Deputy Quinn has 40 minutes.
Private Members' Business. - Housing Land Prices: Motion.
I move:
That Dáil Éireann, noting with grave concern the cutback by the Government on its effective capital provision for Local Authority housing, its failure to control the recent excessive increases in the price of housing, and its lack of action to control the cost of housing land, calls upon the Government to take effective measures, including legislative action, to control the price of housing land.
It is easy sometimes to indulge in playing politics on the question of housing. We do so at the cost of the people who throng the queues looking for loans from building societies or who repeatedly call upon local authorities looking for some form of hope that they will provide what the United Nations has declared to be a basic human right. This is the first debate effectively on housing since the Estimate for the Environment. The purpose of the motion is to examine the state of housing as of now and, in so far as any Opposition Deputy or, indeed, the spokesperson for the Opposition is forced to frame such a debate in the form of a motion such as this, so be it. It is not my intention to try to score cheap political points and I have no wish to do so. On a personal note, I am sorry to hear the Minister is unable to be present with us. That is in no way a reflection on the Minister of State, whose presence is indeed welcomed, but I think all of us wish the Minister well in his present position.
Having made those introductory remarks one may ask why have the Labour Party sought a debate on housing at this moment. We put down the motion in response to a specific request by the administrative council of our own party, the national executive, because of the express concern about housing prices that has repeatedly come through the ranks, so to speak, from all sectors of the community. That concern is reflected in the official statistics that have been published. Indeed, earlier today at Question Time the Minister of State referred to some of them. The fact of the matter is that in the last year housing prices have increased by 34 per cent whereas building prices have increased by little more than 9 or 10 per cent and so there is an inflationary increase above and beyond the easily recognisable and understandable increase of approximately 24 per cent.
Now the purpose of the debate is to focus in on the causes for that increase and see if there is any way in which we can mitigate, reduce or eliminate the factors which have produced that 24 per cent net increase in the coming months and in the coming year. It is seldom Opposition Deputies get their case put forward so eloquently and so pungently by an objectively established and, indeed, State-funded body, the Economic and Social Research Institute. The whole economic analysis of what has gone wrong in the housing market as expressed in a gut sense by members of the Administrative Council of the Labour Party is expressed in economic jargon and parlance by Messrs. J. Durkin and P.J. Menton in the quarterly economic commentary published by the Institute for September 1978. One could simply read out the appendix on the housing market entitled "The Housing Market. Some aspects" and make the case without going any further. I would like to draw attention now to one or two salient features that must be brought to public attention. I believe the Fianna Fáil Party bought the last election. Nothing particularly wrong with that if you happen to come up with 84 seats. I believe that when they went to the polls in 1977 the punters realised they were in a sense being bought and many of them were prepared to be taken for the ride. What I am sure they did not know was the cost of that ride.
Earlier today the cost of the abolition of domestic rates given by way of reply to a parliamentary question tabled by Deputy Noel Browne was estimated at £78 million, if my memory serves me aright, and I was prompted to make the observation that it approximated to virtually £1 million a seat for the Taoiseach and his 83 Deputies. That is just the cost of the abolition of rates. But I was wrong. The cost was more because not only did the abolition of domestic rates cost the Exchequer that much, an Exchequer it is now claimed is no longer in funds, but according to this document the abolition of rates and the manner in which they were abolished was a contributory factor, among others, to increasing the cost of housing above and beyond the building costs index I mentioned earlier.
To summarise what Messrs. Durkin and Menton have said — I will not bore the House by quoting extensively — they claim that the combined effect of the £1,000 grant, plus the abolition of domestic rates, plus the increase in funds into building societies brought about in part as a result of the tax concessions in the 1977 February budget, the last budget of the Coalition Government, which, if I may jog memory, reduced maximum income tax levels from 79 per cent to 60 per cent and consequently made available more funds for building societies with a consequent flow of money into building societies, the combination of these three factors bunched, to use their own phrase, demand in the latter half of 1977 and through into 1978.
What, in effect, did that mean? It bunched demand at a time when housing supply had dropped to a lower level of production due to the cyclical nature of the housing market and the housing construction market and also because of the aftermath of the depression. By bunching demand — the word "bunched" is the economic phrase chosen by these two eminent economists — means in effect that the latter part of 1978 normal housing demand and the early part of the 1979 normal housing demand was bunched into the early part of this Government's term of office with the effect of calling in advance of the money being available housing capital to pay off election debts in the real sense, the net effect of which was that the cost of housing zoomed way up above and beyond the real increase in building costs.
A Government that came to office on the promise of providing a £1,000 grant, a promise of abolishing domestic rates forthwith, presumably on the advice of the think tanks and economic back-up services and all the other acoutrements that belong to a majority party, effectively in the assessment of these economists did more damage to the cost of housing provision than they did good.
That may be considered to be a partisan view and certainly prior to the publication of this particular document it could be dismissed as a partisan view but it can no longer be dismissed as a purely political party partisan view. It has the imprimatur of being paid for by the very Government itself. That is the verdict of State finance-funded economists of the Economic and Social Research Institute. If the Minister of State or any of his colleagues, who are notably absent tonight, want to pursue that all the quotations are there. All the flesh to the bones of the argument I have made is contained in this particular document.
I will be happy in my reply to refer to any criticisms that may be made of that overall conclusion. From the sanctity of Trinity College economic common rooms, I can already hear the voices saying "So what? We brought forward housing demand. We boosted housing output in the last quarter of 1977 which already had been falling in the first quarter. We generated new confidence in the housing sector of the economy" and so on. These would be the objective and somewhat distant distilled comments of people who view housing from the sanctity of such a common room and the security of their own homes. But what has been the real impact of such bunching?
