delivery in 2008, particularly under Part V, have resulted in an increase in the stock of affordable housing units on hand.
Local authorities would have a certain amount of completed affordable homes on hand at any given time, principally comprising units either being prepared for, or in the course of, sale. At the end of 2007, when sales were buoyant, that figure stood at approximately 2,200 homes on hand nationally. It is also important to note that there have been significant sales of affordable housing during 2008, approximately 2,750 nationally.
It is now estimated that the number of affordable units on hand nationally has risen to somewhere in the region of 3,700 units. Those are not spread uniformly throughout the country. There are a number of high delivery areas where the stock levels have increased, while there are other local authority areas that do not have a significant stock on hand. Despite the current difficulties, many of the units on hand are already in process of sale or will be sold in the coming months.
Estimates compiled from local authority feedback suggest a majority of the affordable stock will be sold to eligible purchasers. However, it is estimated that approximately 1,800 of the units already on hand may be difficult to sell in the current market and it is estimated that more than 2,000 additional units will be completed this year. The location and price of many of those will be conducive to sale, even in the current climate, but others may be more difficult to sell.
The Department, in co-operation with the Affordable Homes Partnership, AHP, and local authorities, has been monitoring the situation closely in the context of changes in the economic climate and the housing market in recent months. The costs to local authorities of retaining unsold units are considerable, and it is undesirable that these houses should remain vacant. The Affordable Homes Partnership has already conducted a detailed examination of the position at the Department's request and has met the local authorities in the areas with the highest supply of affordable units to identify actions that might assist in the sale of those units. The position in all areas has been reviewed as part of a recent series of housing action plan meetings between the Department and local authorities. In February, the AHP held a seminar for all local authorities to provide specific updated advice on the marketing and sale of affordable homes in the current market.
The priority now is to ensure available affordable homes are brought into use as soon as possible in the most appropriate and effective way. The first priority of local authorities is to sell these units to persons eligible for affordable homes. That is being done successfully in many cases. However, the indications are that a significant number of affordable homes are proving very difficult to sell in the current climate of uncertainty. This is a problem especially where reductions in open market prices have significantly eroded the discount on affordable units.
The Department has issued a circular to all local authorities this week, which will be accompanied by a sales strategy prepared by the AHP, setting out the options local authorities should consider in addressing the matter. Local authorities are being asked to identify those units most likely to sell and to refocus their sales efforts on those developments. In tandem with the focus on sales, authorities are also being requested to consider alternative options for the use of affordable units which may not sell at this time. Alternative options that will be set out in the circular will include transfer of affordable properties to the rental accommodation scheme for a temporary period, sale to local authority tenants under the incremental purchase scheme, and use of affordable properties as a temporary social housing support, where appropriate.
We are also putting an additional instrument at the disposal of local authorities to help them in their efforts to deal with the affordable stock issue. I am pleased to be able to announce to this House a significant increase in the limits for local authority housing loans from a maximum of €185,000 to €220,000. That represents a nominal increase of 19% but in real terms the effect of the increase is more significant having regard to the significant reductions that have taken place in house prices. A credit policy is also being introduced to support a prudent and consistent approach to lending by all local authorities. That will deal with matters such as income limits. Further details will issue to local authorities shortly.
Where units provided under Part V are no longer required for affordable or social housing, there is provision for local authorities to dispose of them for other purposes, including sale on the open market at market value. However, the clear priority is to sell those homes to eligible purchasers and a key element of that, which is strongly emphasised in the circular, is that affordable housing must be marketed to potential eligible buyers in the widest possible way with efficient market-oriented methods of marketing and sale.
Some local authorities have shown great energy and imagination in marketing and sale of affordable homes. However, others appear to have retained restricted and less efficient approaches, such as allocating specific units to certain applicants and restricting offers to people already on lists. Such practices probably originated at times when demand outstripped supply of affordable housing. I wish to state in the strongest possible terms that the affordable housing market is now dramatically different and such outdated practices must be replaced without delay with a more open and efficient approach to marketing and sale.
In the coming months, the Department will continue to monitor and support local authorities' work in addressing the challenges in the affordable housing area and promoting approaches to take account of the evolving housing market and economic climate. One significant change of which Members of the House will also be aware is the introduction of a new affordable homes purchase scheme which will facilitate the purchase, through a single equity-based mechanism, of property under the various affordable housing schemes. This will be provided for by way of amendment to the Housing (Miscellaneous Provisions) Bill. In the longer term, as the overall market evolves, the extension of this approach to open market purchases as a replacement of the declining shared ownership scheme will be considered.
It is clear we are now in radically different circumstances than those we were in 18 or even 12 months ago. All areas of the housing market have been profoundly affected by those changes and the challenges presented are considerable. I and my Department are committed to working in collaboration with our partners to ensure we will be able to continue to respond effectively to new challenges. We are also mindful of the need to be able to adapt our approaches as fiscal and economic conditions evolve.
In the affordable housing area, we are working through the current issues in very close collaboration with the local authorities. We are putting a comprehensive range of options at the disposal of housing authorities and the Department and the Affordable Homes Partnership will provide every type of support and guidance possible to authorities to deal with the issues that confront them in the most effective and productive way possible. We are also mindful of the need to look to a future beyond the current difficult circumstances and to plan accordingly, learning from the experiences of recent developments.
Paudie Coffey (Fine Gael)
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I welcome the Minister of State to the House to debate this very important issue. It not only concerns affordable housing but also housing in general.
When concluding, the Minister of State claimed we are now in radically different circumstances than those we were 18 months ago or even 12 months ago. I certainly concur with this but remind him that his predecessor, Deputy Batt O'Keeffe, was very upbeat during a debate on housing in the House in October 2007. Indicators at the time showed there was an oversupply of houses. Statistics indicated there were over 50,000 vacant houses nationally, yet we were trying to continue with the policy of propagating the clearly unsustainable housing boom. There was a sense of denial on the part of the Government at that time. As we all know, the Exchequer was greatly dependent on the income from the boom. It was sustaining the public finances at the time.
For every house built during the housing boom, almost 50% of the value was appropriated by the Government, be it through VAT, capital gains tax on the land or stamp duty. Many people did not want to believe the policy was unsustainable because it was keeping the country going and because there was considerable employment in the construction sector. Nobody was willing to cry "Stop". We debated the matter in the House and the current Minister of State, Deputy Finneran, has stated clearly how circumstances have changed.
