I move:
That Dáil Éireann is of opinion that, in view of the crisis in the private sector of the house building industry, provision should now be made for
(a) an increase in the local authority maximum new house loan limit to £6,000 and in the income limit to £3,000;
(b) a 50 per cent increase in new house grants;
(c) the abolition of liability for income tax on interest paid by building societies on deposits up to £5,000;
(d) the granting of trustee status to building societies; and
(e) the charging of fixed interest rates on building society mortgages.
We are urging the Minister to accept this motion to revitalise the private sector of the house building industry. We have two main objectives. The first and basic one is to give to as many people as possible a real opportunity to build their own homes. The second objective—to reduce unemployment—is of particular significance at the present time when the unemployment rate has soared to approximately 100,000.
It is generally accepted that no industry is as capable of giving a response in added employment as quickly as the building industry can. I feel, given the necessary financial assistance, that the private sector of the building industry is capable of providing a dramatic increase in employment.
There is little need for me to stress the necessity to enable as many people as possible to build their own homes. Apart from any other consideration, the more people who build their own homes the less is the strain placed on local authority housing, and the better opportunity those people who could never hope to build their own homes have of getting a local authority house at an early date. The desirability of creating this kind of situation is particularly apparent to Members of this House who are being constantly requested by young married couples, often with young families living in intolerable conditions, to help them to get a house so that they can live normal lives and get away from surroundings where they must cook, eat, sleep and live with their children in a single room and, in urban areas particularly, often up three or four flights of stairs.
Anything that can be done to improve the lot of these people must be done as a matter of urgency, and we are suggesting that improving conditions relative to loans and grants will help them directly or indirectly. It will help them directly by enabling them to build their own homes, or indirectly by reducing the list of applicants for local authority houses. There are applicants on the list for local authority houses for long periods of time. In some areas it is not possible to get a house unless there are one or two children in the family. If we are to make real progress in housing these people, we must accelerate the housing drive on all fronts, but what I am mainly concerned with here is accelerating the housing drive in the private sector.
There is another reason why it is desirable that people, where possible, should build their own homes. In rural Ireland, for example, people tend to build their houses where they themselves were reared. This ensures the continued viability of the area in question, because the facilities already available, such as churches, schools and halls, continue to be fully utilised. This, in turn, saves the State considerable financial outlay. In my experience, local authorities tend to build groups of houses around existing villages and to bring people in need of these houses from the more rural areas, whether they wish to come there or not. This ultimately results in much greater expenditure by the State on, for example, new schools or extensions to schools, while existing schools and other facilities in rural areas are utilised at less than half of their capacity.
The contributions from this side of the House during the budget debate stressed the need to make the best possible use of Government expenditure to stimulate employment. We are, therefore, very disappointed to find that the Government have done little or nothing to make the necessary funds available to lift the private housing sector of the construction industry out of the doldrums in which it finds itself at present. It is a truism that when the building and construction industry is buoyant, then the whole economy is in a healthy state, and of course, the opposite is equally true. It is, therefore, a matter of concern that the increase in the capital budget for the construction industry generally barely keeps pace with inflation and takes no account of continuing escalating prices, and that the private housing sector does not even reach this level. Extra assistance in this field would be particularly helpful, because most of the materials used are home-produced, and because of the considerable employment in ancillary industries.
The private housing sector has been particularly badly hit over the past two years. Little positive action has been taken by the Government to cope with the inflationary trends in respect of loans and grants for private housing, and I think there is general agreement now that the present level of loans and grants and the qualifying income limits are unrealistic. The present income limit to qualify for a local authority loan is £2,350 per annum. This limit has remained static since September, 1973. The cost of living has been escalating since that period, and this certainly has not eased the problems of the married man with a family trying to provide a home. Since September, 1973, wages and salaries have been increased more than once, but these increases, at best, simply kept pace with the cost of living, with the inflationary trend, and did not improve the standard of living of those who received the increases.
One thing, however, these increases in income did in many instances was to remove a considerable number of people outside the qualifying income limit for local authority housing loans and supplementary grants. People's living standards have not improved one iota, but their prospects of building a home of their own have reached zero level, because they were no longer entitled to a local authority loan or grant. I had a case recently where a person called at the local authority office to apply for a housing loan. He was told to get a certificate of income from his employer, which happened to be a State Department. He called at the Department to get the certificate and was told it would be sent on. It was not sent on for quite a long time. In the meantime his income increased, and he was then ineligible. I need not tell the Minister how this man felt about his position.
