Deputy Quinn is in possession.
Housing Finance Agency (Amendment) Bill, 1987: Second Stage (Resumed).
Question again proposed: "That the Bill be now read a Second Time."
When we adjourned last week, I had covered most of the ground in relation to the specifics of the Housing Finance Agency (Amendment) Bill, 1987, which I wanted to draw to the attention of the Minister and to request him and the Department of the Environment, in the formulation of his reply, to have regard to those measures and see if they would be in a position to respond to them. Many of the points I made were centred more on the administration of the Minister's Department than on the intricacies of the legislation itself. It is a convention on Second Stage debates to cover generally the areas which the legislation addresses, so I feel I was in order in covering that ground in a fairly substantial way.
It is my view and the view of the Labour Party that the overall changes in the Public Capital Programme for 1988, as indicated in the Estimates, combined with the effect of this year's budget, which is now currently in operation on the ground, will reduce severely the supply of local authority housing and as a consequence will drive more marginal people, from the point of view of disposable incomes for housing purposes, into the area of low cost loans and into the area which this legislation proposes to cover. Because of the system that is proposed in Housing Circular 10/87 and the way the Government are proceeding to act we are going to compound unnecessarily the housing difficulties these people have. I will repeat what I said in relation to that area but I want to summarise in essence what is proposed.
The State, by effectively shifting its responsibility for a large amount of housing loan capital to the private lending associations, is in the process — in order to ensure that the private lending institutions will offer mortgages to people of modest means — of underwriting certain ceilings up to a maximum of 50 per cent by way of guarantee in the case of default. We have nothing against that principle. Indeed, it has certain merits because those institutions appear to have a lot of savings capital that is not being properly used. Some form of guarantee for people with marginal incomes who are coming into the mortgage market would probably be necessary. One could argue technically on what is the best way to do it, but that is for another day.
I am concerned that the bureaucracy in O'Connell Bridge House is obsessively concerned with matching paper with paper and guarantee with guarantee. The reason for that might be to cover the condition of the guarantee whereby if an applicant is to be successfully considered by a local authority he will have to have two refusals in writing from two lending institutions, for example, a bank and a building society, or any combination of those. This will be a counter productive measure from the point of view of encouraging people to house themselves. This is particularly so when it is recognised that much of the demand in this sector will come from people who will no longer be able to look to a local authority to house them because of the squeeze in the Public Capital Programme on that area of supply.
The view I put forward is not one that is expressed just by me or held by my party; it is a view that has been communicated to me from a number of channels. A number of councillors have been in contact with me directly as a result of the receipt of the circular and the accompanying press release which went to every housing authority. A number of housing officers, with whom I have had private conversations, expressed their dissatisfaction and bewilderment at the motivation behind this. The Irish Home Builders Association which is a subsidiary of the Construction Industry Federation issued a document entitled "Budget Submission On Private Sector Housing" in November 1987. No doubt the Department have already received a copy of this document. They refer specifically to the deterrent effect this new administrative system will have on the people who are coming into the lowest, most exposed and most fraught end of the housing market and the unnecessary hoops they will be forced to jump through.
Not alone will they have to do that but they will be faced with all of the arguments I referred to the last time I spoke, for example, humiliation, duplication and bureaucracy for what appears to be bureaucracy's sake. Many people may decide simply not to bother and this may compound other difficulties which they may have within their families. Deputies are well aware of the impact bad housing has on family life in many ways.
If this is not just a cautious bureaucratic response, which is the benign interpretation of the motivation for this administration procedure, there is the malign interpretation that somewhere in the bowels of Merrion Street there are people who have always argued, from the point of view of the Department of Finance that there is too much State assistance in the housing sector and they should make things more difficult for people rather than easier for them and that this requirement will have that effect no matter how tortuous or convoluted it may appear to be. If my malign interpretation is correct — and I hope this is not the case — I hope the Department of the Environment have not succumbed to the Department of Finance. I ask the Minister to take the opportunity in his reply to clarify this point. We are deducing the reasons this administrative system has been put in place.
I know this is the day when we are apparently asking the Government to withdraw circulars and I do not think the circular which I have asked to be withdrawn has aroused anything like the same degree of controversy, newsworthiness or column interest as the education one has. I suggest, with all due respect, that the Department should reconsider the operation of this system as a matter of urgency. They should rephrase or clarify the circular and look again at the requirement for written refusal from two financial institutions and replace it with a set of criteria that could be drawn up fairly reasonably so that the system could run effectively and efficiently. I have no reason to believe that is not the Minister's genuine motivation and I urge him to reconsider it.
Despite the assurances we received before we went into this part of today's business — the Chair will recall that on the Order of Business the Minister for the Environment indicated that two pieces of legislation would be introduced in this House between now and the end of this session — I would be pleasantly surprised if we got to the stage of having these Bills circulated, having regard to the business to be dealt with. We would be lucky if we reached the Second Stage either on the Bill Deputy Gay Mitchell has been pursuing for some time dealing with Raglan House or the more general Bill dealing with homeless persons. Since we are unlikely to have an opportunity before next April of discussing housing in any substantial way, I ask——
I think Deputy Ruairí Quinn, the experienced Deputy he is, appreciates that he has been delightfully out of order. On Second Stage of the Housing Finance Agency (Amendment) Bill, he must use his ingenuity to refer to what is or should be in the legislation. He cannot, as he knows, range over the area of housing generally.
Not for one moment would I attempt to do so. I was attempting to say what I was not going to do in order to justify it. This, in summary, is the only housing finance legislation we are likely to have for the foreseeable future. Perhaps I was over-extensive in range when making that point. I would like the Minister in his reply on Second Stage to what I proposed to be an amendment to a very successful housing finance institution, the HFA, to indicate to the House, since he has sought to make a massive change in the ceiling of capital borrowings that the HFA will now be entitled to borrow, what other structural changes he would see in the way the HFA disburse their funds. It is clear there will be a massive change in the demand for housing in our economy over the next number of years. Not only will there be a quantitative change but there is also likely to be a fairly substantial qualitative change in the type, location, and structure of that demand.
We are looking at the legislation in the context of the 1987 budget, which has withdrawn an enormous amount of support from the housing market; the housing supply, new house construction and home improvements. I would draw the Minister's attention to two documents. I have already referred to the submission by the Irish Home Builders' Association. The second document from the Construction Industry Federation has also been submitted to the Government in advance of the 1988 budget and is entitled Crisis in Construction— A Strategy for Survival. I think, Sir, you will realise that when a body such as the Construction Industry Federation which in the past has placed so much hope on the Fianna Fáil Party in Government delivering support to the building industry submit a document with that title it is clear there are major difficulties.
If this legislation is to have any substantial relevance to the taxpayers who are represented in this House and to the administrators who derive their powers and authority from the laws which we enact — and we are in the process of debating the enlargement of the amount of money the HFA can borrow by way of State guaranteed sums which will ultimately fall on the shoulders of the taxpayer — it is right and proper that we should hear from the Minister of State with responsibility for housing what he proposes to do in responding to the changing nature of housing demand in our society over the next five to six years.
It is clear there will probably be less than 2,000 local authority dwellings completed in 1988. The figures and estimates vary and in the absence of a detailed response to written questions I can only speculate. The highest figure I have seen is 3,000 for houses to be completed this year with a much lower figure in the following year because of the decline in house starts. If that happens and if the Minister has no other proposals for altering the mix of supports that currently exist for housing supply, for assisting local authorities to provide additional supply through different mechanisms, such as the restoration of some form of the £5,000 buy-out grant that was so successful in stimulating local authority housing supply, we really need to look at whether the provisions of this Bill go far enough, whether the administration of the HFA and the guarantees that are being delivered will be sufficient to meet housing demands in the 1988-90 period when I expect by and large that the present Administration will still have responsibility for Government. Unless the Government start to take significant steps now they will bring about, either by accident or by Department of Finance design, a managed, engineered housing crisis in our society.