We are where we are and I hope serious lessons have been learned. The legacy of our policy is such that local authorities are left exposed to the cost of the provision of affordable houses, which are lying vacant and cannot be sold. Managing this stock presents a problem in addition to the credit crunch and the other financial pressures local authorities are experiencing. This must be considered against the backdrop of the vast number requiring social housing in local authority areas nationally.
It is clear we got our policy wrong. There are still people on social housing lists who cannot be housed by local authorities, yet there is a large stock of vacant houses, both public and private. With regard to the private houses, there are half-finished estates all over the country. Many of the property developers have probably absconded because they cannot make their repayments to the banks. Some of the banks in question are the casino banks with the toxic debts. This problem must be teased out. The truth will eventually come out in the wash.
Local authorities are left with affordable housing they cannot sell. "Affordable" means "inexpensive" or "low cost" and affordability is relative to market value at any given time. Therefore, a unit deemed affordable two years ago or even one year ago would be considered expensive today if sold at the same price. Products are accorded value through the interaction of supply and demand. Where there is over-supply, there is obviously a loss of revenue and false values. Managing the surplus stock presents a considerable challenge, not only to the Department but also to local authorities around the country.
Not all local authorities are equally exposed. Consider the 2007 figures for the commuter belt around Dublin, bearing in mind that these figures have now been updated. Kildare County Council had 189 affordable units, Fingal County Council had 390, South Dublin County Council had 299, Laois County Council had 142 and Wexford County Council had 143. The further one goes from Dublin, the number of affordable units decreases. Some local authorities are not as badly exposed as others while some around the commuter belt are very badly exposed. Moving the units presents a considerable problem for the Minister of State's Department and for the local authorities themselves. Contracts have been signed even for units not yet in the hands of local authorities but which will fall under their charge. The number will therefore increase, aggravating the problem. The financial exposure of local authorities will increase.
The latest circular issued to the directors of services in local authorities asks local authorities to become estate agents, to use ordinary layman's language. We are asking them to operate in markets where estate agents are not operating at all and in which some estate agents have gone out of business. We are asking housing departments in local authorities to engage in the sale and marketing of houses that have lost their buoyancy and sales potential. I honestly do not know how we will square this circle. It will affect the resources of local authorities because they will have to invest time and resources that they do not have. It will also affect local property markets in every town and village.
The market value of affordable stock must be reassessed. We need to find a new baseline for market values, but this is very slow in coming. This is evident in the banking crisis whereby considerable property-related debts, which some refer to as toxic debts, have no real market value just yet. The Leas-Chathaoirleach raised this on the Order of Business today and stated that, to find the real value of property, it must be put on the open market. We cannot manufacture values, as we seem to be trying to do with the affordable stock.
The circular to local authorities is asking them to offload the affordable stock in whatever way they can. Initially local authorities only considered first-time buyers, those on the housing lists and existing tenants. The criteria were very strict at first, and that was not so long ago. Then the local authorities became a little more flexible and began to consider the cases of applicants who had separated or divorced. Now, if I understand the Minister of State correctly, the direction from the Department is to sell the affordable units to anybody who will buy them. The bad news is that nobody is buying at present, in the public or private sector. This is for many reasons.
The Minister of State said in his speech that mortgage interest relief changes were beneficial. Will he clarify this? I understand from the budget that the mortgage interest reliefs are no longer to apply to those paying mortgages for over seven years. That alone will affect people's ability to repay mortgages and loans. The decline in income due to higher levies and other costs, such as that of child care, will have a bearing on one's ability to buy one's own home. I suspect that people will go back on the housing lists. At present, people struggle to repay their mortgages and this is evidenced in the statistics for residential repossession which has increased year on year in recent times. Banks are moving to repossess properties and for what I do not know, because they will be left with them and will not move them on. They do not achieve anything by doing this. The Minister of State, the Department and the Government should pay more attention to this area and assist people with houses to renegotiate their terms with their banks. At present, the banks seem to be very inflexible. I acknowledge the Government has moved to some degree and put a moratorium on the banks which it recapitalised. However, many other banks have no moratorium and on a daily basis they move to repossess houses. People who were already stretched are even more stretched after yesterday's budget. Will the Minister of State consider assisting people in this situation?
With regard to the financial exposure of local authorities, those around the Dublin commuter belt are more seriously exposed. I was provided with figures, and I stand to be corrected, which show that local authorities in Laois, which is in the midlands, are exposed to more than €28 million for affordable housing stock which they cannot sell. This is the amount of loans on their books. They were contracted to take this type of housing under either Part V or the affordable housing schemes. New incentives should be introduced or, as some people suggest, local authorities should just auction them. Perhaps they should be given to people on the social housing list. Something radical needs to be done rather than leaving local authorities with the bill and the ongoing costs of maintaining these houses. They cannot sustain them.
The Department gave five options to local authorities for consideration with regard to off-loading these houses, which is what they are trying to do. The first of these was to sell them as affordable houses. This has failed and in the current climate I would not hold out much hope of too many of them being moved. The private sector has seen huge reductions in prices where private developers are trying to sell houses. They are still struggling to sell them.
The Minister of State referred to the loan which local authorities can provide to potential buyers and he stated this has increased from €180,000 to €220,000. Some people might welcome this but I would caution that local authorities should have very strict credit controls with regard to these loans. We do not want to see local authorities taking on loans to people who could end up in trouble and unable to pay back the loans. This can become sub-prime lending because it is money which can be directed to people fairly easily. I urge that the strongest possible credit controls are put in place prior to any such loans being approved. They should be pressure tested on a financial basis. This is not with the intention of keeping people away from buying their own houses, it is to protect them from entering into the debt which we see throughout the country at present.
The focus should return to the provision of social housing. We have neglected this area in recent years and have depended on the private sector to provide houses. Perhaps we should examine turning some of these affordable houses into social units to take people off the housing lists. This is an avenue I would recommend. This will require funding from the Department because it must front up the money for every social unit provided by the State. I would support the idea of a number of affordable units becoming social units over a phased basis over the coming years because it would remove people from the housing lists, give people a home and release some of the exposure and burden on local authorities.
I welcome this debate and we should try to assist the Department in any way possible to house as many people as possible.
Larry Butler (Fianna Fail)
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I welcome the Minister of State to the House. He has done outstanding work since going into the Department. He has used his imagination, skill and knowledge to put packages together for local authorities. Last week, I heard him speak in Kilkenny and I was very impressed with his approach to housing.
