Written answers

Tuesday, 6 November 2012

Department of Environment, Community and Local Government

Local Authority Housing Provision

Photo of Brendan GriffinBrendan Griffin (Kerry South, Fine Gael)
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To ask the Minister for Environment, Community and Local Government if he will assist long term tenants of local authority houses with impeccable rent repayment records who wish to purchase their houses but are unable to access credit due to their age; and if he will make a statement on the matter. [47969/12]

Photo of Éamon Ó CuívÉamon Ó Cuív (Galway West, Fianna Fail)
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To ask the Minister for Environment, Community and Local Government the reason persons in receipt of social welfare payments are not eligible for a council loan to buy out their own houses under the tenant puchase scheme, even if the repayments on such a loan would be less than their current rent; and if he will make a statement on the matter. [48229/12]

Photo of Jan O'SullivanJan O'Sullivan (Limerick City, Labour)
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I propose to take Questions Nos. 702 and 717 together.

In advancing loans for house purchase by lower income borrowers it is of critical importance that local authorities make such funding available on the basis of sound lending criteria. My Department and individual local authorities have a responsibility to ensure that mortgage lending is prudentially based and that the capacity of a borrower fully to service a loan over the full term is realistically assessed and stress-tested. Provisions governing mortgage lending by local authorities are set out under the Housing (Local Authority Loans) Regulations 2012 and associated credit policy.

The regulations provide for an upper age limit for borrowers of 70 years and a maximum loan term of 30 years. The age limit implies that borrowers over 40 must have a shorter loan period which impacts on their monthly costs of borrowing. In these instances, capacity to repay over the shorter period rather than the age of the applicant is a determining factor in respect of a loan application.

Persons in receipt of social welfare payments are not specifically precluded from purchasing their home under any tenant purchase scheme. However, if the applicants are applying to fund the purchase through loan finance from the local authority they must meet the criteria which apply to such loans. While, as a general rule, the credit policy provides that loans are not available to those in receipt of unemployment/social welfare benefits, an exception may be made where there is a primary income of a permanent waged/salaried nature and where the secondary income is from the Department of Social Protection.

In such cases long term social welfare payments can be considered, provided the long term nature of the payment is confirmed. The final decision on whether to grant/refuse an applicant lies solely with the relevant local authority. All local authorities must satisfy themselves on the financial risk they are undertaking. However, the relevance of the difference between projected mortgage repayments and current rental payments for a prospective purchaser is very limited. It takes no account, for example, of the fact that while rent levels can be adjusted to reflect changing household income, mortgage repayments cannot. Nor does it take account of the additional costs taken on when a household becomes a homeowner thereby assuming responsibility for the on-going maintenance of the home.

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