The industry, represented through the CIF, has submitted two documents which are clearly indicative of a dramatic downturn in demand. Those documents should, I believe, be measured against the background of demand which underpins any housing finance agency legislation, namely, the changing structure of the Irish population. I draw the Minister's attention to a document published in September of this year by Davy Kelleher McCarthy Ltd. which deals in detail with forecasts of population and the labour force to 2011. A recent experience of demographic forecasting would make anybody wary about projecting too far ahead but on the basis of headship rates, the base upon which housing demands can be calculated, there are already sufficient indicators to enable us to be relatively secure in our interpretation of what demand is likely to be, within a reasonable range.
I would put to the Minister and his Department that there is enough documentation and basic research available to back up individual changes, whether in the Housing Finance Agency, the grants structure or in unilaterally withdrawing full support for local authority house-building programmes. In order that a reasoned and rational debate takes place in our society and particularly in this House, on the housing policy we now need, it would be very useful and constructive if the Minister were to bring forward a White Paper.
I believe we really need a very clear and comprehensive outline of the total housing package, of which this legislation is simply a part. The Government for a variety of reasons have dismantled an entire interlocking comprehensive housing support system that produced among other things the highest rate of home ownership in the world, which reduced for the first time in living memory real levels of local authority housing waiting lists and precipitated a massive amount of home improvements in the existing stock. While it has been argued by Government Deputies and Ministers that such a package could not be sustained on grounds of cost, nobody argued that the package was not comprehensive and that it did not address in its own way different subsectors of the housing market while this legislation refers to only one.
I would say, Sir, unless you want to find yourself subject to arbitrary criticism, which in many cases might be ill-timed or apparently unjust because it does not understand or fully comprehend the entire range of activities that you are trying to undertake, I suggest that there is a clear and urgent need to put a new comprehensive housing policy in place as the Government have effectively demolished the present housing policy. First and foremost, the Government need to bring forward a White Paper outlining the changing nature of housing——
Excuse me, Deputy Quinn, this amending Bill makes provision for additional money to the Housing Finance Agency. The Deputy must accept he has ranged a little beyond that.
I recognise the Chair's concern that we should be as concise as possible and I will conclude by summarising three main points.
Again? The Deputy has summarised them three times already.
I hope the Deputy is not advising the Chair that he intends to be guilty of the fault of repetition. The Deputy should conclude as precisely and as concisely as he is capable.
First, the Minister should revise or withdraw the housing circular which is giving administrative effect to this amending legislation. Secondly, he should look at the impact of the capital structure allocation for 1988 on the operation of this legislation because of the effect on people on the housing waiting list. Finally, if the Minister wants to have the support of this House for constructive measures in the housing area — nobody has a monopoly of wisdom or fortitude in these areas — he should bring forward on the basis of the new demographic factors now emerging a White Paper on housing that would enable us to have a proper debate throughout the country and in local authorities so that we could get on to dealing with new kinds of housing problems which certainly exist and which will undoubtedly become worse if action is not taken quickly.
The Minister has indicated that the purpose of this Bill is to increase from £500 million to £1,000 million the Housing Finance Agency's ability to borrow and to empower the Minister to contribute towards the cost of the agency.
The Housing Finance Agency, together with the other publicly-funded loans schemes, have contributed very greatly to the ability of people of modest means to acquire their own homes. Most Irish people and families are very keen at all costs to become owners of their own place of residence. Figures show that we have one of the highest rates of home ownership in the entire world. This has been helped in no small way by the contribution of the publicly-funded loans schemes throughout the years.
The Housing Finance Agency introduced pay-related schemes which gave people the courage they needed to acquire their own homes. They encouraged them to make the necessary commitment to such an acquisition. The acquisition of a home or unit of accommodation is for most people the single greatest transaction they will undertake in the course of their lives. The Housing Finance Agency scheme gives local authority tenants the confidence to acquire their own homes. People experience a sense of satisfaction and commitment when they become owners of their place of residence.
The Housing Finance Agency took a great step forward by relating repayments to income. It changed the face of local authority home ownership. Allied to the £5,000 grant, the changes in local authority schemes, particularly in Dublin city and county, were quite significant. While the £5,000 grant was very much welcomed at the time, we are now seeing the negative effects of this grant. I would not suggest for a moment that it should never have been made available to local authority tenants of three years standing to help them acquire their own homes but certain people involved in social work at that time began to make the point that there was a price to pay, particularly because there was no tenant purchase scheme for part of this period. I think the period involved was 1984 to 1986.
Deliberately.
That may be so. The local authority tenant who wished to become a home owner during that time found himself compelled to vacate his local authority house. Had a suitable tenant purchase scheme been in operation at that time we would not necessarily have seen mass movement out of the local authority estates. This point was made time and again by social workers and community leaders in these areas.
We are now seeing the results in the local authority estates, particularly in Dublin. Over 400 housing units are empty, a terrible waste of national resources. It is not right to claim that we should carry on with the major house building programmes we have had in recent times. In many areas of our towns and cities we have a surplus of local authority houses. We must get the balance right before we embark again on local authority house building.
In my own area of Tallaght and Clondalkin vast numbers of houses are empty, subject to unauthorised entry and interference. The regrettable result is that Dublin Corporation have embarked on a policy of bricking up empty houses in the estates, although they are in the administrative area of Dublin County Council. I have told corporation officials that this is a retrograde step because the appearance of these bricked up houses leaves a lot to be desired. Offering an empty house to a family in need does not always meet with success because prospective tenants are put off by the environment of the estate in which they are shown these surplus houses. I would like to see an end to that practice. There should be adequate security in those empty units until such time as they are required for proper letting.
It is the wish of most people to own their own home and local authority purchase schemes have helped many in the past. It makes sound sense for the Minister to turn to the private lending institutions to help people purchase their own homes. I have always felt that such institutions were ultra-cautious and ultra-conservative when lending to people of modest means. They tended to go after the best applicants and were not always prepared to accommodate the person of modest means who, as a result, had to approach a local authority. The Minister's agreement with the private lending institutions should be applauded. Those groups should carry some responsibility for helping people to acquire their own homes by extending house purchase loans to people of modest means.
An example of how cautious such institutions are is that when loans fall into arrears they seek repossession of the property. I know of cases where those institutions were harsh in their approach and adopted the attitude that if they repossessed the house the local authorities would step in to house the person concerned. That is not the proper approach. Those institutions are in the business of lending money to people to purchase houses and they should have a greater commitment to help those who find themselves in difficulties. They should concentrate their energies on helping people get over temporary difficulties and not be so quick to seek possession. The building societies and the banks should play a greater role in helping people cope with any difficulties they may experience in meeting their mortgage repayments just as local authorities do.
The tenant purchase scheme introduced recently by the Minister has proved very popular. For two years people were not able to purchase the local authority house in which they lived for many years and for which they had paid a lot of rent. It is pleasing to know that many people have decided to remain in their own community in stark contrast to what occurred between 1984 and 1986. I hope we will always have a tenant purchase scheme to enable local authority tenants purchase their own home. We are all aware of the drawbacks of large scale movement from local authority housing estates. Over the years local authority tenants developed basic facilities in their estates and fostered a community spirit. Housing estates of 300 or 400 houses developed their own identity and the tenants developed a commitment to their environment. Community leaders emerged and they gave guidance and assistance to their neighbours. Unfortunately, when those people acquired their own home and left such housing estates they left such communities without leaders.
Another by-product of that movement of people was that only those who were in employment found themselves in a position to obtain house purchase loans. In most cases the new occupier of local authority houses was unemployed and such estates became places of substantial unemployment. An example is the area of Fettercairn in my constituency where more than 70 per cent of the workforce are unemployed. Many of the original tenants availed of the various loans and grants to acquire their own home outside the area. Such a big movement of people from local authority areas will not occur again if we provide an adequate tenant purchase scheme. The Minister should examine this to see if it is necessary to streamline the existing scheme so as to encourage more people to buy out their house.