As far as this party are concerned, the impact is on the people who are most in need of housing, because they do not have the economic resources to be able to play around in the market like so many others, the people who because of the economic system in which we live are forced to rely on local authorities to meet their statutory obligation to provide housing. They are the people who will carry the cost of this election gambit. They are the people who carry the effective cost of this economic and political strategy which has been described as the bunching of demand, or in more gut terms, the buying of elections. In a circular produced by the Department of the Environment, reference No. H37/78 published on 31 August of this year the Minister states in the second paragraph that the public capital programme allocation in 1978 is to be £80.77 million, but that more than £100 million could have been required if local authorities had been allowed to go ahead with what housing schemes they proposed to commence. They did not get the extra £20 million. Why did they not get the extra £20 million? They could have spent it, the demand was there, and there are homeless people in every local authority housing area. The local authorities with their public representatives and their professional managerial assistants sought an allocation of £100 million to meet some of that demand and they were turned down and given £80 million.
Earlier today the Minister for State attempted to suggest that, having asked for £100 million and been given £80 million, they were reasonably satisfied. Neither I nor the Minister can answer for local authorities, who can make their voices heard when they want to, but as a public representative in Dublin city in a borough that has had an increase in the housing demand—the waiting list has jumped from 6,000 applicants to 8,000 applicants—I would say that if the Minister presumes that that is reasonably satisfactory then we live in a different world.
Housing costs have undoubtedly gone up. Ironically, one of the factors that contributed to the increase in housing costs was the spending spree of this Government. As a direct consequence of that spending spree people who are incapable by virtue of our economic system of economically entering into the housing market have been deprived of capital funds in order to finance that spending spree. When one thinks over the implications of that, the attitude of this Government to housing needs begins to come into focus with a horrible stark reality. One can reasonably assume that the cost of financing the abolition of car tax, for instance, was something in the region of £55 million. It was certainly more than £20 million. So not only have the Government's spending spree of bunching demand resulted in an increase in the cost of housing, but one of the most vulnerable sectors that has had to pay the cost of that spending spree has been the sector that depends on local authorities for housing.
There is nothing unique or special about local authority housing that makes it so that everyone should have to aspire to a local authority house or should have to depend on a local authority to provide housing. The historical reason for the existence of local authority housing is as much a commentary on the failure of our economic system to provide housing as it is upon anything else. Certainly, no housing policy can be designed purely with the local authority housing sector in mind. While the local authorities must get adequate funds to meet their obligations nobody on this side of the House regards the local authorities as being the prime movers in terms of housing provision.
The last Coalition Government, in particular the last Minister for Local Government, made a special effort in local authority housing to such an extent that both the White and the Green Papers recognised that demand in certain areas had been largely satisfied in terms of gross need. On the case that the local authority housing sector has been deprived of essential capital funds irrespective of whatever cash increase the Minister may announce later tonight as evidence of increased allocations, the reality is that, as a percentage of overall provision, the numbers and amounts have been dropping and—much more to the point, because talking of percentages of GNP or overall budgets and so on may be ways in which we can interpret reality differently depending upon our debating viewpoint—the most important criterion at the end of the day is the number of houses provided or in real terms the number of people who are asked by their local authority to come in and sign for a house. It is not from the mouths of the Opposition that that expression of disappointment come on that score; it comes, essentially, from the Minister. He expressed disappointment at the number of completions when he opened a local authority housing scheme recently.
There are contributing factors above and beyond the ones for which the Minister and the Government are directly responsible and it would be unfair of me not to recognise them. There are difficulties related to weather, the completion of contracts on time and the scarcity of skilled labour. However, they are not new. Indeed, the first quarter of 1977 was a severe period in terms of building output and it was recognised as such by Opposition speakers here. In so far as the Government are directly responsible, the Minister has given the verdict: disappointment in that sector. The local authority sector in good years covers approximately one-third of the overall housing need with the remainder being met by the private sector. The Government have entered into a new form of Celtic mysticism in their naïve belief in the capacity of the private sector to stand on its head and deliver things for which it was not designed or produce things which it has no capacity to produce. In the area of housing the private sector has been designated by the Government as the specific engine by which the demand which would otherwise have been satisfied by some local authorities can be amply satisfied. The economic commentary I referred to dealt at length with the analysis of how building society funds have been distributed between the private sector, disregarding local authority funds. The conclusion points to the fact that within the private sector the people with high incomes, or, alternatively, those selling their first house and buying another, were benefiting most from the combination of Government policies. I should like to quote further from that report:
Even allowing for a substantial increase in incomes over the period of analysis there can be little doubt that the proportion of mortgages going to those on higher incomes did increase. The reasons for this could be twofold (i) because of house price increases only those on higher incomes could finance sufficiently large mortgages or (ii) that an upward quality shift in the demand for houses did in fact take place.
There are a number of reasons why such a shift should have taken place:
(1) the reduction of the higher marginal rates of taxation in 1977 would have enabled many on above average incomes to finance greatly increased mortgages.
(2) the shortage of land in the outer Dublin area and the land price escalation could have given impetus to builders to build expensive houses.
(3) the high level of savings, and high inflows into building societies in 1976-77 implied that mortgage finance was not a constraint.
(4) by building more expensive houses, builders could avoid the need for a certificate of reasonable value.
(5) the abolition of rates, would have given an impetus to the price of secondhand houses especially and also, as it increased the real disposable income of such householders, could also have encouraged tradingup.
That list of factors indicates to anybody who knows the housing market how complex and variable it is. I do not wish to make a simplistic argument but I do have constraints at times.