The point I am making here is that if, by reason of a cost of living increase in wages or salary, a person finds himself outside the income limit for a housing loan or grant, then he is in an infinitely worse position than he was. His standard of living has not changed, and I am convinced this situation must, in justice, be rectified by increasing the qualifying income limit. This then is the request we are making, that the income limit should be raised to £3,000 per annum. There is nothing unusual in this proposal. Similar action has been taken in other fields to cope with the inflationary situation. We are simply trying to ensure that citizens will not be penalised when monetary increases are granted which merely hold the standard of living at the level at which it had been. It is possible for a person earning a gross income of over £3,000 a year to be housed by the local authority if he falls within the housing priority category. I have no objection at all to this. But it is an anomaly that the very same person, if he wished to build his own house, could receive no assistance of any kind from the local authority.
The new house loan limit, which is now £4,500, again is unrealistic in present circumstances. The loan level has not been altered for a long time. It was introduced in May, 1973, which is the best part of two years ago, and in a period which was bedevilled, as it was, by rampant inflation, it is not necessary for me to refer to the length of time since its introduction, because that is hardly relevant. There is little doubt that the level of the loan is deterring people from building their own homes or from buying houses which are built by speculative builders. The price of a three-bedroomed house, including the site and so on, is now about £7,000, and I understand this price will not remain at this level for very much longer. I am giving an average price here and, in fact, a relatively low average. The present maximum loan level, added to the State grant and to the supplementary grant, where the person building the house is entitled to a local authority supplementary grant £5,150, and this leaves a deficit of approximately £2,000 in round figures.
Now, while the Government may have same hope of getting loans to cover their budget deficits, a private individual with an income of less than £2,350, a married man with a family, has very poor prospects of getting a loan sufficient to make up the difference between the cost of the house and the money available to him by way of loan and grant. Where can he turn to get this money? The banks are not the easiest places to get money, especially when they know already that the prospective house buyer will have to commit himself to making repayments of his local authority loan. Even if the banks were willing to make a loan available, and I am informed that they are not so willing, it would be a short-term loan only, at high interest rates, and these would mean particularly high repayments in principal and interest. If one were to add these short-term loan repayments to the local authority loans repayments, and view the lot in the context of the maximum income permissible, it is not hard to see how difficult the task is for a private individual anxious to build a house for himself and his family.
A person who borrows £4,500 maximum loan pays it back over a 35-year period at 10½ per cent. That is the position in my county and I imagine it is no different in other counties. The annual repayment on this money is £480 or £9.35p per week. If the prospective house purchaser must get a loan from a finance company of £1,500 on top of this—I am assuming though it is a considerable assumption, that he has saved £500—the finance company will give him the loan, according to the information available to me, over a two-year period only and his repayments will be at the rate of £70.40p a month. I might add that I have been told on good authority— and, in case it might be assumed the information was biased, it was not by a builder—that my estimate of £2,000 as the extra money needed is too low. However I am working on that basis and on the basis that the man has saved £500. If we add the rate payable to the local authority and that payable to the finance company and deduct the total from the maximum permitted income we get some idea of the problems facing a person anxious to build his own home, particularly when one takes cognisance of the fact that the cost of living is constantly rising rapidly.
Our proposal is that a loan of £6,000 should be made available with the same rate of interest applying over the 35-year period. The annual yearly repayment would be £648 or approximately £12 a week. That would be appreciably less than the total bill facing such a prospective house purchaser in present circumstances. If our proposal is not adopted I have no doubt that many of those anxious and willing to build their own homes will be compelled to join the queue for local authority housing, very often in the knowledge that they have no chance of getting such a house for a considerable time, unless they have families, and this is a condition which is rarely explicitly stated but which is very much there in practice. As well as that, these people are reducing the prospect of getting houses of those who are unable under any circumstances to build houses for themselves.
I have no doubt the Minister will comment on the fact that repayments on a £6,000 loan would be greater than they would be on a £4,500 loan. This argument was made some time ago when a similar suggestion was being opposed. I have already pointed out that the repayments on the £6,000 local authority loan would be much less than the repayments on a £4,500 local authority loan plus the finance company loan repayments. I would also point out that we propose the qualifying income limit should be £3,000 per annum. We are also proposing that an increase of 50 per cent in new house grants should be made available. With the rapid increase in living costs since the motion was tabled I am not all that sure how long that figure of £3,000 income limit will be a realistic one.
Grants have not been increased since September, 1973, and I would point out that, just as in the case of loans, the present grant levels are much too low particularly when they are related to the present qualifying income level which, for supplementary grants, is something in the region of £1,900 per annum. In my view these are entirely inadequate in this highly inflationary period in which we are living. The purpose of the grants was to encourage people to build their own homes. They symbolised the desire of the State to help out. The grant is now a very much smaller fraction of the total cost of the house and the level must be rectified if justice is to be done. The present level is £325. Increasing it by 50 per cent would mean an addition of about £160, which is little enough in present circumstances.