There is no doubt that local authorities will benefit if more tenants decide to buy out their house. The first benefit that springs to mind is the reduction in the provision for maintenance. We are all aware that the cost of maintaining local authority houses is substantial. From figures provided by the Minister it is obvious that there is a substantial gap between the amount collected in rents and the cost of carrying out necessary repair work to houses. Another advantage is that there will be stability in local authority areas and those of us who represent such estates will welcome that.
I welcome the decision to encourage building societies and lending institutions to play a greater role in funding people of modest means who wish to purchase their own home. I hope the Minister will ensure that the scheme introduced by those institutions is not bound up by a lot of red tape. Those institutions should have qualified people available to discuss all aspects of house purchase with applicants. They should be courteous and helpful to those who apply. The purchase of one's home, whether through a local authority house purchase scheme or a private lending institution, is a difficult and onerous task. It is the biggest commercial transaction that most people undertake in their lives. Private lending institutions should streamline their system to ensure that any difficulties that arise in the initial stages are dealt with swiftly.
I compliment the Minister on increasing home improvement loans from £6,500 to £8,000. This is a very welcome increase. Allied to the publicly funded loans for the purchase of houses, I believe this increased loan will be taken up all round the country. When the loan was pitched at £6,500 that was too low. This increase to £8,000 will be of great benefit to people who need to avail of this type of loan to improve their accommodation.
It will be necessary to look at the complete area of house purchase loans so far as they are publicly funded. I know the Minister is aware of this from his experience with local authorities. I hope when he looks again at tenant purchase schemes he will be able to devise a new system which will be very attractive and will encourage people in local authority dwellings to start purchasing their dwellings. I am primarily interested in people buying their local authority homes because this gives a great deal of stability to the community and helps to develop a community which needs this type of assistance.
Deputy De Rossa and Deputy G. Mitchell rose.
I appreciate the frustration and annoyance felt by Deputy Mitchell who has been here since this Bill was introduced at not being called but, in respect of a Second Stage debate, a tradition has been established as to the sequence of speakers. When the spokesperson for the three major parties and the second spokesperson for the Government have been called, we then call on The Workers' Party. Accordingly I am calling Deputy Proinsias De Rossa.
Thank you, a Leas-Cheann Comhairle. May I offer some consolation to Deputy Mitchell by saying that I will not be making a very long contribution?
I support the Bill as presented but I have reservations as to how the Housing Finance Agency loans operate. I doubt that many people who enter into these loans realise the type of loan they are taking on and the very heavy debt facing them in the first ten to 15 years of that loan. Nevertheless, this system has been availed of widely. The main attraction is that it offers people who would normally be on the housing list, or in local authority houses, the choice of where they would like to live. That does not necessarily mean they want to move out of local authority estates because I know that, in most cases in the Dublin area, these loans are taken on former local authority houses bought in what are high demand areas.
Perhaps this much vaunted demand "to own one's own house" is to a large extent shaped by the fact that it offers a choice to the person who seeks to buy rather than rent. The fact is that, if a person wants to rent accommodation, unless he has a very high income, the only kind of accommodation he can get at a reasonable rent is local authority accommodation. There is ample evidence that, if a person tries to rent a private house or private flat, he pays through the nose for it.
There is no subsidy on renting a private flat or a private house, but if a person is buying a house he gets a substantial subsidy. There is a myth that the only housing which is subsidised in this State is local authority housing. We hear all sorts of criticisms, particularly on the "Gay Byrne Show", of local authority tenants whose accommodation is subsidised, but private mortgages are substantially subsidised. I have seen figures which in some cases indicate that there is a much higher subsidy for the private purchaser than there is for local authority tenants.
There is another aspect about which I am concerned and which I would like the Minister to consider, that is, where local authorities repossess houses, whether bought through HFA loans or through special category loans. The local authority with which I am familiar, Dublin Corporation, repossess these houses and resell them at a price which is really nonsensical. If the house has to be repossessed and sold at a fraction of the cost, it would make more sense to have it put back into local authority stock and rented to a person on the waiting list. However, I have reservations about repossessing houses in the first place, especially where local authorities repossess houses, because in most cases the local authorities are obliged to rehouse those families.
This whole process is carried out simply to satisfy a legal requirement. Rather than disrupt a family by repossessing a house because the family are unable to pay their mortgage, it would make better sense to leave that family there and let them become the tenant of the local authority in their own home. It does not make sense to evict them, rehouse them and then sell the repossessed house at a fraction of its value. As I said, this seems to be done purely to satisfy a legal requirement. This is a matter at which the Minister should look seriously.
The figures for repossession in the Dublin Corporation area in the past five years have risen from seven or eight to about 20 to 24 in 1986. Obviously in terms of the large numbers of loans granted by the corporation this is not a large figure; nevertheless, the rate of rise is significant. We can avoid disrupting even one family by changing the rules and the legislation to enable a local authority to leave that family in their own home, which they might have spent a lot of money refurbishing and making comfortable, rather than moving them, say, 500 yards down the road to another local authority house and selling the repossessed house at a fraction of the cost. This causes financial problems for the corporation and untold hardship and misery for the family concerned. I appeal to the Minister to look at that aspect.
Another point to which I should like to refer in relation to the Bill is the ad hoc approach to housing. I recognise there is a need to increase the money available to the Housing Finance Agency but it is unfortunate that decisions have been made by various Governments without any apparent overall approach to the provision of housing and the need for it. The last time we had a White Paper on housing was in 1960. It is time we produced another which would take into account the various changes which have taken place in society, the age of the population, family sizes, the growth in the phenomenon of single parent families and the kind of accommodation required by them and whether it is right to separate people who cannot provide housing for themselves within their own means from those who can afford a mortgage from the Housing Finance Agency, a building society or a bank. That approach has resulted in housing ghettoes and it means that families on a certain wage level live in a particular area. There is no reason for a local authority not to build houses for sale and for rent, the same as any other provider of housing. I do not see why there is any need to maintain the kind of rigid residential qualifications which the various local authorities have in relation to the allocation of housing.
There is no need to maintain the very rigid divisions between Dublin Corporation and Dublin County Council in relation to the allocation of housing. The last speaker made the point that the corporation are responsible for thousands of houses in his local authority area although Dublin County Council are responsible for the various services such as sewers, water, lights and so on. Dublin Corporation are merely responsible for maintaining the houses but when you go out the garden gate Dublin County Council take over. During a very bad spell a few years ago a pipe burst in a certain area, the corporation had to be called to deal with the problem in the house and the county council had to repair the roadway. It does not make sense. It all relates to the allocation of housing and providing it in the best way possible. As I said, there is an urgent need for a White Paper on housing, to look at its provision and how it is managed, particularly in the greater Dublin area which has a population of over one million. We often hear propaganda in relation to the fact that there is no longer a housing crisis but there are still waiting lists in Dublin Corporation, in Wicklow and Kildare.
The last speaker referred to the fairly large units of vacant accommodation and the £5,000 grant. There is an urgent need for this House to come to grips with the question of producing a coherent housing policy which will deal with modern conditions and take into account that a very substantial portion of our housing stock is sub-standard. There has not been a survey of housing stock or its standard for many years or of the various changes in our population structure.
I welcome the opportunity of speaking on the Bill and I should like to congratulate the Minister and the Minister of State on introducing it as it now provides increased funding for the Housing Finance Agency amounting to £1,000 million.
I welcome the Bill mainly because of the fact that the Housing Finance Agency have, since 1986, introduced a block building approach to the local authority. It is important that the agency can purchase through the local authorities. There are three types of loans involved and it is important that they are inter-related. The Housing Finance Agency are a great help to the people looking for a loan. Over a four or five year period there should be enough funds to operate the loans and to allow funds to be provided to local authorities. It is very important that any crisis or confusion in local authorities is relieved by the fact that we are now providing £1,000 million to the agency.
I am in favour of increasing the income limit for a HEA loan and the maximum for the ordinary capital loan should be increased from £22,500 to £25,000 so that there would be more money available under this scheme than under the SDA loan. We should give that option to people who are caught in income limits.