As we know, local authorities have a glut of affordable housing in stock. It is fair to state that we must examine how to deal with this but there is no great wisdom as to how to do so. From the figures I have examined it is obvious that if we have a surplus we should examine putting at least half of that stock into social housing. Dublin City Council has 4,000 people on the housing list. This is a huge improvement from approximately 6,000 people.
The Minister of State has been making inroads on social housing. This is an opportunity to examine putting a percentage of these houses back into social housing as this would help us out. Dún Laoghaire-Rathdown County Council has a substantial amount of affordable housing on its list but 2,500 people are on the social housing list. They must be cheaper because they were built at affordable prices even with land prices being high at the time of purchase. The houses are still cheaper than if the local authority had built them itself. It is well worth examining this.
I would change slightly the criteria in favour of people not eligible at present who might be outside the salary limits. I would allow leverage on this. One would not be criticised for allowing some affordable units to become social units and selling off the others to balance the moneys which would be spent in this regard. This would shift some of the stock.
It is unfair of Senator Coffey to criticise the banks. Recently, a few people who got into trouble with their mortgages came to me and I had the good fortune to go to the local banks with them. The banks were most considerate in terms of how they would deal with their problems. This is a personal experience I had.
Paudie Coffey (Fine Gael)
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I had personal experience of cases where houses were repossessed; they are what I spoke about.
Larry Butler (Fianna Fail)
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Very little of that is happening since the Government——
Larry Butler (Fianna Fail)
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——recapitalised the banks. The banks are taking a more social approach. The banks examined how payments could be deferred and paying interest only and they even discussed examining a rental system. In fairness, the banks are considering problems which might arise.
Previously, I mentioned to the Minister of State that it would be a good idea where people are in trouble with the banks that local authorities could intervene. It should be a requirement for banks to contact local authorities to see what help they could provide prior to a bank taking action. Instead of a bank taking over, a local authority could implement a rental system because the person involved may end up on the housing list and would have to be housed anyhow. There should be contact between local authorities and banks where difficulties occur and a rental arrangement could be agreed.
Much progress has been made with regard to controlling and having a good mix in estates. This is vital. The legislation on anti-social behaviour was a step in the right direction. Imaginative actions have been taken during the Minister's tenure. He has given local councillors the power to make regulations within estates and by-laws can be implemented to ensure the rule of law.
We may have to look at the provision whereby a local authority was entitled to 20% of the construction in their area. We may not be able to afford it. There is now a surplus of housing. A review should be carried out into our approach to this 20% provision. We might not want 20% from a developer in a particular area, but we might accept from him part of a development elsewhere.
The local authorities are now to the fore in terms of lending. There has been a scarcity of lending by building societies and banks during the past year. In some cases it has been impossible to get a mortgage. The local authorities may have to sell some of these properties much more cheaply. A one-bedroom apartment that was fetching €300,000 in place like Bellarmine in Stepaside, a very good area, is now selling for €222,000 or €230,000. The same local authority apartment in that development is €320,000. It is impossible to sell against a market like that. There are two choices — either use the units for social housing, which is needed, or take the hit, as the builders are doing in places like Bellarmine. You can buy a one-bedroom apartment in Belgard for €150,000. That gives some idea of the way in which local authorities will have to compete against the builders. Nobody will buy an affordable house from the council when it is dearer. Dublin City Council downvalued their properties by 25% some months ago and the valuation is even lower now. I suggest that we look at the social aspect and buy back some properties. We have to look again at prices.
Feargal Quinn (Independent)
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I welcome the Minister. It has been very interesting to listen to his speech. He mentions the challenges and the options he faces. He has also said there are radically different circumstances now from those 12 or 18 months ago.
I had the experience 25 years ago or more of serving on the committee of the Archdiocese of Dublin which the archbishop established in an attempt to get people on the housing ladder. It was a very interesting challenge. In the 1970s young people were paying rent and were not able to raise the basic deposit required to get a mortgage. The church approached various church bodies which owned lands and arranged half-way houses for those who were paying rent. It was an area of which I had been unaware. The challenges facing the Minister are not unlike those that faced us 25 or 30 years ago. The scheme which the archdiocese introduced was based on a similar scheme, Shelter, in London which was very successful.
Figures from the Department of the Environment, Heritage and Local Government reveal that the number of affordable units has risen by 40%, from 2,200 at the end of 2007 to 3,700 today. The Minister has given additional figures. The downturn has had a massive effect on Dublin's affordable housing scheme. First-time buyers are not interested as house prices no longer reflect reasonable market values. These "affordable" houses were bought at pre-recession prices and developers are unwilling to renegotiate prices, despite the drastic change in market conditions. Councils cannot force developers to cut prices. They are contractually obliged. In some cases the affordable houses are more expensive than other similar houses. It is estimated in Dublin that the council may be able to sell off only about half of its current stock. This problem will get worse when the additional 2,000 houses become available this year. It will be almost impossible to sell the houses.
It is amazing that local authorities are struggling to sell the homes, despite the fact that there are approximately 28,000 people on the waiting list. Potential buyers are faced with the problem of not being able to get mortgages as financial institutions are offering only 80% of valuation to borrowers or will not sanction loans on over-valued properties, leaving many people unable to buy and councils having a glut of unoccupied houses. The only solution is for local authorities to revise values further downwards. Perhaps a lottery draw system should be looked at. Maybe it should be replaced with a more efficient system such as a listing process. The large deposit need for the affordable housing scheme is putting a large number of people off. Perhaps this could be examined. A much smaller deposit would encourage people to buy. Having people making payments is of course better than having hundreds of those houses unoccupied. I would also support the suggestion to transfer some of the properties to the rental accommodation scheme, or even use them as temporary social housing and support. There must be many people living in very poor conditions who could be accommodated.
There will be few, if any, affordable housing developments coming on stream this year or in the next few years. Dublin City Council has dropped plans to build thousands of new homes. The three housing projects that have been sanctioned this year have been radically downscaled. There were plans in St. Michael's Estate in Inchicore to build 715 homes, as well as crèches, sports fields and a public square; now there will be only 76 units. Radical cuts like this will affect a large number of people who are less well off. The Minister of State has provided some options today, but the Government needs to find a way to slash prices in the affordable housing scheme to enable hundreds on the waiting list to have a chance to afford accommodation and to go some way towards solving the sizable housing problem.