In most cases those who wish to build their own homes are married people with children. With a qualifying income of £2,300 per annum no one would have any great amount of money to spare. A change must be made here and, on due consideration, I am sure the Minister will agree that this is so. Those who are within the local authority grants qualifying income limit anxious to build their own homes are having a very considerable burden deliberately placed on their shoulders. They accept this burden and, by doing so, are not only benefiting themselves ultimately but are also benefiting society generally. This is, therefore, something that should be encouraged. I do not think one could honestly say they are being encouraged under the present loan and grant system. Indeed, the opposite is true. It is time we faced up to our responsibilities in this and this motion is now giving the Minister an opportunity of playing his part.
The amount of money allocated for 1975 for private housing grants is about equal to the amount provided last year in the period April to December, a nine-months' period, and the only conclusion one can come to is that the Government must be anticipating a fall in the production and supply of private housing. Even at equal money terms it would be necessary to make available about £1.7 million more—and that is not taking the inflationary situation into consideration—if we were to produce the same number of houses as last year.
Building societies have contributed considerably to the provision of houses. The societies are not without their faults but our housing problems would be much more acute were it not for the contribution of the building societies during the years. Much can be done to improve this contribution, to increase efficiency and to give a better service to the borrowers. However, that may be debated at another time. I am concerned about how we can improve the inflow of money into the building societies so that they may be able to provide loans for a greater number of people. In that way they will help more people to build their houses and they will assist in giving employment.
The first proposal in the motion with regard to this matter is that the liability for income tax paid by building societies on deposits up to £5,000 should be abolished. This is not the first time this proposal has been made by our party; it was made on two separate occasions. So far as I remember it was turned down by the Government on the ground that it was not feasible, that if this were done for building societies one would be expected to do it for various groupings who are engaged in encouraging financial investment. I would be inclined to agree that in normal circumstances one would need to exercise care in such matters, but the Minister knows as well as I that as far as the private sector of the construction industry is concerned these are not normal times. They are far from it; a desperate situation needs exceptional remedies that might not necessarily be adopted at other times. On the basis of our social commitment to housing the proposal we are making is a reasonable one.
So far as building societies are concerned, the great problem is the need to attract further investment. When I say it is a great problem for the societies, that necessarily means it is a problem for the borrowers also. It is essential that investment conditions should be so attractive in the societies that they will find it possible to encourage people to invest rather than to leave the money stagnating or to invest it in less useful ways so far as the country and the economy are concerned.
In order to do this the terms must be special. This is what we are asking the Government to do, and what we would do if we were in office. What we propose would be attractive to investors and it would ensure that many people who are outside the local authority income qualifying limit would be able to get loans to build their houses. I am sure the Minister will agree with me that where it is necessary to impose a means test limit for State aid, whether in regard to higher education grants, medical cards or local authority housing loans, those just outside the limit are the hardest hit. Often they are in a more invidious and difficult situation than many on a lower income when they wish to avail of third-level education, when there is regular need of a doctor or when they wish to build a house. They are forced to rely almost entirely on their own resources and these resources are meagre enough when they have met all the costs.
It should be remembered that as a group these people are as anxious to own their own homes as any other section but there is no alternative method available to them to do so. The fact is that, if they cannot get a loan from a building society, many must forego their hopes and prospects of getting their own home. Bank loans and finance company loans are of little use to them because they are short-term, they carry high interest rates and the repayments are usually too heavy. If the Government accept our proposal regarding the tax remission on interest, I am convinced the inflow of money into the building societies would be unprecedented. The fillip this would give to the private housing sector would take up a considerable share of the slack in the area of unemployment at a time when it is most needed.
In section (d) of the motion we are proposing a further measure that will make investment not only more attractive but possible in certain circumstances where it is not possible at the moment. We are suggesting that the granting of trustee status to the building societies would be a considerable help. As things stand at the moment, building societies have not trustee status and therefore, trustees of various types of funds must invest their clients' money in what are tantamount to being gilt-edge securities. Because of this it is not possible for them to invest the money in building societies. This results in a considerable loss of revenue by the societies and it is a great loss to the nation generally because the money could be channelled into housing loans with a resultant upsurge in the building industry. This proposal is a reasonable one and, if the Minister is not prepared to accept it, perhaps he will give his reasons. Is it that the Minister for Finance is uneasy that the money would not be available to him for other purposes? If that is the case and if we knew what were the other purposes, we would be in a position to judge if what we are proposing would be as acceptable and beneficial as what the Minister proposes to do with it.