I have just given a combination of reasons why, all other things being equal, the people who have benefited from the Government's housing policy have not been those in the lower income group, those who are just off the local authority housing lists and moving into the middle income sector. They have not benefited from the effects of the Govern-ment's housing policy and the verdict is contained in the report I quoted from. I should like to deal with one of the reasons referred to, certificates of reasonable value. This factor has given continual cause for stress and concern within the industry. As far as the Labour Party are concerned, we believe in the principle of the CRVs. We recognise that Fianna Fáil—Deputy Molloy was the Minister responsible for its introduction—brought about the implementation of this scheme. However, we are also aware of serious expressions of concern about its administration. We cannot reconcile how the Government, com-posed of a party who depend so much on private enterprise to fulfil the housing needs in this area and who have publicly identified themselves with the private house building sector, have got themselves into a position of total confrontation with that sector over the question of CRVs.
The CIF have indicated that builders are frustrated and dissatisfied with the operation of the CRV system and have been since the outset. I should like to discount those people who do not like any form of scrutiny; they are not in the race as far as I am concerned. I am concerned about the serious house builders, those on whom the Minister depends for performance. Some officials of the CIF have responsibly spoken on their behalf and not on behalf of the cowboys. On 14 September last the federation stated that as early as 1973 it voiced its concern at the manner in which the CRV system was operated, which was contrary to the assurances given to the industry. The federation pointed out that it had continually advocated changes in the system to make it easier to operate without in any way lessening the control which the Department wished to exercise. It said it repeatedly advised the Department officials that a no-change policy would force the house builder out of this system and reduce the number of new houses being built at the lower end of the market, for the first time buyer. The federation stated that the reaction to this advice from the industry had been to ignore it with the result that an inadequate number of new houses at prices which young married couples could afford were being built.
I should like to refer to an article by Eithne Ryan in Business and Finance of 28 September which reinforces this view. She stated that the builders' dissatisfaction with the CRV had caused many of them who would prefer to build a small house to turn instead to the more expensive house and sell outside the grant. She said that this had resulted in small pockets of land in good residential areas becoming greatly overpriced. A builder summed up the situation when he said that he was building houses for £45,000 but the price of the house was directly related to the price of the land. He said he paid £20,000 for the site and had that land been priced at £5,000, which would have been more correct, the house would be selling for £30,000. The kernel of the problem is that there are not sufficient serviced sites.
There are many other illustrations one could provide in relation to the question of housing finance and housing costs and I could go into them, but I do not wish to do so because I do not have time. I have tried to show the connection between election promises and the amount of money that was made available which had the effect of bunching demand. That bunch demand, coupled with a number of other factors — largely the taxation deductions on personal income tax in 1977 which were welcomed by all sides — produced a phenomenon where demand was pumped up at a time when building societies had enough money to provide it. The net effect has been an astronomical increase in the cost of housing. That effect has been financed in part by public expenditure in the form of tax giveaways and the people who have had to carry that cost in part have been local authorities and they have been encouraged to push those people whom they reasonably can push on to the private sector of housing and off the local authority list.
I am trying to show clearly that the combined effects of 18 months in office of this administration has made it more difficult for a young married couple to buy their house than it was on 20 May when the election goodies were unveiled and the promises were put out for offer on the stalls of the Fianna Fáil Party then in Opposition. I believe that if many of the young people who bought that particular pig-in-the-poke had been aware of the real cost of housing or if many of their parents had been aware of the real cost implications of that pig-in-the-poke the decision of June 1977 might have been different.
The Minister of State may argue with some of my figures and some of my conclusions and he will certainly dismiss the political bias that by definition must be on this side of the House. I accept that, but at the end of the day he cannot deny that housing costs have gone up and raced ahead of costs in either the overall consumer index or the overall building costs index. He may dismiss my arguments as partisan but he cannot reasonably dismiss the arguments of Mr. Durkan or Mr. Menton as partisan because they are not. It is in the interests of a democracy like ours that we have institutions such as the ESRI and others that have maintained their autonomy and are notably free from interference by either side of the House.
I should like to devote my remaining time to identifying the sectors that they have identified as being some of the factors that have resulted in the increase in the cost of housing. They have produced, I may add, a number of proposals for mitigating the current problems such as subsidising the cost of mortgages, reducing the liability ratio of building societies and making more money available for the SDA sector. I am sure the Minister is aware of all of these. They are options which fall within his administrative grasp. I should be very surprised if he does not take up the liquidity option which seems to be the softest and the most obvious one. I should like to know from the Minister what action, if any, he proposes to take to deal with the problem of the provision of serviced building sites.
In answer to a question I put to the Minister's colleague, Deputy Barrett, which was answered on 12 October, I sought to discover the number of housing sites available and in ownership of local authorities. I was given a very staggering figure which I think in housing circular 37/78 is given as something in the region of 76,000 sites. In my naïevity—I am still serving my apprenticeship here—I did not distinguish between sites and serviced sites. Therefore, I should like to know how many serviced sites local authorities have as distinct from housing sites since the figures may very well differ.
Aside from the question of local authority houses, it is clearly indicated that there is a considerable land bank in absolute terms if these figures can be taken as accurate—and I have no reason to think they are not. The question remains: what action will be taken by the Government to see that house prices generally are stabilised and, specifically, the price of land? First, have they any legislative proposals in train—by that I do not mean under review—that would give effect to the Kenny Report, that would change the basis of the compulsory order legislation that we have at present and change the basis for valuation of land acquired under CPO procedures or in any other way intervene in the housing market to the extent that the land factor as the dominant cost in the provision of housing would be mitigated?