I outline some other thoughts. Has society been focussed too much on getting people onto the property ladder and not focussed enough on the provision of quality homes for all? If one owns less than 20% of one's home, one is effectively renting it from the bank anyway. The affordable housing scheme has other drawbacks. If one has previously owned a property — the Minister of State may explain otherwise if I am incorrect — one is not eligible. What of people who have lost their homes? Also, a person also must have held a property for 20 years. If one buys an affordable housing property, let us say, a two-bedroom apartment, one is very likely to need a bigger house in the future or likely to have to move to take a new job outside of Dublin, abroad or somewhere else. Is there enough flexibility? Is this putting people off? I do not know the answer to these questions.
The Minister of State has touched on some of the issues and has provided some options today. I am very pleased that the Minister of State, Deputy Finneran, is in place because he has grabbed the challenge since assuming the position. I hope that in future the same commitment to attempt to solve this will be present. My experience from 25 to 30 years ago is that the problems do not remain the same. They are challenges, they change and they are different from the problems of last year. As the Minister of State noted, the problems of last year are different from those we must now face. I am pleased this debate has taken place, that we have had the opportunity to draw attention to the matter and I am pleased the Minister of State is giving the matter the attention it deserves. Hopefully we can find solutions.
Dominic Hannigan (Labour)
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I welcome the Minister of State. It is widely accepted that the real economy began what was initially a slow decline in 2002 or 2003 some six years ago. It is common to hear the lament that instead of investing in the real economy we simply built and sold more houses to each other since then. While this is undeniable, it is somewhat bizarre that the Government of a small nation such as ours could devote itself so wholeheartedly to the promotion of the most unsustainable construction programme in the history of the State and still manage to emerge on the other side with a housing crisis.
The housing and economic crises are intrinsically and tragically linked. As early as 2006, the warning signs indicated the market was becoming seriously over-heated. Despite those warnings, the Governments could not bring themselves to shout "Stop". During this period, the notion of a house as a home became secondary to the idea that a house was a commodity. As we continue to adjust to the new economic realities it is vital that we challenge that notion once and for all, because the right to a home is a basic human right. It is an essential aspect of our social economy and of the ability to live a decent and secure life. Despite this, Focus Ireland points our that Ireland compares very poorly to other European Union countries when it comes to housing rights. For example, Spain, Holland, Belgium, Sweden and Greece have enshrined in their constitutions the right to housing. Countries in which this right is not constitutionally guaranteed, but in which it is guaranteed in law, include Austria, France, Germany, Luxembourg and the United Kingdom. Ireland has an established policy guide for housing provision, but no constitutional rights or no legally established right to housing.
We now face a period in which all the problems of the boom period are retained. There is still homelessness, poverty and social exclusion. However, we now face the additional crises of negative equity, mass unemployment and an affordable housing scheme that is no longer affordable.
Compounding these problems is the reality that our housing policy framework is no longer fit for purpose. A recent report stated that the number of affordable units should be approximately 6,000 units by the end of this year. However, given that there are almost 30,000 people on local authority housing lists throughout the country, it is difficult to comprehend that there could be a demand problem, but that is exactly the situation we now face. The affordable housing scheme was never designed to accommodate the notion of rapidly decreasing house prices. As a result, it is now only marginally cheaper in some local authority regions to buy affordable housing rather than buy homes on the open market. I am aware of cases in which the price of affordable housing units from county councils are higher than housing units on the open market. This creates very significant problems in the provision of mortgages, which is not an easy task at the best of times, but in the current environment it is harder still. The net result is that some local authorities expect to end up with up to 50% of the current stock still on their books because it is basically impossible to sell under current market conditions.
It is often suggested that the State is too slow to respond to issues in the context of the economic crisis. It is, therefore, vital that the Department of the Environment, Heritage and Local Government acts on social housing as quickly as possible. The prospect of brand new housing units lying idle while 30,000 people are seeking homes is simply unacceptable. Different areas will have different sets of priorities and local authorities should be given the freedom and support necessary to exercise area-specific solutions whether it involves re-categorising affordable units under the rental accommodation scheme or using the properties as social housing solutions, options which have been suggested by some of my colleagues. Either of these options is infinitely preferable to leaving housing units empty while many people are in need of housing. It is economically and morally unacceptable to allow that. Creativity is essential and could help to avert a full-blown housing crisis in the country in the coming three or four years. Policy leadership is required and there must be a recognition that there are several flexible solutions beginning to emerge, most of which come from the private sector.
I was struck by an article I read recently in The Bray People which discussed the case of a young couple who made use of the rent-to-buy scheme. The couple is now investing in a reasonably priced home close to their place of work and family. If they sign to buy after 11 months, the rent already paid will be offset against the overall asking price of the home. It is a classic case of a family which might otherwise face a difficulty in terms of purchasing a home in these times. If such a case could be replicated throughout the nation, it would go a long way to ensure the housing crisis could be somewhat mitigated.
We must also consider issues related not only to people trying to buy new, affordable homes, but to the affordability of homes. Mortgage rates have come down recently which everyone on a tracker or variable mortgage welcomes. We need a debate specifically on the issue of fixed-rate mortgages. Let us use the word "encouraged" rather than a stronger word for now, but many young couples were encouraged to take fixed rate mortgages at a rate of 5% or 6%. Such people have not benefited at all from the recent interest rate reductions. As a result, it is more difficult for such people to afford their repayments, especially if people are losing their jobs. Last week, I spoke to a young couple in Duleek who have not seen any reduction in their mortgage repayments. Unfortunately, their personal economic circumstances have deteriorated in the past year. They now have a difficulty paying their mortgage. We all acknowledge that breakage fees must be paid, but mortgage providers must examine the possibility of including breakage fees on top of the capital repayment of the mortgage, of changing mortgages to variable rates and, in the process, make it a good deal more affordable for young people to make mortgage repayments. The last thing we wish to see at the end of this economic crisis is people driven from their homes onto local authority housing waiting lists because we did not support them in trying to ensure they could continue to pay their mortgages.
The affordable housing scheme must be reformed urgently to meet current realities. Some 30,000 people are in need of a home and housing solutions must be found if they are to be accommodated. There is a very substantial over-supply in the market at present. One positive aspect of the crisis is that at least a buyer's market now exists. Economies of scale and the upper hand of the purchaser could be used by the Government to invest in a national housing stock that could accommodate those who require housing. I am pleased to see the Minister of State indicated the Department is committed to working and collaborating with his partners. I urge him to engage with those in Focus Ireland, the Simon Community and Threshold to hear their views on how the housing crisis could be improved. The Labour Party is willing to engage on this issue at any time. I have said many times that if sensible solutions are produced by the Government we will certainly support them.