Section (c), which deals with the charging of a fixed rate of interest on building society mortgages, is important. It is generally accepted that it puts an intolerable burden on some people when the original mortgage rate is increased very considerably. The fact is that the local authority loan interest rates are frozen in the sense that the rate charged when a person receives the loan is the same rate which prevails throughout the period of the loan. This is a very satisfactory situation because the borrower can always budget for the future. He knows exactly what his repayments will be and, therefore, he is in a position to decide on other financial matters. The position is quite different in relation to loans from building societies. Repayments very and depend on the cost of money at any given time.
For years the trend has been in one direction only, upwards. Interest rates have been increased quite often and this means that the borrower cannot budget for the future because he does not know what his outgoings will be in regard to his mortgage repayments. The tensions and pressures of family life which result from this type of situation are very severe and the least I would ask the Minister to do in this respect is to consider the points I have made. It is unfair that a client who is offered financial assistance at a certain rate of interest should have that rate changed to meet the exigencies of the moment.
It would be wrong for me to suggest that it would be easy to find a solution to this problem but any solution would need State financial involvement. I am aware of the fact that the Government in the past made a subsidy available to the societies but this was only for a couple of years and was of little use to the societies who loaned money over a long period but what will happen when the subsidies are withdrawn? A bigger loan and an increased grant necessitate a greater subvention from the Exchequer. It would be of little use to make larger loans and grants available from the same amount of money because, obviously, this would defeat the whole purpose of the motion.
In moving this motion I should like to point out that we understand the problems but we are willing to face up to them. There is a difficulty at present in obtaining money from building societies. Some of those with whom I have had contact since I was made Opposition spokesman on local government affairs have set conditions such as that the applicant must have money invested in that society for a number of years before a loan is made available. There is also a condition whereby the loan is related to the applicant's income. I have no doubt that if the inflow of money into the societies is increased, as would happen if our proposal was accepted, more money would be available for borrowers and the restrictions would be less onerous.
Everybody is aware that the building industry is a labour intensive one employing mainly male workers but it also gives considerable employment in ancillary industries and builders' providers. The manufacture of the commodities associated with the construction industry gives considerable employment when that industry is doing well but when it is seriously and detrimentally affected as at present employment falls. There is no need for me to list the commodities or the industries affected by the recession in the construction industry but everybody knows that if the demand for these commodities falls off there is unemployment, redundancy and short-time working.
Many of the ancillary industries have been severely hit in recent times; some, in fact, have closed down. Builders' providers are also severely affected by the slowing down in the construction industry. The Minister has insisted that there is nothing wrong in the industry, an attitude which I find difficult to accept when I see the difficulties and problems facing the private housing sector in my constituency. I should like to make it clear that I am not questioning the Minister's veracity but I find it difficult to equate his point of view of the situation with conditions in my constituency. The figures for completed houses of all kinds between April and November of last year, as compared with the number for the previous year, are down and money for private house grants is less than it was in former years. In my view if the number of privately built houses is to be increased more money will have to be made available.
From statistics published to date there is a continuous decline in the sales of cement in 1974 as compared with 1973. This was underlined today in the reply given by the Parliamentary Secretary to the Taoiseach to a question put down by Deputy Cronin. I imagine that statistics in relation to the cement industry are one of the best barometers available as regards the progress or otherwise in the building industry. I know of a large construction firm in my constituency which obtained planning permission to build 400 private houses but, after they had completed 130, stopped because of the lack of purchasers. These houses, in so far as I can ascertain, were, in present circumstances, very reasonably priced but the potential buyers were unable to obtain a deposit of the difference between the loan plus grants and the price of the house.
Among the many workers in the building trade at present unemployed are skilled tradesmen. I should like to make it clear that I am not interested in anything except improving the output of houses. I would like it if we could clear up the confusion which appears to exist in relation to the industry. Statements are being issued by all sides which completely contradict each other. I am not blaming anybody because it is possible to interpret statistics in many ways. If we could get clearly in our minds exactly what the position is, we could make better progress.
It is true to say that, with regard to the building of houses in the private sector, there is ample evidence in the official figures published—and from our own observations—to show that things are not as good as they might be. I would, therefore, ask the Minister to give favourable consideration to the proposals set out in the motion so that this very important sector of the industry can be restored once again to its full vitality.
If the Minister accepts the motion and puts its terms into operation, not only will he be doing a good job in helping those who are interested in buying or building their own houses to achieve their aims but he will also, in a time of serious unemployment, help to reduce the number unemployed. I have no doubt that the Minister is as concerned about this matter as we are on this side of the House. I believe that if the terms of the motion as put forward were accepted, this would have a beneficial effect all round.
