(Cavan-Monaghan): I move:
That Dáil Éireann expresses alarm at the unreasonable increase in the cost of house building and deplores the Government's failure to take remedial action.
I notice that the Minister for the Environment has tabled an amendment to this motion in rather peculiar terms. He proposes to delete all words after "Dáil Éireann" and to substitute "expresses confidence in the steps taken by the Government to regulate house building costs". I am sure there was a long and learned discussion about the word "regulate" and I am sure that other words were put in and struck out. Eventually the word "regulate" was agreed upon. It is noticeable that the Minister does not take credit for reducing, moderating, or controlling house prices. He picks on this peculiar word "regulate". I await with interest the Minister's explanation of what he means by "regulate".
The recent dramatic increase in the cost of houses and house building has far outpaced inflation, wages and salaries, and has already devoured the £1,000 new house grant introduced by the Government. It has made the increase in the small dwellings acquisition loan from £4,500 to £7,500, which many people thought would solve their difficulties, quite useless and ineffective.
In reply to questions which I put down recently to the Minister for the Environment, I got some very interesting information which I submit requires an explanation from the Minister.
In reply to those questions I learned that the price of the average grant house increased from £12,870 in the quarter ending March 1977 to £15,345 in the quarter ending March 1978. That represents an average increase of £2,475 or 19.2 per cent compared with the previous 12 months. It is certainly an increase of 13.7 per cent in the previous 12 months. It is certainly good-bye to the £1,000 new house grant, as it was called. Even at this stage the increase in the small dwellings loan from £4,500 to £7,500 has been eroded almost out of existence.
These increases are all the more alarming and certainly require an explanation when we take into consideration the fact that, during the same 12 months during which these increases took place, inflation was running at 9 per cent, and the Minister boasts about that. Over the very same period the average percentage increase in the house building index was 11.6 per cent. According to any reasonable yardstick, or any yardstick available to me, these prices are quite unreasonable and are far too high.
For example, the national wage agreement provides for an increase of 8 per cent approximately in wages and incomes. That is regarded as a reasonable increase in incomes. We understand the Minister for Agriculture has some sort of a similar increase in mind for the farmers. Furthermore, the Minister for the Environment, when dealing with the local authorities and estimating what their budget should be for the current year, decided that an increase in rates of 11 per cent would be reasonable. Apparently he satisfied himself that an increase of 11 per cent would be sufficient for the local authorities to carry on their services for the current 12 months.
Yet we find the price of houses in the past 12 months gone up by almost 20 per cent. The Minister was elected on a programme to control prices. There is an entire page on price control in the Fianna Fáil manifesto and, in the section of the manifesto dealing with local government, the Minister pledged he would make it easier to buy a house. He has done absolutely nothing about that. In fact, it is far more difficult to buy a house now than when the Minister assumed office because the cost of a house has far outpaced any increase in the house builders' wages or income.
Deputy O'Donnell raised this matter during the concluding stages of the debate on the Estimate for the Department of the Environment last week. In his reply the Minister referred to Deputy O'Donnell's contribution. I will read what the Minister said because I am not clear on exactly what he means. As reported at column 1639 of the Official Report of 27 April 1978 the Minister said:
This morning Deputy O'Donnell referred to the increase in the average price of houses in the first quarter of 1977 and the first quarter of 1978. The Deputy should refresh his memory on this matter. On 3 March 1978 my Department published a quarterly bulletin of housing statistics for the quarter ended 31 December 1977. The Press release that accompanied the bulletin indicated that the average gross price of new houses for which loans were approved by the main lending agencies increased by 20 per cent last year compared with 1976. The corresponding increase of 19 per cent in prices in the building and construction industry generally should also be mentioned. Since April 1973 house prices, house costs and earnings have fluctuated considerably but the stage has now been reached where increases in house prices, house costs and average earnings have been broadly in line with each other. There is nothing new in the written reply to Deputy Fitzpatrick to which Deputy O'Donnell referred this morning. The increase is slightly under 20 per cent. It was 20 per cent for the whole of 1977 and it has averaged 19 per cent since 1973. It is not suddenly an unusual occurrence.
I find it hard to know what point the Minister is making or what he is boasting about, if he is boasting. The only reasonable construction I can put on it is that the Minister is satisfied with an increase of 20 per cent in the price of house building for the quarter ending in March last as compared with the quarter ending in March 1977. If that is so, I am amazed. He goes on to say price increases have kept in line with the increase in salaries and wages. That is not so. There has been a 20 per cent increase in houses and an 8 per cent increase in wages. According to information in reply to a question on 26 April, the cost of building a house increased by 11.6 per cent. I fully appreciate that this does not include the cost of land but it includes everything else, although a footnote states that it does not take into account overheads, profits, and so on. Of course it does; they are built into the previous price and this percentage is put on.
