Bernard Durkan (Kildare North, Fine Gael)
Link to this: Individually | In context

Question 120: To ask the Minister for the Environment, Community and Local Government if his attention has been drawn to the concerns of families with shared ownership mortgages who are currently at a serious disadvantage arising from a situation of almost nil equity in their homes despite paying a mortgage on half the value of the property and rental on the remainder of property for several years; if it is intended to examine this issue with a view to resolution; and if he will make a statement on the matter. [15864/11]

Willie Penrose (Longford-Westmeath, Labour)
Link to this: Individually | In context

Under the shared ownership scheme houses are acquired by a local authority and leased to the shared owner, who purchases at least 40% of the value of the house and rents the remaining equity from the local authority. The local authority finances the transaction by borrowing from the Housing Finance Agency. The purchaser may buy out the local authority's share at any time and the only requirement on them to do so is that they do it within the 25/30 year timeframe.

As the shared ownership scheme commenced in 1991, the first of the transactions are approaching the end of their term and local authorities have brought to my attention some cases where the household may not be in a position to buy out the local authority's share within that timeframe. The terms of the shared ownership scheme are kept under review by my Department and this particular matter will be considered in this context. For transactions commenced on or after 1 January 2003, the annual rent is calculated at 4.3% of the value of the local authority equity and the rent is increased by a fixed 4.5% on 1 July each year. The rent is used to repay the cost of the local authority equity to the Housing Finance Agency and, depending on the level of mortgage interest rates obtaining, any surplus may also be used to pay down the capital outstanding on the local authority share at the end of each year. Local authority mortgage holders – including those who purchased under shared ownership – also benefit from extremely keenly priced interest rates which generally run at around 0.5% lower than the best rates available in the market.

Further support is available through rent subsidy. This is available to households purchasing under the Shared Ownership Scheme who have a gross household income of up to €28,000 per annum in the preceding tax year. The level of subsidy ranges between €2,550 for incomes up to €13,000 and €1,050 for incomes up to €28,000.