Ciarán Cannon (Progressive Democrats)
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I welcome the Minister of State and I thank him for his contribution. As he pointed out, we have seen a significant change in the dynamic associated with affordable housing in our local authorities. As public representatives, we have all worked with couples, tried to get them on the affordable housing list and to have them included in allocations in recent years. Now, the exact opposite applies and the Minister is asking local authorities to show great energy and imagination in the marketing and sale of affordable homes. There has been a turnaround in our fortunes.
I concur with the suggestion by a number of Senators, including Senator Butler, that we should consider allocating a proportion of the houses in question to social housing. The private sector's intent in proposing the rent-to-buy scheme was to generate cash flow for private developers to allow them to keep up with interest payments and so on. We should consider generating a cash flow for local authorities, which have invested a significant amount of money in providing affordable housing. Perhaps they were unable or unwilling to track affordable house prices downwards to match private sector prices. As Senator Butler pointed out, so-called affordable houses are considerably more expensive than houses in the private market. Previous speakers suggested that we must remove some of the constraints applying to the scheme. For example, few people are able to pay the significant deposit required. Flexibility in exiting the scheme must be examined.
My primary reason for contributing to this debate is to discuss a policy paper given to me by a friend in Galway, a lady with a fantastic entrepreneurial track record. She works towards the intersection of the social and economic regeneration agendas. She has much experience of such work in the UK, but she is now living in Ireland. She submitted the paper to me several weeks ago, but I have been awaiting an opportune time to discuss it. I will provide a copy to the Minister of State and his official.
The policy ties directly into what we are trying to do in terms of affordable housing. It has the added benefit of generating activity in the small to medium sized construction sector. She proposes the establishment of an independent, not for profit company to take possession of partially developed housing estates, which can primarily be found in small provincial towns and villages where, perhaps unwisely, a large number of estates were developed. There have been cases of vandalism and squatting. The potential for social unrest in such areas is significant, as the estates are effectively boarded up and surrounded by chain-link fences. There is no opportunity to see them develop in the near future.
The lady is adamant in pointing out that the agency would have a finite life and would not become another pointless quango wandering on for years without end. She suggests that it would buy semi-developed schemes from banks and developers and that each scheme's value should be based on the locality's average household income. As such, it would be real affordable housing for those in the area. The site's value would be the residual value of the cost to construct and manage it, which would be paid to the developer or landowner. The rest of the value would be written off and would constitute the private sector developer's contribution. The capital investment that he or she would receive would not realise what he or she previously considered to be the development's potential, but it would provide an "out".
The agency would be established as a not for profit, independent company that would be well governed, accountable to its stakeholders and extremely transparent. It would be small, lean and effective. It would also have a finite life. It would intend to deliver four main outcomes, those being, to finish and sell semi-developed private housing stock, to provide to targeted groups affordable housing based on what local people can achieve through their incomes, to create employment in the small to medium construction sector and to prevent ghost estates from turning into areas of anti-social behaviour. There is considerable potential for such behaviour. For example, some estates in Gort, Loughrea and Athenry are boarded up and fenced off and there is no sign that anything will be done with them in the near future. The agency would buy semi-built estates from the banks that repossessed them or from developers who are under severe financial pressure and do not have the resources to finish them.
This policy paper is worth considering. The agency could undertake a wider agenda. For example, the Homes and Communities Agency in the UK is based on a similar concept but operates on a larger scale. It is a direct arm of the British Government and has an annual budget of £15 billion. Several times, it has stepped in to partner with failing developers on key schemes.
If the proposed agency is to work, it must be established quickly. It could undertake one or two pilot projects. It needs to be independent, have key stakeholder involvement and Government backing and operate with a minimum of staff. It would be unlikely to remain intact after two or three years, as its approach would be unnecessary after the market started to readjust. It is likely to play an evolving role in the same sector. If not, it could be wound up.
We should explore this policy and I would be grateful to the Minister of State and his official were they to take the time to assess its impact. While some of its elements might not work, I am confident that the lady proposing it provided a considerable degree of detail. From her ten-year experience of creating similar agencies in the UK, she is confident that it would work. I suggest that the Minister of State and his official examine the paper and, if possible, revert to me.
Martin Brady (Fianna Fail)
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I welcome the Minister of State and thank him for the good job he is doing in the Department. The schemes he has initiated will make a considerable difference to people on the waiting list. In Dublin city, approximately 4,400 people are on the waiting list. From time to time, we must all make representations on behalf of people seeking housing, transfers and so on. Given the number of vacant houses in the city and its suburbs, that people are waiting for three or four years is difficult to understand. We should examine the matter.
The Minister of State and the Department are constantly liaising with local authorities. As he stated, the priority is to ensure that affordable homes are brought into use. While we all agree in this respect, a number of homes in my area in north County Dublin have been idle for the past six months or longer. Hundreds of houses have no one in them. That affordable homes for people in Dublin can only be found 40 or 50 miles away is an issue. People can buy a house on the open market for less than they can buy an affordable home in Dublin. This issue is raised regularly.
Local authorities' first priority is to sell units to those who are eligible under the affordable homes scheme. They have met with some success and I know of many people in the city who have availed of the scheme. I congratulate the local authorities on no longer ghettoising people in apartments. When that occurred, people revolted. The authorities have come to terms with this fact and dealt with the situation efficiently. People who engage in anti-social behaviour are now moved out. However, they must be housed elsewhere. I thank the Dublin local authorities for their good estate management, which the House should acknowledge publicly.
I thank the Minister of State and hope he continues his good work. I appreciate what he is doing in the Department. He never takes his eye off the ball, which is a good comment to be able to make about anyone.
1:00 pm
Paddy Burke (Fine Gael)
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I welcome the Minister of State, Deputy Finneran. While I also welcome this opportunity to say a few words on affordable housing, we cannot deal with it in isolation. One must link together all the other aspects of housing, including public housing, and must examine the overall context in respect of the present position regarding housing.
When the Fine Gael-Labour Government left office in 1987 in the middle of a recession, no one was waiting for a local authority house as sufficient housing was available. While that could be due to a number of reasons, including people emigrating to seek work, at the time there also was a vigorous campaign to provide public housing. We now face a situation in which each local authority has people waiting on housing lists but in which there are several different ways to accommodate them. These include affordable homes, rented property and the social leasing scheme for which the Minister of State recently announced €20 million, as well as areas in which the health boards assist in respect of private rented accommodation.