Numerous other studies have clearly shown that unless some action is taken to stabilise the cost of land—serviced building sites—the bunching of demand in the housing sector for electoral purposes or otherwise will simply exaggerate the cyclical profile of the house building industry with consequent damage first, to the industry itself—I speak in a certain sense as a person who still has an interest in it. It has suffered considerably from such cycles. The land is a key factor and the wording of our resolution, having condemned the Government roundly, as is the formula in such motions, specifically asks what effective measures the Government will take, including legislative action, to control the price of housing land. We have identified the need to deal with housing land, that is serviced building sites, if some effective attempt is to be made to break the cycle of boom and depression in this area. The Kenny Report has set out that the key to stabilising house prices is stabilisation of land prices by the provision of a substantial number of serviced sites. By substantial is meant sufficient to influence the market price of all land for housing. This is a difficult task to achieve when there is a high level of demand for land for other necessary economic purposes.
In conclusion, there is no simplistic solution to this problem. The components of the cost of the provision of housing are complex and highly varied. We recognise that, and we recognise that the housing sector of the construction industry is prone to extremes and high risk in terms of credit squeezes and booms and so on. Perhaps in isolation it is the most extreme example of the absurdity and irrationality of the capitalist system of economic development and growth. No other system or sub-system mirrors the waste and irrationality better than that sector. As a capitalist party, there is a limit to what the Government can do. We do not expect real solutions from Fianna Fáil. Having quoted the quarterly review and other commentaries, we want to know what decisive legislative action the Government will undertake to undo the damage that has been done by them in their first 18 months in office.
I move amendment No. 1:
To delete all words after "Dáil Éireann" and substitute the following:—
"notes with approval the action taken by the Government to increase housing output, including the provision for this purpose of unprecedented amounts of public funds, and the measures which it has taken to curb the rate at which housing costs, including the cost of building land, have been increasing."
At the outset I should like to express to Deputy Quinn my appreciation for his kind remarks regarding the Minister for the Environment. I know that all fairminded Deputies will share his hope that the Minister will be back shortly to serve the Oireachtas and his Department.
While I disagree with many of the Deputy's contentions and must question the accuracy of some figures and estimates he quoted, I appreciate the constructive and restrained manner in which he put his case. The one regret is that the Deputy did not have a better case to plead.
I want to deal briefly with each of the three points raised in the motion, to demonstrate how ill-conceived they are, particularly with regard to the record of those Deputies subscribing to it who had it in their own power as members of the previous Coalition Government to deal with a situation similar to that which their motion alleges to exist now.
The first statement made in the motion criticises the cutback by the Government in the capital provision for local authority housing. Are the Deputies opposite serious and honest in this? Under the Coalition's last budget, in 1977, less than £72 million was provided for local authority housing. The policy to run down the local authority housing programme was by then well established—8,794 dwellings were completed in 1975, 7,263 in 1976, but only 6,333 in 1977, a direct consequence of the inadequate capital allocations made by the former Government for social housing. The 1978 Budget raised the allocation for this purpose from £71.7 million spent in the preceeding year to practically £81 million which, together with the normal 10 per cent overdraft working margin which local authorities are allowed to use, represents a gross provision of £88.85 million in the current year, an increase which certainly more than offset the rising costs of building.
The Government have made a further practical move to help persons on local authority waiting lists by assigning a total of £5.9 million to fund low rise mortgages this year, a move which will help tenants of local authority houses or people on waiting lists to become homeowners, thereby easing the burden on local authorities of direct house building and speeding up the rehousing of other families on waiting lists. This provision of practically £6 million compares with a total of £2.1 million advanced under the mortgage scheme in 1977.
It has been suggested from time to time, and indeed in this House, that the present Government have a bias against local authority housing. This is absolutely false. The Government's basic housing policy was spelled out over nine years ago in the 1969 White Paper, "Housing in the Seventies". That document set out clearly our fundamental objective to ensure that every family should be helped to get a proper house of their own at a cost or a rent they could afford. That is still our basic housing aim. A person who can afford to build or buy a house for himself receives every encouragement—a grant of £1,000, exemption from stamp duty and rates and the availability of adequate mortgage finance, including a total of £39 million provided under the public capital programme for house purchase loans this year by local authorities. At the same time, the Government have never varied their commitment to ensure that a family in genuine need of housing should not be debarred from getting it by reason only of their limited financial resources. This commitment is reflected in the big increase in the allocation for local authority housing in the current year.
Figures give a more incontrovertible picture of what has been done than mere words or opinions. Under the Coalition's last budget, introduced early in 1977, a total of £99.13 million capital was provided for all forms of housing activity—house purchase and reconstruc-tion loans, housing grants and local authority dwellings. In spite of rapidly rising costs at the time, this was a reduction of more than £6 million on the 1976 budget provision of approximately £105 million. The present Government increased the 1978 budget provision over that inadequate total for 1977 by more than 40 per cent—from £99 million to more than £140 million. I ask Deputies if it is not just naïve, but downright dishonest, then for the sponsors of the motion to refer to a cutback by the present Government in their capital provision for local authority housing.
There are a few other facts and figures which must be put on the record of the Dáil in relation to this motion. When the Coalition were dismissed from office in the 1977 general election there were, at the end of May, some 29,496 local authority houses in course of construction, in tenders, or being planned. This represented a considerable drop on the 34,854 houses at a similar stage two years earlier. By comparison with the May 1977 figure, a total of 32,088 dwellings were being built or planned or at the tender stage at 30 September 1978. The number of men employed on local authority housing schemes was 6,174 at the end of May 1977. By September last, the total was 6,550. This is one of the best indicators of trends in the amount of work actually in progress at these two dates.