Through the Housing Finance Agency loans many families have been able to get new and secondhand houses and a large number of people on the waiting list for houses have been able to buy them. However, one of the things that concerns me — and many public representatives — is the delays in relation to title when people apply for these loans. Despite the best efforts of local authorities, there is considerable hardship for people who have to wait long periods for the title to be sorted out, as they must pay very high bridging finance. Time is of the essence for applicants for these loans. It is important that legal difficulties are sorted out, certainly within four or five weeks, so that people will not have to pay very high bridging because of the delays.
In relation to income limits it is very unfair that one-income families are dealt with in the same way as two-income families. A one-income family should be allowed twice as much as a two-income family. One-income families have experienced hardship under the present system. The Housing Finance Agency has worked well. The administration costs are low and the local authorities have worked hard in this area. Nowadays very few loans are coming through my local authority because income limits are the same for all loans. It is time now to make a change.
Many of the people who got subsidised loans through the local authority under the Housing Finance Agency scheme did not realise that they would have to pay back so much money to redeem the house and buy another house some years later. In these instances, people are losing money. Many local authorities have advised applicants to pay back a little more than the required amount. An income-related scheme is very attractive in the early stages but people do not realise how much they owe on their houses and it comes as a shock to them when they try to sell and repurchase. This should be pointed out to people repaying loans.
In relation to the financing of private housing, I am glad that the interest rate has now dropped to 9.75 per cent which includes mortgage protection. I have spoken about this to the Minister on many occasions. When other financial institutions have a lower rate than the local authority for SDA loans, it is time to reduce the interest rate for SDA loans. I welcome the reduction. Over the last decade building societies have become the mainstay of the private housing sector. The SDA loans and the HFA loans were very important in the last five years, but the building societies should be more involved in the provision of finance for private housing. Figures from the construction industry federation show that in 1985 SDA and HFA loan payments accounted for £163 million out of a total for all agencies of the £600 million in the private housing sector. In other words, the State provided between 20 per cent and 25 per cent. That points to the need for the financial institutions to be involved in housing finance.
The request of the housing sector for a guarantee of funds was acceded to in the Minister's announcement introducing this Bill when he stated that the State's role would give a limited guarantee to the borrowings from the financial institutions. That is very important. The director of the construction federation said that any new arrangements would have to focus on, among other things, the need to place the investors' interests on a par with those of the borrower in what has become a ritual row that mortgage rates had to be moved upwards. In that context the State's role in guaranteeing the private sector is important.
I appeal to the Minister to ensure that applications already with local authorities are dealt with under the old scheme. It is unfair to send people who had already applied to local authorities back to the private lending institutions. I hope the Minister will be forthcoming on that.
I welcome the Minister's announcement that home improvement loans have been increased from £6,500 to £8,000 and that these will be funded by the Housing Finance Agency. This is the only source of State funding for house improvements. Many people wanted this loan increased.
I congratulate the Minister on introducing this Bill and I thank the local authorities and the Housing Finance Agency for their work. I hope the Minister will look at some of the points raised about the amount of loans, the income limits and the delays in establishing title which have caused a lot of hardship to applicants who have had to pay very high bridging finance.
The Minister said that the income related loans scheme and the more recently introduced convertible loans scheme have made a significant contribution to the ability of people to acquire their own homes. That is a fact. I would like to see a greater ease of convertibility from Housing Finance Agency loans into fixed interest loans, as people get on their feet. Many people take on the HFA loans in the commencement years of their mortgage and find it difficult to convert later.
I want to refer to something Deputy Flood said. It is a fact that, in certain parts of Dublin, in particular — because of the availability of the £5,000 grant to people who surrender their local authority homes — there is a number of houses remaining vacant. However, that problem is being mitigated. Whereas it may justify the fact that there has been almost a full stop to house building programmes in Dublin I suggest that there is still housing squalor in Dublin. I will not attempt to apportion blame.
In recent years our efforts on both sides of the House have concentrated on local authority housing lists which have been brought considerably under control. The previous Government spent £156 million, from Dublin city's budget alone, on building houses in the years 1984, 1985 and 1986 and that has had a major effect on reducing the housing waiting lists. When I first became a public representative, in 1979, one could not get a house for love nor money in Tallaght or anywhere else. Certainly that problem has been dealt with. We need to address our attention now to the housing squalor in our inner cities. I make no apology for saying that. I want to say to the Dublin Corporation official who was reported in the press as saying that I must never have visited these places: yes, I have visited them, they are located in the inner city part of my constituency. I will bring any official who contends they do not exist there and how him these places.
There are in Dublin city 16,000 local authority flats. I will put my hand on my heart and say that approximately 10,000 of those are not fit for human habitation in terms of accommodation in which we should like to live ourselves. That should be the litmus test: would we wish to live in them ourselves? Some of those flat complexes are unfit for animal habitation never mind human beings; human beings should not be asked to live in them. The State has a duty to provide proper housing accommodation for those people. I have seen the developments that have taken place in Leaview House in Hackney. I must say that the standard obtaining there is the one to which we should aspire for our local authority tenant dwellers, not just in Dublin but in Cork, Athlone and anywhere else where there is need for major refurbishment. For instance, when Oliver Bond flats and St. Teresa's Gardens complexes were built they were considered luxurious because, before then, people had been living in tenements with perhaps one toilet or a bathroom on one floor shared by all occupants. Therefore the move into these flat complexes then was considered a major advancement. Indeed I should say fair play to the Government of the day who provided them. However, many of those flats do not have a shower. There have been steps take to replace windows and so on but such does not constitute proper refurbishment. We need to refurbish those flat complexes along the lines of what has been done in Hackney at Leaview House. They need to be converted into dwellings in which people can live for another 20 or 30 years. I am talking about expenditure in the region of £20,000 per housing unit. It would cost approximately £200 million to bring Dublin's inner city flat complexes up to scratch. That is not an unrealistic figure or one incapable of being achieved. For example in the years 1984, 1985 and 1986 we spent the historic figure of £156 million. The work can and should be done. People should not be asked to live in those types of complexes and their attendant environment.
If the Minister is free some day I shall be very happy to show him some of the flat complexes about which I am speaking. I know he is as concerned about them as I am. There is a potential Housing Finance Agency role here, were we to engage in that type of investment and request people to make repayments based on a percentage of their incomes in order to finance such a project. That may be a possibility. It might be possible also if we were to abolish the housing maintenance programme in Dublin city which are nothing short of a disgrace and are not properly organised at all. Indeed their operation was investigated by An Foras Forbartha at the request of Dublin Corporation. Such refurbishment works could lead to a major saving in the Social Welfare Estimate, taking people off the unemployment list and engaging them in such refurbishment projects. This is something that must be tackled. Before the inception of the Housing Finance Agency we did not think people could buy their own homes. I can assure the House that I believe it is possible to carry out a major refurbishment job. When one thinks of the educational problems and the protests taking place at present one might well ask oneself how children can be educated in that type of environment? It must be acknowledged that they start from a handicap in terms of background. That is a disgrace and we must try to find a solution to the problem.
I might make a passing reference to the £10,000 income limit which I contend should be increased. There are many people who would be quite happy to build or buy their homes if this limit was revised even to take account of inflation. They are snookered if they engage in even a little overtime over a three year period and can find themselves in serious difficulties. I hope the Minister will find it possible to devote his attention to that matter and revise that limit in the not too distant future.