Undoubtedly, however, the Minister of State is in a corner in respect of affordable housing. It is a predicament for the Minister of State, his Department and the local authorities and the problem is how to get out of it. I note the Minister of State outlined that 40,000 new houses and 55,000 to 70,000 second-hand houses remain unsold. In other words, 110,000 homes are vacant and for sale in one form or other. This undoubtedly will depress the market and as no houses are being sold at present, the bottom price is unknown. I refer to a number of aspects of yesterday's budget including the levies imposed, the removal of mortgage interest relief and others in respect of the criteria used to assess a person for a loan. While I am not familiar with the exact criteria used, they include a calculation of something like 2.5 times the salary or combined salaries of the applicants. However, as people's gross and net income now will differ greatly, against what will new loan applications be assessed? Will they be assessed at 2.5 times net or gross pay, because the two amounts will differ considerably? This will depress the housing market further because people will only be able to secure a loan of a certain amount.
The Minister of State announced a significant increase in the limits for local authority housing loans from a maximum of €185,000 to €220,000. This means that a person on a low income can get up to €220,000, depending on his or her income. I believe that simply is an effort to maintain housing prices and that one must wait until the housing issue bottoms out. I presume this will entail the establishment of the national asset management agency as outlined by the Minister for Finance to buy the bad loans from the banks. I concur with Senator Coffey's comment that they should be put on the public market as otherwise we never will know the point at which the entire market will bottom out. We never will know the point at which land prices and house prices will bottom out. People will not buy until the market bottoms out and the sooner this happens the better for everyone. Moreover, this race to the bottom will entail a considerable degree of pain and negative equity for those who bought at the high end of the market. While I appreciate the Minister's actions in raising the limit from €185,000 to €220,000, in one sense it could lead people to getting higher mortgages to maintain the prices of affordable homes at a time when both the budget and the present number of houses for sale will have the opposite effect and will reduce prices considerably in the coming months.
Senator Coffey suggested that local authorities should auction some of their affordable homes and Senator Butler proposed that councils should lease them. This issue must be approached from several angles whereby the councils could lease out some homes and sell or perhaps auction others. Local authorities definitely will take a hit in this regard and consequently, ratepayers, that is, those who pay water and sewerage charges and rates, also will be obliged to stump up for this. Moreover, services also will be hit. The sooner local authorities learn what is going to happen in this regard the better. Nevertheless, as the Minister of State noted, it is a shame that houses are available but empty. Were local authorities to get some rent for them, it would be of assistance to them. Perhaps local authorities could rent them in the private sector while waiting for people to purchase homes. Although there may be several aspects to this issue, the Minister of State will be obliged to make some decisions.
While I compliment the Minister on the work he has done since taking over responsibility for housing, he is in a predicament in this regard. Either the local authorities or the Government will be obliged to take the hit and if it is to be the former, I hope it will not be passed on to those who pay water and sewerage charges and rates and that it will not affect essential services. There is great scope for cutting waste within local authorities and services should not be cut because this is a major issue. Housing also constitutes a significant part of a local authority's budget. Moreover, this will affect some local authorities more than others as some would have had more planning issues, housing developments and affordable homes than others. Although I do not know what will be the Minister of State's solution, he faces a predicament.
Could the €20 million leasing scheme announced by the Minister of State a number of months ago be included in this aspect of the affordable homes? As local authorities own the affordable housing stock, should this issue not be given first priority in respect of the €20 million he has raised for the leasing scheme? The Minister of State should examine this issue more closely. I do not believe that giving people additional money to buy such houses is the answer as that would lead them up the garden path. Such people would end up with higher mortgages and in negative equity within a year or two.
A friend of mine bought an affordable home in inner-city Dublin approximately three months ago. He paid a hefty price for it and although he knew what he was doing, he now regrets having concluded the deal because the house now is worth considerably less than was the case three or four months ago when he signed off on the deal. It is sad that a person who could not afford a home 12 months ago and who bought an affordable home now is in considerable negative equity in Dublin's inner city. Given the present position, I hope those who will buy some of the affordable homes on the books will not be in negative equity in three or six months' time.
Fiona O'Malley (Progressive Democrats)
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I welcome the Minister of State back to the House at what to an extent is an extremely difficult time for him. I do not refer to the immediate issue of his survival as a Minister of State, as I am sure he will, but to the question of dealing with affordable housing in the present climate. I do not envy the Minister of State that task. He is damned if he does and damned if he does not. Given the housing market, the international economic climate and the banking sector, it is very difficult to legislate and provide for housing in this fluid market. I do not envy the task of the Minister of State because the relevance of plans he has made has expired. That is not so say the plans should be jettisoned. It is difficult to provide for housing in this climate. That does not mean it cannot be done.
In Dún Laoghaire-Rathdown there is an acute problem because of the cost of development land. The local authority never had a good track record of providing social and affordable housing. The lists never moved and a predecessor in the role of the Minister of State, Bobby Molloy, used to give out to me continually about what the local authority was doing. At the time, land prices were soaring and the cost of providing any social and affordable housing was astronomical and did not make economic sense. This is one area where affordability is now within reach of people. That is to be welcomed. All of us who own properties see a devaluation but that is theoretical. What is most important is that homes become and remain affordable for families. The schemes the Government has devised have been successful in trying to reach out to provide home ownership.
From our history or for whatever reason, Irish people have a strong affinity with owning their homes. It is something everyone wishes to aspire to, even though one wonders about the wisdom of it. In view of the security it provides the Government has put energy, effort and resources into facilitating people to own their homes.
The Minister of State referred to planning in the document Towards 2016 requiring revision because of economic circumstances. It is a time when a cool head is needed and everyone will be giving the Minister of State conflicting advice. Nobody can read the markets; even actuaries or financial experts have difficulties reading the markets correctly.
Fiona O'Malley (Progressive Democrats)
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Has he read the markets correctly? It is easy to be wise after the event and to comment on it——
Paudie Coffey (Fine Gael)
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The Government Senators would not listen, they did not want to listen.
Fiona O'Malley (Progressive Democrats)
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——but to forecast what might happen is particularly difficult. This is particularly true when providing services as fundamental as providing a roof over one's head. The upside of this economic downturn is that more people can provide homes for themselves. Whether this is provided by local authorities or by the person, it is a good thing.
In every town and some villages, many houses were built with tax incentive schemes. In some cases there is a tight qualification of how these houses are to be used, particularly those in holiday resorts. I question the wisdom of holding fast to those conditions, which are no longer relevant. I ask the Minister of State to consider removing people from the obligation to have these only as holiday lets. They should be available for purchase by the local authorities on behalf of those on housing lists or other people.