At the same time, I would be less than frank if I did not admit that I have been disappointed myself with the level of local authority house completions so far this year. This, I want to make clear, has had nothing to do with any shortage of capital for the programme. Weather conditions in the early part of the year slowed down the programme and industrial problems in recent months, the scarcity of certain skilled tradesmen and some important building materials also have had a limiting effect on house completions, as on all other branches of building and construction. Housing authorities estimated some weeks ago that they would complete about 6,500 houses this year. I would be glad to see their expectations realised but, because of the factors outside my control and which I have mentioned, completions will probably be no greater than in 1977. However, we go into 1979 with a good programme of work in progress, in tenders or being planned and with an adequate work force employed. In that year the Government are committed to maintaining a local authority housing programme designed to meet genuine housing needs and to maintain a steady rate of progress and employment. The capital to be provided in the 1979 public capital programme will once again give evidence of the Government's firm intentions to achieve their housing objectives.
In short, I can assure the House that the local authority housing programme is at a satisfactory level. There is no basis for the claim in the motion that the authorities have been left short of the necessary capital resources. The situation in reality is that most authorities have never been so well funded and, indeed, generally, no authority have been short of capital for their housing programme in the current year.
The second part of the motion seeks to indict the Government for failing to control what it terms "the recent excessive increases in the price of housing". Members opposite would have the public convinced that the Government are unconcerned about increases in house prices; indeed some Deputies have tried to give the impression that we are prepared to live with a situation of escalating house prices without taking any corrective action. Nothing could be farther from the truth. In fact, our record in this area of house price controls contrasts favourably with that of the Coalition Government under whose four years of administration, average house prices rose by an unprecedented 113.5 per cent—including a staggering increase of 36 per cent in the cost of house building in their first year of office.
When we resumed office in July 1977, we found that the controls on new house prices, as operated by means of the certificate of reasonable value system, which the previous Fianna Fáil Government had introduced in February 1973, had not been strengthened, contrary to what should have been expected after a period of rapid price escalation. Indeed, the controls had, if anything, been considerably weakened by the drastic curtailment in 1976 of the new house grants scheme. Concerned that the situation had been allowed to drift without any Government direction for four crucial years and also because he was aware that the introduction of the £1,000 grant could, in the absence of suitable controls, be inflationary, my Government and the Minister immediately extended the CRV system to all grant type new houses provided for sale and also to flats. Previously houses in schemes of three or less and all flats were exempt from the controls.
I have been keeping the trends in house prices under regular review for more than a year past. When statistics for the second quarter of this year became available they indicated that the average price of houses for which loans were advanced by the lending agencies were increasing more rapidly than building costs, although not as seriously as a superficial examination of the figures might suggest.
It is necessary for me to emphasise this point. Deputies quote freely from the statistics of average house prices shown in tables 19 and 19A of my Department's Quarterly Bulletin, but, where this suits their argument, they completely disregard the warning at the back of the tables that the houses concerned are not necessarily comparable from quarter to quarter or from area to area. This applies particularly in areas where the number of loans approved in a quarter may be small and the average prices are influenced significantly by individual housing schemes.
Subject to this caveat, I was satisfied that there was evidence, particularly in the first half of 1978, to suggest that the increase in average house prices was due to a tendency for builders to move up the market and to provide larger and more expensive houses than normal grant-type dwellings, thus avoiding the CRV controls.
A significant development was the fact that the average price for CRV houses had, for the second quarter in succession, shown a rate of increase only two-thirds that of all new house prices. It was against this background that the Government decided in August 1978 to request building societies, who provide the big majority of mortgage funds, to apportion their available loan money on the basis that at least 60 per cent of the total funds available for mortgages should be allocated for house purchasers whose mortgage requirements do not exceed £13,000 each; at least a further 20 per cent of the funds should be allocated in providing mortgages to house purchasers whose requirements lie between £13,000 and £16,000 each; CRVs be furnished by all applicants for mortgages not exceeding £16,000 for the purchase of new dwellings; and that the apportionment of loans as between new and previously-occupied houses should be maintained at the levels then current.
The Government decision, which is effective until 31 March 1979, was taken with a view to ensuring that the available moneys should finance the purchase of the greatest feasible number of reasonably-priced houses and, at the same time, that all purchasers of new houses with loans under £16,000 would be assured of getting reasonable value for their investment.
These measures are already showing results—for example, figures to be published shortly in my Department's Quarterly Bulletin of Housing Statistics will show that the average gross price of new houses for which loans were approved by the main lending agencies in the quarter ended 30 September 1978 increased by 3.4 per cent compared with an increase of 8.4 per cent in the June quarter and 11.7 per cent in the first quarter of 1978. Again, the average price for CRV houses increased by only 2 per cent between the second and third quarters of this year, compared with an increase of almost 6 per cent between the first and second quarters. Significantly, building society loan approvals accounted for 50 per cent of all loan approvals in the September quarter and the average gross price of houses for which loans were approved by the societies in the then quarter increased by 2.8 per cent compared to an increase of 9.2 per cent in the quarter ended 30 June last. A comparison of the trends during the September quarter in house building costs, private new house prices and consumer prices shows also that while private new house prices were still somewhat out of line with house building costs during the quarter, there was a closer relationship between increases in house prices and in consumer prices generally.
The stabilisation of the rate of increase in the cost of commodities such as building materials and joinery products and in the level of professional charges associated with housing have been important factors in the control of house prices. The Minister for Industry, Commerce and Energy is controlling these and the intervention of the National Prices Commission and the Minister since July 1977 has helped largely to stabilise the prices of basic materials such as cement, aggregates and readymix concrete.
In the situation in which the Government must provide the £81 million capital for local authority housing this year and then meet in full the loan charges—a subsidy amounting to £45 million in 1978 as against £31 million spent on the purpose last year—it is natural that firm control of tender prices for these housing schemes is essential. I want, therefore, to refer briefly to the arrangements in operation which ensure that optimum value is obtained for this huge expenditure of public funds.