I am most disappointed at the activities of building societies generally. It is my belief that thy could be of much more assistance in helping people at what might be termed the lower end of the market obtain or purchase their own homes. At present local authorities operate in the same way as building societies, albeit their activities concentrating on the lower end of the market. It is my belief that building societies have not taken seriously their duty to provide homes for people on a mutual society basis. They have grown into monarchies with profits being made by small numbers of directors. There are 13 building societies in existence, five of which dominate the building society arena taking 90 per cent of business and operating as a cartel. We need to examine the way in which building societies operate. For example, in 1970 the total assets of all Irish building societies amounted to £87 million. In 1985 that figure had risen to £2,638 million. In 1970 they had 76,000 investors which figure had risen to 932,000 in 1985. None of those investors had any say in how the building societies operate, or in assisting the Minister or those people who endeavour to house themselves. The people who control the building societies seem more interested in taking those profits and concealing them in purchasing premises at every crossroads rather than lending those profits to people for the provision of homes. For example, at Sundrive crossroads in my constituency there are located five building society offices and there were signs of a sixth locating there recently. That is totally unnecessary, a squandering of money.
Building society expenditure on advertising has been scandalous. They are supposed to be mutual societies. We would not have to be concerning ourselves with Bills such as this if only these people got their act together and did what they are supposed to do, operate on a friendly, mutual benefit type basis. Rather than self-perpetuating monarchies, making profits, concealing them and lending money for business purposes — which they are not supposed to do — they might take more seriously their concern for and duty to the public.
I expressed concern in the House earlier in the year when the building societies increased their interest rate, by one stroke of the pen, by 3 per cent. One might well ask if they have ever reduced their rates by a corresponding amount? The answer is: no, and they never will. Instead they reduce their rates by perhaps 0.5 per cent now and 0.5 per cent again. They have people's hearts broken by their method of operation.
I welcome the involvement of building societies in lending to people at the lower end of the market. I really do believe there is need for a major investigation of their activities. Local authorities such as Dublin Corporation — at present on the brink of bankruptcy because of insufficient funding — are being asked to lend money under the Housing Finance Agency and local authority funding schemes. Yet it is those local authorities who have to make up the losses when people cannot meet their repayments. The building societies make no effort whatsoever to assist.
In an effort to underline the point I am making I might give an indication of the post-tax return on gross assets, average figure for 1981 and 1982. In the case of the Bank of Ireland the figure was 0.77 per cent; Allied Irish Banks, 0.80 per cent; Irish Permanent Building Society, 1.32 per cent; and Irish Nationwide, 2.37 per cent. These are profit-making bodies. They should be told by the Government to assist us in housing these people and to help us to remove the housing squalor. This money belongs to the one million investors who will not be allowed to elect people to the boards of the building societies. If the societies are not behaving like mutual societies in the national interest then the Government and this House should tell them that we are going to legislate. It seems they are largely ignoring or finding their way around the legislation which was passed last December and which was very beneficial.
I hope the Minister will be in a position to tell the House what progress he has made as a result of his consultations with the building societies and what the outcome of those consultations has been. I regret that the Minister has not involved in those consultations the account holders of the building societies. They should also be consulted. The building societies adopt a very high-handed attitude and this needs to be brought under control. They, like other sections of the community, seem to think that they are a republic within a Republic and I ask the Minister to ensure that they are brought back on the rails very soon.
The number of branches of building societies should be examined. In 1971 there were 97 branches. In 1982 that figure had risen to 525 and there is probably in the order of 600 or 700 branches now. The building societies are not supposed to make profits of the order they are making and therefore they hide those profits by taking on real estate costs, costs which they can realise at a future date because they are acquiring an asset which is increasing in profit. They buy prime sites in every town and village and write them off against their profits. Therefore they show smaller profit figures than they would otherwise show and they have a large amount of real estate to their credit for doing so. That is not the function of building societies and they should be prevented from doing that. Their function is to lend money to people to buy their own homes.
If the building societies were providing money for that purpose the Minister would not have to come in here today with a Housing Finance Agency Bill. There would be so much money available that interest rates, which are at a synthetically high rate at present, would be reduced. They could quite easily be reduced further to compare with the rates prevailing in other countries. There would be a greater amount of cash available and there would be greater competition between building societies in seeking to make that money available. The Minister would not have to introduce a Bill such as this because the building societies would be very innovative in getting borrowers to provide homes for themselves if they were forced to make that money available.
I suggest that the Minister ask the building societies if they are involved in lending money for the purchase of public houses. They should not be allowed to do so. I wonder do any of the people who put money on deposit in building societies know that some of their money is being loaned for risk purposes. Not so long ago a bank had to be pulled out of the mire because of bad investments and I hope the day does not come when we have to do the same for a building society. Many people who invest money in the building societies do so in the belief that it is being lent for housing purposes only and that there will be real assets should the borrowers not be in a position to make repayments. I do not think many of them would be very comfortable if they knew that some of their money was being loaned for the purpose of purchasing public houses or other types of businesses. There is evidence to show that that has been happening and the Minister should look into that.
In regard to the management expenses which the building societies must show to the Registrar of Friendly Societies, in 1983, the last year for which I have figures available to me, they showed a total figure of £31 million. There is no breakdown of what these management expenses are and the building societies are not required to indicate what they are. These are meant to be mutual societies, societies which are democratically controlled and not societies controlled by one or two people or in some cases by families. There should be a requirement in the legislation that a breakdown of these management expenses should be provided. If all these matters were addressed there would be no need for us to be constantly concerning ourselves about extending the remit of the Housing Finance Agency.
I ask the Minister to address these questions and to report to the House the current situation on his meetings with the building societies. I ask him in particular to address himself to the lack of mutuality in these societies. I reiterate the urgency of addressing the state of our inner city flat complexes. I hope also that the Minister will make it easier to convert from Housing Finance Agency loans to fixed interest loans. These are very serious matters which need to be addressed. Coming into the millennium year we could make a start on removing much of the housing squalor that exists. I want to assure the Minister that he will have every assistance possible from this side of the House if he will set about tackling that urgent task which is calling out for attention.
In many cases the people involved feel totally alienated from the system. The voting rate in some areas at election time is as low as 50 per cent because the people do not feel part of the system. Money could be made available to the building societies, the Housing Finance Agency and to many other areas if we put our minds to it to remove the sort of housing squalor that exists. I ask the Minister to bear in mind my comments. Perhaps some day when he is free we could take an informal trip around some of the complexes and he will be so aghast that he will take into account what I have said today and very quickly bring in legislation to deal with the matter.
I would like to take up the last point made by Deputy Mitchell which has nothing to do with the Bill. I can assure Deputy Mitchell that if he could persuade a very busy Minister of State to take a trip around some of those areas he has mentioned he would find it a valuable experience. Indeed, we had the privilege of taking the Minister of State, Deputy Connolly, to the Oldcourt estate in Bray recently and to Rockfield Park in Kilmacanogue and as a result of that, and within something like two weeks, we cut through all of the bureaucratic red tape and put into operation two of the finest modern refurbishment schemes which other Deputies from other parts of the country should visit and replicate in their own areas. It is a timely opportunity to put my personal gratitude and the gratitude of the residents of Oldcourt and Rockfield Park on the record. I hope that the Minister will be as forthcoming with funds in those estates next year and that his largesse will know no bounds.
This legislation is relatively straightforward. It is quite undeserving of some of the hysteria that has attended a number of the contributions made already in this House. The Bill seeks first of all to increase from £500 million to £1,000 million the amount the HFA may borrow to fund house purchase loans. That must surely be welcome to Members of the House. Second, it aims to empower the Minister for the Environment to contribute to the cost of the agency and to validate contributions already made. I really cannot see how anybody can object to that. The effect of both of these amendments is to expand the financial capacity of the HFA. The changes are vitally important in the context of the agency's operations and should ensure a swift passage of the Bill through this House and through the other House.
The HFA has been a success since its inception. It has undoubtedly enabled people who found themselves above SDA limits and who would not normally have been in a position to go to the commercial agencies to buy their own houses. This must, of course, always be the object of housing policy, and has been the object of housing policy of successive Governments. Home ownership is not an ideological principle, it is a pragmatic principle which has been espoused by all Governments certainly since 1947 when that particular housing policy was enunciated. I find myself at a loss to understand some of the comments made in this regard about home ownership and its elevation by Deputy De Rossa. I can understand that there would be ideological arguments perhaps among Marxist parties that should not be the case. But the reality is that most Irish people want to own their own homes, most Irish political parties want people to own their own homes and we should encourage that. I think most democratic parties do.