We need a fresh approach to the housing stock we have. It is something we cannot afford to ignore. There are many vacant houses and we must consider how to get them occupied and marry the vacant houses with the people who need homes. I would welcome an initiative on this. We must reinvest with human capital in these smaller towns and villages. These were places where people would spend money on holiday homes and local residents were priced out of the market and had to leave. We have the opportunity to provide homes for local people at proper local prices. This is to be welcomed.
The one place we can get value is in the housing stock. We must provide local authorities with enough resources to fill the houses with people in need. I look forward to hearing the revised plans for affordable housing. It is very hard to set any fast ground rules because this is a market in flux. One of the most important financial commitments one makes is for a home and one does not want to see the value of it decline. People are slow to commit to purchasing. There comes a time when people must stop looking at the market and think about investing in their homes for their families for life. One consequence of this may be that people will invest in their homes for life, not as a speculative venture. The return to solidity in how people view their home is to be welcomed.
Michael Finneran (Roscommon-South Leitrim, Fianna Fail)
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I am glad this debate took place. People have put thought into it and have views. I am impressed by this.
If there is a difficulty with the sale of affordable homes today, with 3,700 in stock and 50% of them to be sold off, it is important to state that they are part of the national infrastructure and are available for people to live in. Those 3,700 houses will be used for 3,700 families in one form or another. What I am getting from the House is that people have certain views, some of which are mine. Even the houses that are not in public ownership are part of the infrastructure. There may be difficulties in unfinished estates. Time will show that they are there for the use of the public in a private or public manner. I have brought forward an innovative scheme for up to 4,000 of these houses to be dealt with in 2009 under the long-term leasing scheme.
Although local authorities have traditionally worked on the basis of building in different areas, old systems do not have to stay as they are. People must move on and think anew. Life cycles have changed etc. I am asking people in the political system to look at what we are doing so we do not stick our heads in the sand thinking that old schemes are those which served us best. They delivered what we wanted in their time but today we have an opportunity because of the overhang of houses.
It is very important for us to avail of that for the public rather than the private interest, although it may be of benefit to private interests if they could lease their houses. It may kick-start the construction industry in the residential property area somewhat, but that is not the motive. There are people on housing lists and it is important that we adapt and develop schemes which are suitable to their needs in the present time.
I take on board Senator Coffey's comments and we are moving on those areas. We are using such accommodation for social purposes and if local authorities come forward with proposals we will not close our minds to different approaches. As a Minister of State, I am certainly not closing my mind to it; I am open to suggestions from the local authority system. There is much flexibility in housing authorities, which are mostly local authorities. The 20% figure is a maximum so there is flexibility. There are rental accommodation schemes and other programmes.
If local authorities in certain areas come forward with a proposal, I will not close the book on any of them. I would be open to looking at them on the basis of how would provide a home for a family or a person in that functional or catchment area.
Michael Finneran (Roscommon-South Leitrim, Fianna Fail)
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The area of repossessions, which Senator Coffey spoke about, is emotive. When the credit crunch and the difficulties of people losing their jobs became evident, I found when I took over this portfolio that there was a code of practice for lending institutions. This did not cover all institutions and it did not have a statutory basis so I moved on these issues. At the moment all lending institutions are covered under the code of practice, and there has been a statutory instrument since February. There are strict criteria and on a regular basis my officials and I meet the two relevant organisations, namely, the regulator and the Irish Banking Federation.
Michael Finneran (Roscommon-South Leitrim, Fianna Fail)
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I am talking about repossessions. This is an emotive issue and there are many cases in the courts. Nevertheless, there are not many housing repossessions and many such cases relate to farm machinery etc. There is a mix of cases. The information available to us is that there is a limited number of housing repossession cases. There is an increase in the number of people who are getting into problems with arrears. The rate has increased by approximately 15% or 20% and will probably rise further because of people losing their jobs. The information is that lending institutions are dealing with people and rearranging their finances. We have made it very clear to the banks — representatives were in two weeks ago — that repossession should be a last resort and they should address the matter. The borrower must address the issue also by engaging at an early stage.
I got advice towards the end of last year that no property can be repossessed for two years but I do not believe in that principle. If that is followed, nobody will engage as they approach the end of that period. It is important for us to advise people to engage at an early stage and work out a system if possible.
Yesterday I listened to a radio programme while travelling in the car and I found that people on fixed-rate mortgages are having difficulties. I immediately asked the regulator to give a report on this because there is a variation between what one lending institution is charging for a breakage and what another charges. Some institutions have no breakage fee. There should be some uniformity on the matter. Some people were in circumstances where they believed it was a good idea to go into a fixed mortgage and they are now paying 3% more than somebody on a variable rate. An opportunity to switch to a variable rate can be very expensive as in some cases people are asked for €15,000, €16,000 or €19,000. Different figures were given.
The code of practice is there with regard to repossessions. I do not have the complete figures before me but I will make them available. They deal with the matter up to the end of 2008 and there may have been some increase in the first months of 2009. We do not know what that will be.
With regard to the leasing scheme I mentioned, I find it hard to understand why some local authorities are not promoting or availing of the scheme. Such authorities may nevertheless have 150 or 200 people on the housing list. It is not appropriate for authorities to act in this way. This was a Government decision implemented by me and it is not a matter for authorities to pick and choose from schemes. It is more important that the housing sections of local authorities avail of the Government schemes that are aimed at taking people off lists. The long-term leasing scheme has enormous potential.
Michael Finneran (Roscommon-South Leitrim, Fianna Fail)
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Yes. There is much potential to take people off lists through this and I am thinking of ways to advance it further. Very few local authorities have publicly advertised the scheme. The local authorities in Senator Coffey's area in Waterford have made no requests to my Department for the schemes. I do not have the figures here but I am sure that in both those authorities there are many people on the lists that could be accommodated under the long-term leasing scheme. We will go into this further, but €20 million of the capital budget is available to the local authority system to house from 2,000 to 4,000 people because rents are coming down in 2009. There is no reason this number cannot be increased in 2010 or 2011 if the scheme is successful.
Senator Butler commented on the move to social housing and raised the figure of 50%. I do not disagree with his comments, although the current maximum is 20%. As applications come in we are considering the matter. I do not want to create ghettoes again, as somebody mentioned, where all the estates would be made up of social housing. In so far as is possible, I want to maintain sustainable communities with a mix of private, affordable and social housing, if that is possible.