A local authority may accept a tender for devolved schemes of up to 60 houses without seeking specific sanction, provided the unit cost of the dwellings is within a limit agreed between the authority and my Department. If the unit cost is higher than this limit a formal submission is required. Generally, authorities work within the agreed unit costs and submissions are the exception rather than the rule. The unit costs are reviewed regularly in my Department with regard to trends in building materials prices, labour costs and land prices. In the case of a scheme comprising 60 houses or more, a local authority must get the approval of the Department to the acceptance of a tender. Approval of a tender is very rarely withheld.
Housing authorities have not had any serious problems in obtaining reasonably priced tenders for their schemes. In fact, tendering has been keen and competitive. An analysis of rural housing schemes comprising, on average, some 60 houses or so, shows that the average number of tenders received for each scheme was seven. In the case of some large Dublin Corporation schemes advertised this year, the average number of tenders was nine and indeed 14 tenders were received for one scheme. Largely as a result of this keen tendering, the difference in cost between the lowest and second lowest tenders has been less than 1.5 per cent in some cases of the overall contract sum.
That is one interpretation.
This indicates that local authorities, without any loss of standards, are getting houses built at reasonable costs.
Finally, I want to say something about the third point of criticism in the motion, which alleges that the Government have failed to take action to control the cost of housing land. As the Minister pointed out in a reply to three parliamentary questions on 11 October 1978, he shares the general concern about increased prices for building land. Like him, however, I am very much alive to the problems associated with the subject, the danger of acting without full and adequate information and the danger that particular decisions, possibly based on inadequate consideration of all the relevant facts and issues, could have a disastrous effect on the construction industry in the short and medium terms, seriously affecting the Government's programme of job creation.
At this point I would like to recap on the action taken so far on the proposals put forward by the Committee on the Price of Building Land chaired by the Hon. Mr. Justice J. Kenny. The Kenny Report was presented to the Minister for Local Government in March, 1973, the month in which the Coalition Government assumed office. In a statement issued ten months later, on 26 January 1974, that Government indicated that the problem of the high cost of building land was a complex one and that an effective solution to it involved remedies which were both far-reaching and comprehensive. Although the Government announced their acceptance in principle of the approach put forward in the majority report, they indicated that before making firm decisions on many of the more important matters of detail they would have to take into account the views of interested parties.
Their statement at the time did not make a commitment as to finance for compensation and left open the question as to who should be the designating authority envisaged in the majority report. The question of dealing with compensation in various cases, of hardship which might call for special treatment, was also conveniently deferred.
A preliminary scheme outlining the legislative provisions that would be required to give effect to the main recommendations was later prepared in the Department of Local Government. This scheme highlighted major legal, financial and administrative implications which would require further detailed study.
The scheme, however, did not settle some of the more important issues such as the level of financial investment and the designating authority which the Coalition Government had left over for later decision. Further questions which arose, requiring Government decisions, included the phasing of the introduction of the scheme, the constitutionality of certain aspects, whether to modify or restrict application of capital gains tax and wealth tax to land transactions affected by the scheme, whether resources, financial and staff, on the scale required to implement the scheme successfully would be made available. However, the previous Government did not take decisions on these critical issues before leaving office.
Since taking office as Minister of State at the Department of the Environment, I naturally, in close association with the Minister, gave precedence to promoting the work programme of my Department and to the arrangements necessary for the fulfilment of commitments announced in the Government's election programme. However, I have been examining the proposals put forward by the Kenny Committee to curb the increasing price of building land and, in particular, problems such as possible constitutional difficulties, the possible disruption of the long established traditional marketing arrangements for land, and other legal difficulties and the problem of providing the financial and organisational resources necessary for its implementation.
I have also secured substantially increased resources for housing, roads and sanitary services, thus providing the necessary infrastructure to increase the availability of serviced land for housing and other development. An undue switch of resources from these sources to a programme of land acquisition could tie up excessive capital in land, giving little employment and possibly adversely affecting the building industry.
As part of the current examination of problems associated with the cost of housing land, An Foras Forbartha have been studying land price trends in the Greater Dublin area since 1970 and other related matters. This commission to An Foras Forbartha is designed to ensure that essential information on the subject is available to help in formulating ideas as to whether the Kenny proposals or alternatives should be recommended to the Government.
Though I have felt it necessary to tell the Dáil in some detail what has been happening in relation to the Kenny Report, I would like to dispel any suggestion that the present Government are ignoring the question of housing land costs until final decisions can be made on that report.
The cost of the site is one of the basic elements making up the price of a house and we have been acutely conscious that the rising cost of building land has necessarily affected the prices being charged for houses. The improvement in the economic climate since our return to Government has meant that land costs—which had lost real value during the recession associated with the Coalition Government's term of office—have increased and to some extent have been responsible for the increases in house prices over and above building costs. Such increases in land or site value are taken into account by my Department in determining the reasonable value of houses for CRV purposes, but in this context I would like to make it clear that we do not feel bound to accept in full and automatically the price paid by a builder for land or sites when considering an application for a CRV. Considerable weight is given to bona fide evidence of actual site costs, but if the price paid by the builder is considered unreasonably high, having regard to site values in the same or comparable areas, it will not be accepted for CRV purposes.
In all the circumstances, I ask the House to support the amendment which I have tabled to the motion. As I have said, I completely reject the motion. There has not been any cutback by the Government in their effective capital provision for local authority housing. We have not failed to control excessive increases in prices.
It is a terrible thing to see a decent man come into the House with a prepared script, presumably because he had neither the heart nor the conscience to speak from his own knowledge, and to have the effrontery to tell the House and the country that there is anything but an extremely serious position in regard to the provision of both local authority and private housing from the point of view of supply of houses, their price and the finance available for their purchase.