One of the features of the HFA's short history has been the number of changes and the number of modifications made since its introduction. A fundamental change came about in 1986 when the HFA was allowed to confine itself in effect to a more central role with the local authorities becoming effectively its agents operating the loan system and bearing the risk. This change was not universally welcomed at the time; it was not welcomed by everybody in this House. Listening to contributions here it is evident that not just here but in the local authorities there is confusion as to the authors of that change. For example, Deputy Gay Mitchell seems to have some confusion in his mind on this point.
A more important change was the decision recently to allow the HFA to put forward a more flexible lending arrangement whereby a fixed income related loan scheme would not be the only means of funding but whereby a fixed repayment scheme would come into operation. This is a major breakthrough. It moves the HFA away from being an entirely income related payment scheme which caused very considerable hardship and I think every Deputy in this House now recognises that it has caused some hardship. It caused hardship largely because of changing circumstances. I would like to make the point to the Minister and the Minister of State that some local authorities were apparently reluctant to notify people on HFA loans that this particular possibility of modifying the repayment schedule was coming up. I would certainly feel where local authorities have been tardy in this regard they should have their knuckles well and truly rapped and told to discharge their responsibilities properly to the borrowers in their areas.
The recently announced decision whereby the building societies and banks have been encouraged to increase their lending to persons who would normally have been seeking local authority loans is a very welcome one. Under the new arrangements the financial institutions will increase their funding of home purchase loans for persons under the £10,000 income limit and they will be increasing loans made to people of more limited incomes up to about £70 million. That is a very good move. Like Deputy Mitchell I agree that it is about time the banks and other financial institutions, particularly the building societies, were forced to take up some of this area. The administrative arrangements whereby there is a limited guarantee given by the local authority in these loans is welcome. I also note that the guarantee is not open ended, that there is a limit on the amount being guaranteed. So there is some element of sharing the risk between local authorities and financial institutions and that is welcome.
I really cannot understand how some Deputies opposite have had a problem with this innovation. I must say I was rocked on my heels by Deputy John Boland's contribution in this regard. I note and would put it on the record that there is obviously a serious departure in views between what Deputy Boland had to say the last day and what Deputy Mitchell has had to say today. It strikes me that Deputy Mitchell's contribution is far more meaningful and logical in this regard. As I said, a number of Deputies grossly misrepresented the situation with regard to this decision. They went further, it was suggested by Deputy Boland that because lower income families would still inevitably have to make demands on SDA and HFA loans that "the portfolio of risk in the SDA would be increased". This, I would submit to the House, is a gross slander. If the Deputy had chosen to check the record he would realise that there is no evidence whatsoever that low income families easily become delinquent on mortgage repayments. I admit that there are very few statistics available in this regard but in so far as there are statistics available they prove that low income families value the idea of purchasing their own house and that they will not easily become delinquent on mortgages; indeed many other things would suffer first. I think if, with some mature reflection, Deputy Boland looked at his contribution here, he would remove his remarks from the record and indeed remove the slander that he puts on low income families.
The core of the Bill is of course in sections 2 and 3. Section 2 does not require any elaboration whatsoever. Section 3 is very welcome. The need for the type of contribution from the institutions referred to in the section arises because of the problem the agency has had in index linked funds. It is a technical section. There is no need to go into it in great detail, but it is a realistic section and is to be welcomed.
A number of Deputies have ended their contribution by straying somewhat from the main point of the Bill. They have chosen to present us here with a distorted picture, a vista which is distorted beyond recognition, of the housing situation in the local authority housing area. Certainly in the case of the local authorities with which I am familiar there is no sign of a crisis build up on the council housing lists. I would submit to the House that there is no crisis in local authority housing at this time. Anybody who seeks to suggest that there is is ignoring the reality which is plainly visible throughout housing estates the length and breadth of the country. In the conventional housing estates the reality is that there are empty houses in many areas. These houses are being allowed to deteriorate. More to the point, they are being subject to squatting and to vandalism and to wanton destruction, and this surely cannot be good housing policy.
To go on investing more and more money into the standard, traditional type of local authority housing units would be folly not acceptable to Ireland's taxpayers nor acceptable to those who are looking for local authority housing at present. Our scarce resources must, of necessity, be channelled in a much more discriminating way than has been the case in the past. The waiting lists have been reduced dramatically. Talk of a three year waiting list as in the contribution of Deputy Quinn is not just specious nonsense, it is a wilful effort to distort reality. What is happening with regard to housing demand at present is of interest to this House. An analysis of housing lists in north County Wicklow shows that the type of demand coming forward is going through a change. In Bray, for example, which is a typical town with a fairly conventional housing programme, up to 35 per cent of the current housing demand in the local authority area is for small family units, primarily for elderly couples, for single parents, for elderly single people and in some cases, tragically, for the single homeless. In this housing area there is no crisis. What we are witnessing at the moment is a dramatic alteration in the pattern of housing demand. This needs to be appraised, to be addressed by the local authorities, leading to the provision of more small family units and the more flexible use of existing housing stock.
Another area which requires attention, although not new building, and which has been ignored by Deputies from the opposite benches, barring Deputy Mitchell, is the question of refurbishment of existing housing stock. We in County Wicklow have a very proud record. We have broken the ground on this and have undertaken, in Kindlestown Park in Greystones, in Rockfield Park in Kilmacanogue and in Bray, major, and in my submissison model, housing refurbishment schemes. For too little attention has been given to refurbishing local government housing stock over the years. I would go a long way with some of the remarks of Deputy Mitchell in this regard.
In north Wicklow we have, for example, a direct labour scheme which is highly cost effective, so much so that one local authority are operating as contractor and adviser in other cases. This has produced housing stock of the highest quality. I welcome the opportunity of showing any Deputy from any part of the country and, indeed, any party, around those estates. It strikes me as an important innovation and as an area in which we should be investing funds in the future. In this regard I would confine my comments entirely to the refurbishing of local government housing stock. I would also like, as other Deputies have done, to welcome the increase in the home improvement loans from £6,500 to £8,000. This strikes me as a reasonable and far from excessive figure and is a very welcome change. Again, it helps in regard to improving existing housing stock, which is something we have tended to ignore.
Housing is, of necessity, an emotive issue. Discussions on the topic should be cool, they should be dispassionate and if any progress in housing is to be made people who contribute to the discussions on housing should make an effort to check the facts. It is very evident that many Deputies on the Opposition benches have come into this debate, which should not be acrimonious, and have introduced spurious logic and distorted treatment of reality. This has not helped to progress the discussion on housing. I find the contributions of Deputies Boland and Quinn particularly reprehensible in this regard. Both of these Deputies know the reality better than they reflected it in this House. We are going through a period of change in local government housing. That change needs to be addressed and not to be distorted. If we are to have logic in housing policies, elected representatives, who have a good deal of contact with those on housing lists, owe it to themselves and particularly to their constituents, the taxpayers and everybody involved to reproduce reality and not distortion. Fiction should not find its way into debates. We should have facts.
A number of people have requested the Minister that he insist that all local authorities be required to treat existing HFA and SDA applications under existing arrangements. I have had a number of cases, as I am sure other Deputies have had, of people who are well involved in the process of buying houses being told by housing officers that they must fulfil some bureaucratic requirement to get their refusals from banks and buildings societies. That is not on. It has caused quite unnecessary hardship to people in the process of buying their houses. This additional requirement has been spuriously introduced by housing authority officers. I hope that the reality relating to existing mortgage applications, or SDA or HFA loan applications, would be brought clearly to the attention of the local authority housing officer and that people will not be forced unnecessarily to go through the whole process when they are halfway through house purchase — a traumatic period for any young couple. I hope that they will not be shoved through any unnecessary bureaucratic hoops by local authorities. The changes proposed in this Bill are positive and as such they should be welcomed.