Michael Finneran (Roscommon-South Leitrim, Fianna Fail)
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I do not want to switch everything to social housing either. I want to leave a certain type of community. Many of the social problems in our big estates arise from mono-tenure occupation. We are regenerating the older estates in places such as Ballymun, Limerick and Sligo. The policies which existed may have seemed correct in the past but they were not the best policies. A mixed accommodation is better and leads to a sustainable community. In such cases, social problems do not develop to the extent that they did in the past in mono-tenure estates.
I do not know about the banks and financial institutions. I would love to think they are making more credit available, but I am not sure that is exactly the position. A recapitalisation programme was introduced but I know people are still finding it difficult. People telephone and write to me as a result of difficulties they face. An option has been made available to such people in the form of the home choice loan. The take-up in respect of the latter has not been what we might have expected. As already stated, however, it is provided as an option only for people who cannot obtain loans elsewhere. Where banks or other financial institutions seek 20% deposits from customers, we reduce it to 8%. Therefore, the loan will amount to 92% of the overall cost of one's home. Funding is available from the Housing Finance Agency, through the four local authorities that are responsible for making the home choice loan facility available, to support people who wish to go down this route. I thank those local authorities for their assistance in this regard.
Like Senator Quinn, I recall the housing agencies in London and the people who were involved with them. The Senator referred to his involvement some years ago with a committee of the Archdiocese of Dublin that was established by the then archbishop to help get people on the housing ladder. The co-operative system remains in place and the voluntary groups operating throughout the country have been extremely successful in filling the gap that existed in this area. Such groups provide a large percentage of the homes required by elderly people, those with disabilities, etc. My Department provides funding directly to the local authorities in respect of these groups, which then receive 100% grants. These voluntary groups do a great deal in the context of meeting the housing needs of people in the categories to which I refer.
Senator Quinn also referred to the listing process and the fact that people who lost their homes are excluded from purchasing affordable houses. Such people may have lost their homes for particular reasons, but I assure the Senator that I will give consideration to this matter. Senator Quinn also called for a flexible approach to be taken.
Senator Cannon asked that a percentage of housing be allocated as social housing. The Senator's thinking is very much in line with that of the Department. We are flexible in respect of this matter. Senator Cannon referred to a friend of his from Galway who worked in the UK but who is now resident in Ireland. The Department will certainly consider the paper she submitted to the Senator.
Senator Brady stated that there are 4,000 people on the housing lists. I accept that this is a large number. However, it must be remembered that many of those on the lists have already been accommodated under the different schemes. My Department dealt with almost 19,000 households in 2008, either by providing houses or by offering assistance through the rental accommodation scheme, rent supplement or whatever. People are being catered for and 19,000 households is a large number with which to deal in one year. While every scheme does not deliver exactly what we desire, there is no doubt that, by and large, the many housing authorities try to assist people.
I accept that some of the schemes could be tweaked and we are open to suggestions in this regard. I am not particularly wedded to any scheme and I am prepared to consider alternatives. What is the goal of any public representative working with his or her local authority or a Minister working with his or her Department? It is to ensure that people have homes in which to live. That must be our focus.
Senator O'Malley made a number of thought-provoking comments. I accept what she said regarding particular holiday homes being built with certain conditions attached. One or two county managers have already tabled motions or had provisions included in their county development plans to release such houses. It is a matter for local authorities to take action in this regard. If there are 30 holiday homes lying idle in a particular local authority area and if that authority's housing list indicates that 30 people require houses, it is open to the authority to change the scheme, either by means of including a provision in the development plan or tabling a motion to be decided upon by members. I have no difficulty with such houses being released. It has already been done in a couple of cases and I provided advice in respect of it to one county manager. Local authorities are housing authorities and if they want to change schemes, they have the power to do so. Tax implications, etc., may arise in certain circumstances but that is a matter for the individuals involved.
Local authorities entered into agreements at a time when house prices were at a high. My predecessor issued a word of caution in 2007 with regard to prices being unsustainable. My Department was responsible for flagging the fact that developers were involved in inflating house prices to a large extent. Everyone recalls the gazumping that occurred and the fact that €50,000 might be added to the price of a house during the course of a single day. My predecessor stated at the time that this approach was wrong.
I hope I have responded to the issues raised by Senators and also to the strong points they made. As already stated, I am open to suggestions with regard to how progress might be made in respect of the housing lists. For one reason or another, some 55,000 people throughout the country are on those lists. Local authority housing officers and officials of my Department have a major responsibility in respect of these individuals.
The council loan was increased from €185,000 to €225,000 because people were not able to buy affordable houses in Dublin for €185,000. The increase was introduced, therefore, to ensure that, if they wish to do so, people will be able to obtain these loans in order to buy affordable houses. Like the home choice loan, the council loan is merely a facility and there is no pressure on people to use it. However, if they are experiencing difficulties in the open market, they may wish to avail of it. I do not wish, in any way, to place people in a position whereby having taken out a mortgage, they might find themselves in a position of negative equity in the future. I would prefer it if people were dealt with through the social housing programme rather than see them affected in this way.
The Housing (Miscellaneous Provisions) Bill, which was introduced in this House and which is before the Dáil at present, makes provision for an incremental purchase scheme. I have always believe that when a local authority makes a house available to someone, that authority no longer owns that property to any great extent. Such a house might be passed from generation to generation of one family. There is then a tenant purchase scheme under which the people occupying the house might eventually buy it. Why not offer the people involved the opportunity to buy the house when it is first made available to them, particularly if they are in a position to make repayments of a certain amount each month? Under the incremental purchase scheme for which the Bill to which I refer makes provision, a person will be able to state from the outset that he or she can afford to pay a mortgage worth 40% of the value of the house made available to him or her. He or she would, therefore, be the owner of that house from day one. The scheme will allow people to have ownership of their homes and local authorities will obtain a financial return that can be invested in the provision of further housing.
Today's debate is about affordability. There are some 3,700 affordable housing units available at present. Information emanating from local authorities indicates that, through the affordable housing scheme, they will be in a position to off-load half of these to those who are eligible. The local authorities did the deals with regard to these houses. In circumstances where difficulties may have arisen, however, I am open to suggestion in respect of such houses. I will not stand in the way of a local authority that puts forward a proposal which will ensure that these houses will come into public use. If that does not happen, we are prepared, as a last resort, to consider the matter in the context of the open market.