Tuesday, 4 October 2016
Commencement Matters (Resumed)
I welcome the Minister of State, Deputy Damien English. This issue relates to the need for the Minister for Finance to ensure that the introduction of a first-time buyer's tax relief is extended to those who have had to surrender their homes on foot of a court order, for example, those who have been divorced or those whose house has been repossessed. Starting over again will be a lot harder as the period between now and the retirement age of 66 is shorter and the repayments will be much higher. In many cases, people's circumstances have changed and they are now in a position to start over by buying a new home. However, those who have had to surrender a home on foot of a court order find they have to pay a deposit of 20% under the Central Bank rule. I ask the Minister for an extension of the tax relief scheme to include all those who have lost their homes on foot of a court order.
The Minister of State last week addressed the issue of local authority mortgages and I believe this needs to be addressed in the budget. The statistics in regard to mortgages issued through local authorities through the home choice loan scheme demonstrate that since 2009, only 21 loans have commenced, which is an average of just three a year over a period of seven years. This is a huge issue that needs to be addressed given that in the same period, some 1,100 standard local authority mortgages have commenced. I ask the Minister of State to examine the provision of mortgages through the local authorities and to extend the scheme and the cap, as there is an issue in this regard. Overall, some people are not qualifying for mortgages and this needs to be addressed.
I am here to represent the Minister for Finance, who sends his apologies as he cannot be present. The second issue raised by the Senator is one that was raised in the House last week and it is under constant review. I made it clear to the Senator's colleague that we will take on board suggestions. However, with regard to schemes that have a low drawdown, we cannot force people to take part in a scheme. They are choosing the other scheme as they judge it has better conditions, which has resulted in the respective figures being 1,200 versus 21.The reason for that is that product suits them better but I made it clear if the Senator has ways to make it better, we will take on board all suggestions. There was a lack of suggestions in last week's debate. We are open to suggestions and the Minister and I are keeping everything under review because we want to make mortgages available to people who want to buy homes, where appropriate. Local authority mortgages are only available if applicants have been refused credit by two lending institutions. We will take on board all suggestions.
With regard to the issue raised, the macroprudential rules are set by the Central Bank of Ireland, which is independent of the Government. The Minister trusts that the Senator and her party have brought their concerns regarding the classification of the cohort of buyers that she referenced to the attention of the Central Bank as part of its review of the macroprudential residential mortgage lending measures.
A key priority for the Government is the development of a fully functioning housing market that responds adequately to the needs of our citizens. To this end, Rebuilding Ireland - An Action Plan for Housing and Homelessness, was launched on 19 July last by the Minister for Housing, Planning, Community and Local Government. He has primary responsibility for the delivery of this action plan with cross-departmental support, including from the Departments of Finance, Health, and Social Protection. As a complement to the structural actions contained in the action plan, a commitment to introduce a new tax-based help-to-buy incentive was also announced, with the full details of the incentive to be provided on budget day.
The Government is conscious that there is a supply shortage of housing and of the challenges individuals face in meeting the macroprudential rules for residential mortgage lending. It is against this background that the Minister for Finance has asked his officials to design the new incentive. One important consideration that was taken into account was that the incentive could not be designed to circumvent the requirements of the macroprudential rules but to assist home buyers in meeting the deposit aspect of those rules. In this regard, the Senator will be cognisant of the supports that have been provided by successive Governments in recognition of the difficulties faced, in particular, by first-time buyers. These have taken the form of grants and additional mortgage interest relief for such purchasers.
Subject to the approval of the Oireachtas, eligibility for the new incentive will be backdated to take effect from 19 July 2016. This was the date of the publication of the action plan and the Government did not wish to cause any interruption in the housing market as a result of potential purchasers deciding to defer purchases, pending the commencement of the incentive. The Minister for Finance will outline the full details of the incentive, including eligibility criteria and implementation method on budget day next week. He is sympathetic to the situation of those who have had to surrender their homes on foot of a court order. However, there are many potential scenarios in which such orders have been or will be made and it would be difficult to treat all of those scenarios in the same manner. Some individuals may have access to a residual equity amount following such orders. Furthermore, those who have divorced, may have had access to grants or increased mortgage interest relief by virtue of previous classification as a first-time buyer. It would again be the case that such individuals may have sold a family home, with the proceeds being split between the parties.
There are many individuals who face the difficult task of saving the increased deposit required by the Central Bank macroprudential rules for non-first-time buyers. However, this rule takes account of existing equity that can be available to such buyers. The Minister has concerns that providing additional access to relief for special cases would lead to additional lobbying across the board. Responding legislatively to difficult cases does not, in general, make good tax law or practice. Furthermore, he is of the view that it would be inequitable to treat one class of non-first-time buyers more beneficially than another class, particularly when such individuals may have already received additional supports from the State when they first bought homes. I hope this brings clarity to the issue for the Senator
I welcome the Minister of State's response. He referred to homelessness but there is a housing crisis and a lack of supply. People who are unable to secure a mortgage will end up renting for the rest of their lives and something needs to be in place for them. To get a local authority mortgage, one has to have been refused by a bank and a building society. This applies to first-time buyers as well. I want to make sure everybody can get a mortgage. I am delighted first-time buyers will get tax relief but that needs to be extended. If it is not, the housing crisis will worsen because the core issues leading to homelessness will not have been addressed.
There are many causes of homelessness, including financial problems, illness and family issues. The help-to-buy scheme we are proposing in the budget will not be the only solution. The action plan for housing sets out 84 actions.As many as 84 actions have been set out. The Minister and I are confident that with the implementation of the 84 actions and a spend of €5.5 billion, which has been set aside to drive this agenda, we will tackle the crisis in housing accommodation and homelessness. We can fix this issue if we have the full support of all Departments, the Independents and €5.5 billion of taxpayers' money.
Please bear in mind that the incentives to be identified in the budget next week will target a particular sector. It is quite clear to us that first-time buyers are finding it difficult to purchase a house due a low supply of houses. What will be implemented in the budget next week has to do with the supply of housing. At the moment, there is not a supply of houses for that price range or market and, therefore, we must stimulate the first-time buyers' market. One must analyse the solutions in terms of the overall action plan and not just what will be in the budget next week to address the concerns raised here today.