I want to address myself to a few points contained in the Bill. First, a number of speakers have referred to the success or otherwise of the Housing Finance Agency over the past number of years since it was introduced. It certainly fulfilled a very valuable role and achieved its aim in making available to people in a particular income bracket an agency through which they could be favourably considered within a reasonable time for loan applications which would ultimately lead to their being able to house themselves with the aid of that agency.
I might add that the agency was not received favourably on all sides in the political arena, especially among local authorities, and got very much a baptism of fire. I note Deputy Roche's advice to avoid distortion. I can assure the House that distortion occurs in various other fora as well as in this House and I have witnessed it at very many county council meetings. We all know what we are talking about there.
One area that requires a little attention at present, and which was referred to by the last speaker, was the question of people who by virtue of their being in a high income bracket and perhaps having received a loan some five or six years ago find themselves making very heavy repayments and have asked for annuity facilities. That request is not being favourably considered at present. The local authorities are saying that they have received a communication from the agency to the effect that they want to defer further discussion on that matter. That is the ultimate in senseless and useless bureaucracy.
These facilities would help the people involved to pay for their houses in the best possible way and to keep their repayments up to date. By virtue of the ridiculous bureaucracy, they have been pursued by the agency, through the aegis of the Department of the Environment, and are finding that they are not able to meet their repayments because of the ever increasing amount of their income they must contribute towards their mortgages. This is ridiculous and I would ask the Minister to ensure without delay that persons requesting to opt for annuity based repayments be given that facility, provided that they have a reasonably good payment record and that it will not place the agency at a serious financial loss. The effect of a refusal should be taken into account. I would emphasise that it is totally and absolutely undesirable to allow a delay of a year or 18 months while those concerned find themselves in ever increasing financial difficulties. This infuriates the public who deal with local authorities, or with any other State agency. The Minister of State knows quite well that what I say is true and probably has had ample experience of it himself.
I want to refer now to the question of the introduction of a new system which hopes to save something in the region of £55 million for the Exchequer in a full year. This involves calling on banks and building societies to service the loan area to those with an income of over £10,000 a year. I take issue with Deputy Roche in his criticism of Deputy Boland's remarks in relation to this area. What is happening is that the cream of the area to which the local authorities heretofore lent is now being handed over to the financial institutions because on paper at least they seem to be the safer risk. I appreciate that a £10,000 limit always applied but those under the £10,000 limit must first go to a lending institution and, having been refused, must then go to a local authority. What should happen then is that the housing authority, or the lending agency as it used to be prior to the recent change announced by the Minister, would take account of the housing needs of the particular individual. There is nothing to compel the lending agencies to take into account any such needs and they have no intention of doing so. If they should start doing so they would find themselves in a very precarious position with their investors.
If a person under the £10,000 income limit goes to his bank or building society and finds he is not being entertained, he will go back to the local authority and because his employment record during the past few years has not been as it might have been they may say again that they do not consider him a fit risk within the meaning of the new regulations. That is a departure which is completely and absolutely unacceptable because again the local authority will be getting away from their responsibility under the 1966 Act in the belief that they have no duty or moral obligation to look after the basic housing needs of people who are not in a position to get local authority housing and who are not in a position to provide houses for themselves by any other means.
We would then attempt to put them on a long waiting list and they could either rent accommodation or live in a mobile home or some other unfit accommodation until such time as they could either raise the money or put a deposit on a house with a building society or are lucky enough to get a local authority house. Given the present financial climate, and I do not criticise any Government in relation to this, it is highly unlikely that any Government will be able to provide sufficient funding to meet the shortfall in the market by way of direct local authority houses in the foreseeable future. That is an area that will become the ultimate as far as bureaucracy is concerned and I ask the Minister to pay special attention to the way the local authorities will operate the new regulations.
It is important that we remember also that a number of other grants, such as the £5,000 grant and the home improvement grants which were available to people in the particular income group to which I have referred — those in need of a local authority house or those who ordinarily apply for local authority loans — have been abolished. I was critical of the abolition of those grants previously in this House. It is absolutely essential that the Minister take personal interest in how those people are going to fund the building or the buying of a house in present circumstances. I would also point out that here I am speaking from personal experience. Not alone have I been keeping an eye on what has been happening in my own local authority but also in other local authority areas and, as the Minister is aware, I do not have to travel very far beyond the county boundary to find that out.
I ask the Minister to pay special attention to the difficulty I am pointing to. Otherwise the system which was envisaged under the 1966 Act will become irrelevant and people will be housed, not on the basis of need, and here I am talking about the lending system which includes the Housing Finance Agency and the new system which will be operated by the banks and the building societies, but rather on the basis of their ability to raise a deposit. Previously, the local authority had to have regard to the housing needs of the individual. That was of paramount importance.
The introduction of the variable interest rate has been lauded on some sides of the House. I fully accept that at times of decreasing interest rates the variation is of benefit but I would also point out that going back over a ten year period a fixed interest rate was far more beneficial to people. We should not get too fixed on the idea that the ultimate would be to depart from the fixed interest rate and go on to a variable interest rate and that it should never be changed again. I presume that the Minister intends, should interest rates increase, introducing a clause stipulating that the rate may be fixed. Otherwise serious problems may arise for families who have taken out loans under these schemes. In fact, problems have arisen for those who have taken out such loans from the building societies and banks.
The Minister referred to the commercial agencies who will now have certain responsibilities in relation to what previously were local authority loans. He said:
In this context, I should emphasise that house purchasers will still be able to apply to their local authority for a loan where they have failed to obtain one from the commercial agencies. The participation of banks and building societies in this area of the mortgage market is very welcome and will enable the Public Capital Programme provision for house purchase loans to be reduced from £155 million to £100 million with a consequent saving in the Exchequer borrowing requirement of £45 million and a saving in the HFA's borrowing requirement of £10 million.
But then there is another clause whereby the local authority underwrite the possible loss in the event of a borrower defaulting. It seems rather peculiar that the Exchequer attempts to save money by handing over to the commercial interests an area in which previously the local authority were involved while at the same time decides to underwrite half the possible losses that could be incurred by the lending agency should the borrower default. It seems that the commercial agencies have scored very well on this one because I cannot recall a similar provision being made in regard to any other agency and the banks and the building societies must be considering themselves very lucky to have achieved this.
We do not live in a healthy financial environment nor do we live in the happiest of employment climates at present. I am not making a political point but that is a fact of life, not only in this country but right across the world. There is a strong possibility that people will find themselves in difficulties and they are finding themselves in difficulties at present. I do not see why the handing over of the responsibility for lending the money to the commercial interests should also bring with it a commitment from the Government in relation to any possible losses. I do not think it is a good idea and it may prove to be an expensive one, much more expensive than has been anticipated by the Minister's Department.
I welcome the increase in the reconstruction loan from £6,500 to £8,000. I would have increased it by another £1,000 because due to the removal of grants and various other incentives, a number of people are entitled to apply for that type of reconstruction loan and can do a good deal with it to improve their homes. In my county of Kildare there are quite a number of old vested houses, in some cases with no sanitary facilities, and in many cases tenanted by people on low incomes, a fixed income on social welfare and in receipt of unemployment benefit or assistance and in some cases with fairly large families. Deputy Roche referred to refurbishments which have taken place in some estates in Wicklow. I hope that will apply to a number of others throughout the country.
There is a file in the Minister's Department from Kildare County Council on a number of individual houses such as I have just described. They are old type or pre-1940 houses which are in need of restoration and the provision of basic sanitary facilities and improvements. The only thing the occupants of those houses have to assist them at present is the unsecured loan which is about £2,000. In those circumstances they are incapable of carrying out the work and cannot be expected to do so, and the local authority have not sufficient funds, even if the house is devested, to carry out the work. Therefore, the increase in the reconstruction loan is a welcome improvement.
