asked the Minister for Local Government if he is now in a position to accept the latest recommendations on local authority house purchase sent to his Department by Dublin County Council.
Written Answers. - House Purchase Recommendations.
66.
My decision on Dublin County Council's recommendations was conveyed to the council by letter dated 5th December, a copy of which, with your permission a Cheann Comhairle, I propose to circulate with the Official Report.
Following is the letter:
Department of Local Government
O'Connell Bridge House
Dublin, 2.
The Secretary
Dublin County Council 11 Parnell Square DUBLIN 1.
5th December 1972
A Chara
I am directed by the Minister for Local Government to refer to your letter of 17th October, 1972, regarding a scheme under section 90 of the Housing Act, 1966, for the sale by Dublin County Council of houses to existing tenants and to state that he has considered the proposals put forward by the Council.
As indicated in previous correspondence, a local authority making a sales scheme must base the selling prices on the market or replacement value of the houses, less the generous discounts of up to 30 per cent of these prices. They cannot legally make, nor can the Minister approve, a scheme on any other basis. A local authority disposing of any capital asset must have regard to the fiduciary duty they owe to the community which they represent and, in the absence of specific authority, cannot so dispose of public property as to benefit a limited section of the inhabitants to the financial detriment of the general body of ratepayers in their district.
Fresh housing needs are constantly arising. In selling dwellings in their housing estates a local authority reduces the potential pool of accommodation available to them, as a result of vacancies, to cater for part of these needs. Furthermore, the proceeds of sales of houses should, in large measure, be applied to the provision of new houses for letting to families in need of accommodation. In making a sale scheme, the Council cannot, therefore, ignore either the current costs of replacement dwellings or the interest rates at which they must borrow capital to provide the dwellings. The proposal to sell houses at an effective interest rate much lower than that payable on current housing loans is analogous to a reduction in the market values assessed by the Council's valuers and could not be approved. For example, the purchase annuity proposed in the case of a semi-detached house at Glasmore Park, Swords, would, at current borrowing rates (plus 0.5 per cent for administrative costs), be sufficient to defray a 35 year loan of approximately £1,970, whereas the gross 1970 value of the house, as assessed by the Council is £3,600 and the actual all-in-cost, in December, 1967, was £2,520.
In view of the fact that the houses in the sale scheme have been provided out of 50 year loans while the maximum lending period under sale schemes—as with all house-purchase loans—is 35 years, it is not clear how it was intended to operate the arrangement under which a tenant's purchase annuity would be adjusted over the sale period so that it would be equivalent to the Council's actual loan charges on the house, plus an additional 0.5 per cent to cover administrative and other costs. However, even if such an arrangement were feasible it could not, for the reasons set out above, be approved in the context of a sale scheme.
The Minister notes that—apart from the considerably more generous discounts now available—the tenants of some of the houses comprised in the draft sale scheme could have qualified for more favourable purchase terms as regards market values and interest rates had the County Council made a scheme immediately after the coming into operation of the relevant regulations under section 90 of the Housing Act, 1966.
He could not, however, agree to a departure from basic principles which apply to all local authority sale schemes in order to compensate some tenants in County Dublin for the delay on the part of the council in making a scheme. Were he to agree to the proposal to relate the tenant's purchase annuities in County Dublin to the interest rates payable by the County Council on the loans for the provision of the houses, he could not reasonably refuse to approve of a similar concession to all other local authorities, some of whose loans, still current, were issued at interest rates as low as 2½ per cent.
The Minister has also noted the opinion of the Council that tenants purchasing their houses under the sale scheme should receive financial benefits corresponding to those for which persons buying new private houses qualify. An examination of the relative financial concessions available to the two categories will, however, make it clear that the balance of advantage under the existing arrangements lies substantially with the Council tenant who opts to purchase. The following points are relevant in this regard.
(1) A private purchaser gets a maximum State grant of £325 and, in some cases, a supplementary grant of up to an equal amount—making a maximum total of £650. His purchase price is also liable to be increased at any stage up to the closing of the contract because of rises in wages and other building costs.
Under the sale scheme prepared by the Manager, a Council tenant could get a maximum discount of £575. The purchase price of his house will, until 31st March, 1973, be on early 1970 values which, in effect now represents an additional concession of about £550 to £700 from public funds— making a maximum total of £1,275.
(2) A private purchaser gets a graduated remission of rates which over the nine-year period, can be worth an estimated average of £550.
While the tenant purchasing his house cannot qualify for a rates remission, he has already as a rule, benefited from rent subsidies during his tenancy. For example, in the case of the first three schemes listed in the schedule to your letter, the average rent subsidies contributed by the State and the Council up to 31st March next will have totalled approximately £370, £560 and £440 per house in the Balbriggan, Shankill and Swords schemes respectively.
(3) A private purchaser must pay legal and other fees which, in a normal case, will not be less than £150. The tenant purchasing his house pays no legal fees or other preliminary charges— even his fire insurance is paid for him by the Council during the purchase period.
(4) A private purchaser must, from his own resources, pay a deposit of about £1,200 to £2,000. A tenant need not pay any deposit.
(5) Having paid a deposit of £1,500, a person purchasing a private house corresponding to the semi-detached dwellings in in the draft sale scheme will face minimum loan repayments of £8 a week. The tenant purchaser, despite being relieved of liability for any deposit, can obtain a good, modern, semi-detached dwelling for an annuity which ranges between £4.56 and £7.32 a week.
The practical value of the financial concessions available to tenants under sales schemes has been clearly established by records of re-sales of houses bought under the schemes. In Dublin City, for example, more than 100 former Corporation houses have been resold. Many of these houses have been in areas immediately adjoining the county boundry. Disregarding all cases in which improvements had been carried out to the houses or where the contents had been sold with the houses, the following average figures result:—
|
Average market value in sale scheme |
1,692 |
|
Average discount allowed |
337 |
|
Average net price |
1,355 |
|
Average re-sale price |
3,444 |
|
Average profit on re-sale |
2,089 |
|
(i.e. 154 per cent) |
In the light of this experience the Minister could not agree that additional concession from public and local authority funds could be justified.
Finally, I am to draw the attention of the Council to the fact that the valuations for the purpose of the sale scheme approved by this Department's letter of 23 Meán Fómhair, 1971, and adopted by the Council when preparing the revised scheme represent the estimated market values of the houses in the first half of 1970. Having regard to the substantial increases in housing costs since then, the Minister will not be prepared to agree to the retention of these values after 31st March, 1973. Arrangements should be made early in 1973 to re-assess the values of the houses in the light of housing costs and market conditions then prevailing so that a fresh sale scheme providing for up-to-date valuations, can be formulated.
Mise le meas