It is a pity the Minister did not discuss this motion in a constructive way rather than in the inevitable defensive manner we have come to expect from the Government, and try to meet the parties on this side half way in an attempt to tackle a problem involving a basic constitutional right. Then we would have been able to get above and beyond party politics and make progress on behalf of the people whom we are all concerned about. I do not believe the Minister is aware of the gravity of the position. For example, I do not think he appreciates that the local authority housing lists of applicants have increased in six months by between 30 and 35 per cent, a horrific figure by any standards.
This indicates a number of problems. It indicates first that there is a shortage of finance for people to buy their own homes; that there is therefore, possibly, a shortage of houses available, that loans available are no longer of any use or relevance in the context of restoring house prices. Earlier today I asked a question and I should like to repeat it. Would the Minister now be agreeable to consider, in order to get rid of the cross innuendos that exist in a debate like this, the possibility of an open inquiry into the whole area of house prices? That would serve the interests of all parties involved, including the many professional organisations whose concern has been growing in vehemence and volume since the Government came to office, despite the purring sounds that emerged from those quarters prior to June 1977. Such an inquiry could deal dispassionately with this important problem.
I do not know what the response will be. I suspect it will be negative because I suspect that Fianna Fáil have too much vested interest in ensuring that the facts of the housing situation will not be put before the people in a dispassionate manner. I cannot see how such an inquiry would prejudice the case the Minister has put forward if he is happy with his case. We all know that the devil can cite scripture for his purpose, and I suggest that the Minister has been extremely selective in the facts he put before us. He is not taking cognisance of the huge social tragedy which is growing daily by virtue of the inactivity and the vested interests of Fianna Fáil who have turned a blind eye to the housing problem since they came into office, apart from a few cosmetic touches such as the £1,000 grant. Nobody seems to know where that money went, or at least nobody is saying, though a lot of people know where it went.
The integrity of the Minister's stance must be taken in the context of the promises Fianna Fáil made prior to the last election. They were quite clear. The manifesto stated:
Because Fianna Fáil believes that as many families as possible should own their own homes, it will be made easier to buy a house and cheaper to keep it.
If the Minister wishes us to believe that that manifesto promise has been implemented he is uttering a deceit. Nothing could be further from the truth. How can the Minister sit there and pretend that he is helping as many families as possible to own their homes, that it is easier now to buy a house and cheaper to keep it? Only this week people got notices from the building societies of the highest ever increase in mortgage repayments. The Minister should not try to tell us that it is easier to buy a house and cheaper to keep it than it was a year or two ago. In the propaganda campaign before the election we had large advertisements in the newspapers, including one in the Sunday Independent, 3 June 1977. The benign and smiling face of the Minister's leader appeared in a large advertisement in The Sunday Independent of 12 June 1977, in which we were told that Fianna Fáil would increase local authority house purchase income limits and maximum loan limits to realistic levels. All I can say is that Fian-na Fáil's realism differs substantially from the realism which we are seeking on behalf of those who need houses.
I am satisfied that the only way to make progress is to have the kind of inquiry which I now demand. Because of the crisis in the housing situation, the full dimensions of which have not become clear, we should have a national housing authority and adequate funds to ensure the rights of people to own their homes and not be dependent on the whim of the £, the rise and fall of shares on foreign markets, the sanction of the Minister for Economic Planning and Development, or the varying demands of a number of Ministers on the Exchequer. Housing should be above other considerations. I believe that the stability and welfare of our society springs from housing and education. If the Minister considers the facts he will realise that major initiatives are necessary, not the kind of initiative that we have come to expect from the Government, which has been to kick to touch and to tell us that things are under review. There is a fundamental difference between what I consider to be the function and art of Government and what the Government practise. Government is about doing things, not considering options. They were given the mandate to take action and that is what they should do. People are crying out for leadership and they are getting reviews. All things will be produced from this magical review body in the sky in three years' time. That is the trick but I may be too young and naïve to appreciate it. I reject it as a shallow philosophy.
The housing situation is alarming, particularly in Dublin where there are 8,500 families waiting for housing. House construction is not keeping pace with demand. The Minister referred to the capital allocation. The relevant data in this context would be to take the proportion of capital expenditure on housing over a 12-month period as a constant and assess it over a number of years to see how it works out. There is no point in telling us that the cash provision for housing has increased when the cost of housing has gone sky high. The cash provision is irrelevant unless considered in the context of other criteria. The percentage of the public capital programme allocated to housing in each financial year shows a deliberate cutback. In 1975 the figure for local authority housing was 11.82 per cent. In 1976 it was 11.89 per cent, an imperceptible but significant increase. In 1977 the figure fell to 10.89 per cent and in 1978 the estimate is 10.55 per cent, the clear peak of the graph coinciding with the coming into office of this Government.
Since the Minister came into office the capital expenditure on housing has decreased, which does not surprise me. Anyone who has taken an interest in either the Green Paper or the White Paper could be surprised at the decision to downgrade the local authority sector. I do not know what the reason for this decision is but it is not to create more housing in the private sector, except in negligible numbers. I appreciate that that may be the Minister's concern but that is not the way it is working out. Paragraph 5.8 of the White Paper contains the following clear statement:
In the face of these high costs and given the progress already made towards satisfying needs, the level of activity in the local authority housing programme and/or the extent of Exchequer subsidies will have to be subjected to continuous critical review in the light of available resources. The local authorities will be requested to examine the circumstances of housing applicants in more detail to determine priority needs.
