Written answers

Thursday, 24 June 2021

Department of Housing, Planning, and Local Government

House Prices

Photo of Aindrias MoynihanAindrias Moynihan (Cork North West, Fianna Fail)
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27. To ask the Minister for Housing, Planning, and Local Government the measures being put in place to ensure that the introduction of the shared equity scheme will not create a rise in average house prices; and if he will make a statement on the matter. [33812/21]

Photo of Darragh O'BrienDarragh O'Brien (Dublin Fingal, Fianna Fail)
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The Programme for Government, commits to putting affordability at the heart of the housing system.

The Affordable Housing Bill 2021, the first ever stand-alone legislation providing for affordable housing measures, is currently before the Oireachtas, and provides for three schemes delivering on the Programme for Government commitment to put affordability at the heart of the housing system and prioritise the increased supply of affordable homes through (1) affordable homes on local authority lands, (2) the introduction of a new form of tenure in Cost Rental, and (3) a new affordable purchase shared equity scheme.

The Affordable Purchase Shared Equity Scheme, one of the provisions of the Bill, will enable first-time buyers to buy a new home, much sooner than would otherwise be the case, through bridging the gap, by means of an equity stake, between the mortgage available to them, and the price of the new home they want. At the same time, it will also build confidence in the construction sector to increase much need housing supply.  Budget 2021 had made available €75m to support the scheme and it is estimated that this level of intervention could account for approximately 1%-2% of housing transactions annually.

Extensive engagement has been undertaken with key stakeholders to ensure the optimum design of the Scheme, and the significant feedback has been factored in to the development process, and I am confident that the final design of the Scheme can mitigate any potential inflationary risks.

A 2019 report by the UK C&AG and the National Audit Office concluded that a similar scheme in England increased housing supply by 14.5% and prices by just 1% compared to homes not purchased under the scheme.  However, I intend to apply more targeted measures than the English scheme to ensure that potential risks can be addressed and mitigated before the introduction of the Affordable Purchase Shared Equity Scheme later this year. The Scheme will be specific to new builds, and will establish conditionality linked to maximum allowable home price by local authority area and maximum levels of equity support that will be made available. Any financial support provided will be limited to bridging the gap between the maximum mortgage available to the household and the open market price of the home. 

In terms of the prices for new homes under the Scheme, the setting of maximum allowable home prices will informed by the CSO recorded median prices of new first-time buyer homes sold by area, thereby targeting homes in the lower half of recorded sales prices over the previous year. The proposed caps will be reviewed and finalised in advance of the scheme’s deployment, and will be kept under review thereafter.

Finally, I have previously confirmed that the scheme will be formally reviewed after one year of operation.

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