That statement by the Minister seems to be an abdication of the task he undertook and a throwing in of the towel. We may talk about percentage points but the figures given by the Minister show clearly that the average price of a grant house increased by £2,475 between March 1977 and March 1978. That needs an explanation. The sum of £2,475 is, in round figures, two-and-a-half times the £1,000 grant and it very nearly closes the gap between the increase in local authority loans from £4,500 to £7,500.
I should like to draw the attention of the House to the percentage increase in house building costs since Fianna Fáil came into office. From 1 April 1977 to 1 July 1977 the housebuilding cost index increased by 1.44 per cent. From 1 July 1977 to 1 October 1977 the increase had jumped to 2.98 per cent and between 1 October 1977 and 1 January 1978 the increase had rocketed to 3.42 per cent—nearly three times what it was when Fianna Fáil came into office. They assumed office for the purpose of controlling prices and making it easier to buy a house. If the Minister is satisfied with these figures then he is easily pleased, and God help young people who want to make a home and buy a house.
When we find the average increase in the house building cost index during the 12 months ending March last running at 11.6 per cent and the average increase in the cost of a house during the same period running at 19.2 per cent, we must look for an explanation. I will give one explanation. The cost of the site is included in the price of the house, which has increased by 19.2 per cent, but the cost of the site is not included in the house building cost index, which has increased by only 11.6 per cent. It is obvious that there are land barons who are speculating in building land in a most disgraceful way and they are getting away with it. These site brokers particularly around Dublin, bought sites some years ago and have watched them appreciating in value. They found that if they wanted to build grant-type houses on these sites and applied for a certificate of reasonable value, the certificate would be based on the price that these gentlemen had paid for the land, plus holding charges. Therefore, they would not regard it as profitable enough to pass on the sites to the house purchasers at the price which they paid, plus reasonable interest charges. They are selling these sites to small builders at inflated prices and when the small builders apply for certificates of reasonable value the certificates are based on the price that the small builders have to pay.
I understand that these site barons are really ceasing to be building contractors or are building only luxury dwellings on part of the land acquired and selling the remainder to small builders at these inflated prices. I want to know why the Minister is not doing something about that. It is one explanation of why the index shows an increase of 11.6 per cent and the price of a house over the same period shows an increase of 19.2 per cent.
The certificate of reasonable value was introduced in an effort to control house prices. In fact it is being used to delay grant approval and to subject the purchasers of houses to stamp duty at 3 per cent. I am told that in some cases the delay in issuing these certificates is quite unreasonable. There has been an improvement since the new year. For the first six months of the Fianna Fáil administration there was quite a go slow in this. It has been said that the purchase of a house is by far the biggest single purchase that most people will ever make. Many people enter into a contract to buy a house on the understanding that the £1,000 is available and then find that because the house does not qualify for a certificate of reasonable value the grant is not payable, and the conveyance of the house becomes liable to stamp duty at 3 or 4 per cent often involving a payment of £400 or £500. The law should be changed and people should be relieved from such contracts even contracts which do not specifically guarantee the £1,000 grant but where people were led to believe that the grant was available. It is unreasonable to charge stamp duty on new houses because all new houses are adding to the national stock of houses and they should be free of stamp duty.
The Minister applied the system of the certificate of reasonable value to flats. I admit that prior to the change of Government no grants were payable in respect of flats but it was possible to get a certificate exempting flats from stamp duty. Since the Minister changed the system, certificates of reasonable value are required if flats are to be exempt from stamp duty. We find that since the Minister came to office certificates of reasonable value were issued in respect of only 55 flats. We know that flats are being built all over the city and that flats are becoming a way of life for many people. Only 55 flats have qualified for the certificate because the Minister refuses to recognise a sales policy in respect of flats. It is obvious that some flats in a scheme would sell for much more than others because of location and so on, but the Minister insists on averaging the entire scheme and dividing it by the number of flats in it and the result in most cases is that none of the flats qualifies for a certificate. The further result is that all new flats purchased there are subject to stamp duty of 3 or 4 per cent. I suggest that the Minister take each flat on its merits and value it according to its location and issue a certificate where flats qualify for a certificate.
As I said earlier, the £1,000 grant has disappeared, it has been gobbled up by the builders and the site barons but at best it is a restricted scheme. It should but does not apply to people who bought secondhand houses a few years ago and who want to improve their accommodation by building a new house. During the election campaign it was stated that this grant would provide a deposit, and great play was made about the fact that no longer would young married couples have to hunt for a deposit, that they would get it from Fianna Fáil in the shape of this grant. We find now that it does not provide a deposit because it is not payable until the person is living in the house. By that time people would have had to pay the full cost of the house.
Whether the Minister realises it or not, the most recent power of investigation which he is seeking in regard to the £1,000 grant will discourage people from applying for it altogether. In this year's Finance Bill which has just been circulated the Revenue Commissioners are being authorised to supply confidential information regarding applicants for the housing grant to the Minister for the Environment. Information given by the tax payer to the inspector of taxes is to be given by the Revenue Commissioners to the Minister for the Environment so that it may be checked and, no doubt, cross-checked. This is a completely new departure.