Not, one might assume, an unreasonable proposal. It is only unreasonable if it is the only area of public expenditure to be given increased scrutiny, as if there were people on the housing list who should not be on it, as if local authorities were negligent in their scrutiny of applications. If there is evidence then let us hear it. If not, that slander should be withdrawn. It is like the other papers we have had from this Government: a way of creating an environment for cutbacks in order to fuel the private builders, which I favour to an extent, but the interests of some builders may clash with the best interests of the public.
There is a need to ensure that adequate funds are made available for local authority housing. The figures show that there is a decline in these funds. When the Minister seeks to pretend that this is not so he is not telling the truth. A major ingredient in the price of housing is the control of the cost of land. Most of us agree that urgent action is needed in this area. The position in regard to the land banks available to the major urban authorities is critical. There is a negligible land bank available in the Dublin city area, which is the second largest local authority in the country. The Government's lack of interest in this matter means that the majority of people seeking local authority housing are being forced to migrate to areas which are foreign to them. I am talking about new clinical estates. It is difficult to talk about housing without talking about the social implications of housing in these barren landscapes. The Minister should consult with his colleagues in the Department of the Environment and Health. Young mothers are obliged to rear families in new estates without shopping facilities, community centres, nurseries, schools, churches and so on. If young people wish to stay in the city they will not benefit from the grant because there is no new housing in the city. It would be of help to extend the £1,000 grant to these people. They should not be forced to leave the areas in which they were born. They are penalised by the Government and have to go into areas where there are grave social problems.
The Minister tried to pretend that the increased cost of housing does not give cause for concern. Let the Minister deny if he can that in the last quarter of 1977 and the first quarter of 1978, the period in which it is reasonable to expect that this Government's influence would have been felt in terms of house prices, the price of new houses for which loans were approved by building societies rose by 44.1 per cent, the price of new houses for which loans were approved by assurance companies rose by 37.64 per cent and the price of the new houses for which loans were approved by the associated banks rose by 37.88 per cent. Is it not clear, therefore, that an extraordinary increase, over two and a half times the increase in inflation during the same period, took place in the price of new houses? This is tragically underlined by the fact that during the same period the cost of building materials rose by less than one third of the figure which the Central Bank maintain to be the actual increase in house prices. In other words, there was an increase of over 23 per cent on what might be considered to be the legitimate cost. Where has this money gone? How is the extra 23 per cent justified? That is a reasonable question and it is the Minister's job to give a reasonable answer.
I have no doubt that the Minister's complacency regarding available finances will bring at best a wry smile of regret to the faces of those who are waiting with bated breath to see what kind of loan they can get. At worst, their reaction will be burning anger. For the first time in recent years, people in this city have been obliged to queue from 3 a.m. to get application forms for loans. A new phrase is current in housing policy, namely, "the loan famine". I had not heard that phrase until six months ago. Loans are not as readily available as they were and those which are available are in many cases irrelevant. I refer in particular to local authority loans. The salary limit of £3,500 and the kind of repayments necessary will make this loan less and less relevant. It is not enough to increase the loan unless the limit is increased sufficiently to enable people to obtain loans and to repay them. The present statistics add up to an unreasonable proposition. By his insistence on the tax certificate the Minister is ensuring that fewer rather than more people will get them.
The Minister tried to pretend that the local authority housing sector is healthy and that the number of completions and general activity in the area suggest that. The facts do not bear this out. Although there was an uneven period during the past three or four years in relation to local authority housing completions, in 1976 7,263 local authority dwellings were completed. The figure available to us for 1978 is 5,770. That can only mean that the Government and the authorities are not building as many local authority houses. It does not matter what gloss is put on the figures. Over 10 per cent fewer local authority houses have been built this year compared with last year and the Minister knows that the number of completions for all houses built this year will be lower than last year.
The Government's statement that they would build between 21,000 and 27,000 houses during the next few years comes into focus. I suggest that house completions this year will be down. The Minister should not try to blame the weather; it has not been more inclement this year than other years. Local authorities are building fewer houses this year and have a lower percentage of total capital expenditure than heretofore. The Green Paper underlines both these facts in its philosophy which is to squeeze out of the market people looking for local authority houses and to squeeze the local authorities away from the provision of such houses.
I ask the Minister urgently to consider the problems of urban areas. He shows no concern whatever, nor does any member of the Government, regarding inner city problems. There are growing areas of dereliction and blight in this city because young couples who want to live in the city are discriminated against in that they cannot get the £1,000 new house grant and must leave the city. If Fianna Fáil continue to get their way only the old and the poor will be left in the city. The Minister should consider the need to institute a properly phased programme of inner city housing. The land is there if the Minister wishes to take the power. At a conservative estimate there are over 200 derelict acres in Dublin city alone and nothing is being done. The ridiculous compulsory purchase order procedures and the exclusion of the rights of the community because of the apparent reverence for the rights of the individual, both in the Constitution and in the national legislative framework, apparently paralyse the Minister and his colleagues from doing anything concrete about taking over these areas of blight which make this capital city the shabbiest in Europe. It is a matter of growing shame to us all. Cork, Limerick and Galway are the same except in microcosm. They have the same problems of blight and suffer from the same lack of Government interest in inner city areas.
I will show the Deputy around Cork.
I regularly go to Cork. My mother comes from there. It is a very much sadder city since the Minister and his colleagues came into power.
The Minister for Labour has enough problems of his own and should leave housing alone.
I will show the Deputy around Cork any time.
The Chair would suggest that if any Deputies wish to visit Cork they should wait until the weekend.
On the subject of visiting cities, I would ask the Minister of State if the integrity of his response today is of the same calibre as that of the Minister for the Environment when, in order to exhibit his concern for people in inner city areas, he undertook in a letter to me to visit the constituency of Dublin North Central before the end of the Summer Recess. This letter is on file and I would ask the Minister to reconsider this visit.
Debate adjourned.