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

Question 30: To ask the Minister for the Environment, Community and Local Government if, in the wake of the Keane report, any evaluation has been done of the shared ownership mortgage scheme operated through the local authorities; the extent to which the flaws in the scheme have emerged, with particular reference to the extent to which borrowers at a vulnerable end of the market are being forced to pay well in excess of a mortgage instalment while potentially owning only half of the property; the provision for the remaining equity to remain in the ownership of the owner; if he will ensure that the scheme is amended and that provision can be made for borrowers under the scheme to dispose of the property in a fair and equitable way and ensure that such borrowers are not forced to live indefinitely in overcrowded conditions which did not apply at the time of purchase and where relocation may be necessary for a variety of reasons including employment; and if he will make a statement on the matter. [37655/11]

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

Question 144: To ask the Minister for the Environment, Community and Local Government the extent to which he expects to be in a position to review the operation of the shared ownership mortgage schemes operated by the various local authorities; if his attention has been drawn to the difficulties the scheme has created for a large number of borrowers who find themselves locked into a mortgage from which they cannot extricate themselves in the event of changed circumstances such as job relocation; and if he will make a statement on the matter. [37979/11]

Phil Hogan (Carlow-Kilkenny, Fine Gael)
Link to this: Individually | In context

I propose to take Questions Nos. 30 and 144 together.

Any borrower, including a borrower purchasing under the shared ownership scheme, who is facing difficulties in meeting mortgage repayments, should engage proactively and constructively with the lender to seek to achieve an agreed solution. The services of the Money Advice and Budgeting Service are also available to such borrowers and support is available through the Supplementary Welfare Allowance Scheme.Provisions regarding lending by local authorities for the purposes of house purchase are set out in section 11 of the Housing (Miscellaneous Provisions) Act 1992. If a loan stands in default, section 11(10) provides that a local authority may make such monetary arrangements with a borrower as they consider equitable to take account of the particular circumstances of the borrower.

In addition, my Department issued comprehensive guidance to local authorities on the treatment of mortgage arrears, including local authority mortgages for shared ownership transactions, in March 2010. That guidance was closely based on the Central Bank's first statutory Code of Conduct on Mortgage Arrears to ensure that cases of local authority mortgage arrears are handled in a manner that is sympathetic to the needs of the particular household, while also protecting the position of the local authority concerned. To reflect the content of the Central Bank's revised Code of Conduct, which replaced the previous code on 1 January 2011 and was informed by the deliberations of the Expert Group on Mortgage Arrears and Personal Debt, my Department is preparing updated guidance to local authorities in consultation with the City and County Managers Association. Mortgage interest supplement under the Supplementary Welfare Scheme, administered by the Department of Social Protection, is payable, subject to the qualifying conditions of that scheme, in respect of mortgages under shared ownership transactions, in the same way as in the case of mortgages generally.

Under the Shared Ownership Scheme, the rent charged on the local authority's equity in a shared ownership transaction is to cover the funding costs to the Housing Finance Agency which are based on borrowings at the prevailing interest rates. Any difference between the rent and prevailing interest rate is reflected in the capital outstanding on the property i.e. if the rent charged in any period is greater than the prevailing mortgage interest due on the local authority's share, the purchase price of the outstanding equity will be reduced accordingly. Support is available to purchasers under the scheme through rent subsidy. This is available to households 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.

In terms of disposal of properties, purchasers have the right to buy out the local authority's share and acquire full ownership at any time. Alternatively, this may be done by purchasing, from time to time, additional shares of the authority's equity. For Shared Ownership transactions commenced from 1 January 2003, the cost of purchasing an additional share or the redemption value of the outstanding share is based on its initial cost adjusted annually to compensate for differences between the rent paid on the local authority's share and the interest calculated by reference to the prevailing variable interest rates. The rent payments under the Shared Ownership Scheme are intended largely to meet the cost of funding provided by the Housing Finance Agency to local authorities to finance the rented share in the equity of the house.

For transactions commenced before 1 January 2003, the cost of purchasing an additional share, or the redemption value of the outstanding share, is its initial cost updated in line with the most recently published Consumer Price Index to the time of purchase. Accordingly, the scheme is structured on the basis that, on redemption, the price of the outstanding share is not determined on the basis of a percentage of current market value, but is, rather, a function primarily of its initial capital cost. While this may seem unfair to those living in shared ownership properties in the current market, it is important to note that the purchasers were in the position of having their share of the property rise in value when the market was rising. The Government's housing policy statement, which was published on 16 June 2011, announced the standing down of all affordable housing schemes, including the shared ownership scheme.

Question No. 31 answered with Question No. 7.