The Minister did not say — and I am not sure whether it is in the Bill — whether the period for repayment has been increased. It needs to be increased considerably. At present there is a provision of 15 years for repayment. It should go to at least 20 years in order to give people in that lower income group a chance to meet their repayments. It is one thing to provide them with the loan, but we should also consider their ability to repay it. If we pitch the loan at the right level and the repayment period over a reasonable time, they have a greater opportunity to meet their commitments. We can swamp them by cramming repayments into a short time and then the unfortunate applicants find that the situation gets out of hand and perhaps they end up with re-possession. That is not on.
This HFA Bill encompasses quite an area as does any Bill relating to housing. I ask the Minister to have regard to the areas to which I have referred. I know that he has personal, first hand experience, as a member of a local authority, of the way local authorities very often seem to become bogged down by mountains of bureaucracy and ultimately the public who have to have access to the services provided by these local authorities are completely put off and discouraged by the response they get and often give up and go away. Their opinion of the local authorities and the agencies on whose behalf the local authorities are working is very much soured.
Given various Acts, regulations and statutory instruments provided by the Oireachtas through the Minister from time to time, surely the attitude of any agency, be they the HFA, the local authorities, or whatever, should be to operate to assist people who have to have recourse to them, but that does not always apply. For instance, in many areas a member of the public makes application for something under some heading and is told all the reasons he cannot qualify. The simple thing to do would be to assess his situation and decide there and then whether the person has a valid application, and either tell him straight out that he has no chance and should forget about it or else adopt a positive approach and help him. We public representatives must spend a great deal of time on Saturdays, Sundays and Mondays and every other day of the week at various clinics. We will not have to spend so much time if what I suggest is put into operation. That criticism applies to very many agencies operated by the State.
I welcome an opportunity to speak to this House on the Housing Finance Agency (Amendment) Bill, 1987. I welcome the thrust of the Bill because anything that pumps or injects finance into the building sector at this time must surely be welcomed. If ever there was an area which must be reeling under the onslaught of cutbacks it is the construction industry and, unfortunately, this measure seems to be too little and too late. Looking at the pattern of scaling down of activity in the construction industry, the consequent effect on employment and the statistics, one cannot but wonder if any housing policy is in place at this time.
As Deputies Boland, Quinn and Durkan have pointed out, a number of the key components and support areas for the construction industry have been dislodged and put out of place or dismantled completely. The most innovative development in the construction industry for a number of years was the decision to introduce a grants scheme which would help to refurbish dwellings, to bring back to habitable condition dwellings which had lain idle, were dilapidated or had deteriorated to the point where they could no longer be expected to be used as habitable accommodation. If ever an innovative measure caught the public imagination, was welcomed generally with open arms and had the desired effect of boosting the housing stock, it was the house improvements grants scheme. It had ancillary benefits. It gave people the opportunity to realise a cherished dream which had been unrealisable in that they had not the finance themselves to do the work.
In addition, it had the quite obvious direct knack on effect of coaxing people out of the black economy, of ensuring that people who were working as illegitimate operators in the building trade, unregistered plumbers, carpenters, blocklayers, painters and so on, were now for the first time being induced out into the open economy on the basis that there was an attractive lucrative scheme there. It induced them to register for taxation proposes and become legitimate for the first time. What happened? The people were driven underground again. There was an increase in the number of people who had to take to the emigrant boat and a whole scaling down in the level of operations particularly in the area of reconstruction and improvements to domestic dwellings.
This, in isolation, was enough of an attack and assault on the construction industry and caused enough demoralisation in its own way. It was coupled with a number of other measures which equally demoralised, undermined and generally brought about the wholesale devastation of the construction industry. I am also talking about the lack of finance at local authority level, for example in the Minister for the Environment's own County of Mayo. I recall this time last year that he pontificated at length during the Estimates debate and he informed the House that when he became Minister for the Environment there would be wholesale devolution of power, numerous schemes would be brought on stream and local authorities would become real local authorities with enough autonomy of their own to have decision-making powers for the first time ever.
In the local authority of which the Minister was a member since the early seventies, we do not have enough money to pay any essential repair grants. Disabled person's reconstruction grants were a great haven for elderly people. They were enabled to build little flatlets adjacent to houses of other members of the family, thus creating a physical environment where the extended family became a physical reality, where there was a sense of detachment and at the same time a sense of belonging. People were able to keep elderly people out of geriatric homes by constructing little flatlets, granny flats and so on. All of those measures proposed up, supported and financed by the disabled person's reconstruction grants are now scrapped at Mayo County Council level because the finance has not been made available to provide the necessary funding for these particular measures.
This Bill is designed to increase the number of new houses to help the housing construction industry. The new house grant scheme was valuably augmented by the presence of the mortgage subsidy scheme. The scheme was introduced initially as a £3,000 scheme repayable over the first three years and subsequently, it was extended to a five-year period. A person received £1,000 in the first year, in the second year £800, the third year £600, the fourth year £400 and the fifth year £200. All this helped to get young couples over the teething stages of the early repayment period of a mortgage. Suddenly, in one fell swoop, this was dismantled, gone, annihilated. It now seems gone for ever and certainly for this Administration's term in office.
The special tenant purchase scheme was a new dimension, an innovation, and was designed to bring to reality and fruition the realisation of a dream — which was to many people nothing but a dream — of again owning their own house. Somebody in a local authority dwelling would be given £5,000 to move into a house purchased by him or her, or them as the case may be, or to construct their own house. This was working in areas like Ballyfermot, Blanchardstown, Tallaght and in a number of our provincial towns. Those local authorities suddenly found a situation emerging where people were taking up at an increasing rate, those offers of £5,000 coupled with the SDA loan or the Housing Finance Agency facility and were moving out and establishing independent houses of their own in some other area. All this led to an increase in activity, a generation of industry, a sense of dynamism and excitement in the construction industry. This scheme which was the last ditch hope of many persons in local authority houses to own a house of their own has been dispensed with.
If you look at the estimates of the various local authorities at present, there is a startling contrast when you come to the programme dealing with construction, the building industry and so on. If you look at the estimates in that segment for 1987, 1986 and 1985, you will see the number of houses at design stage in each local authority area. The number of houses in the course of construction was evidence that a lot was happening in the construction industry. The number of houses anticipated for completion was statistically enumerated for everybody to see, but this year the pages are largely blank. Certainly, in the local authority of which I am a member it is envisaged that there will be no new start-ups in any of the provincial towns in County Mayo. All of this serves to underline the fact that housing and housing policy, for some reason, has gone out the window. I should like to know from the Minister of State when it is envisaged it will come back again so that people will know precisely where they are and what the housing policy will be for the future.
This is all the more extraordinary when one considers that there was a very clear commitment given at an Ard Fheis less than 12 months ago that there would be a massive injection of capital into the construction industry. A sum of £200 milion was to be pumped in in order to create 20,000 jobs. This massive investment was intended to create the necessary buoyancy in the construction industry to carry it over the hump and set the scene for a massive inflow of capital into the nineties and the next century. It is extraordinary also that this year it is proposed to cut public building projects funded by the Department of the Environment by £250 million. Rather than the anticipated additional investment of £200 million as stated at the Ard Fheis, we have in addition the further taking out of £250 million from the public building projects. Let nobody say that the Government's decentralisation plan will compensate for that massive reduction of spending in this area.
The day on which the Minister of State introduced the Housing Finance Agency (Amendment) Bill, 1987, to the House, people were startled by a tandem announcement from the Minister in relation to the funding of local authority house purchases. Local authority housing loans which were one of the really worthwhile schemes which were worth maintaining, because if ever a scheme did a tremendous amount to keep our housing programme up and enabled people, particularly in the lower income sector to realise the ambition of owning their own homes, it was this particular scheme. People knew it had a beginning and an end. There were terms of reference which were clear and defined. There was an interest rate which was generally lower than the interest rate which prevailed in the banks and lending institutions and in insurance companies. At present, it is pitched at 9¾ per cent. It was frozen and static and repayments from day one or at the end of the 30 year repayment period were precisely the same. People could budget for it. It was within the means and the income of the vast majority of the people.
Now the Minister has decided that this scheme is no longer essentially in being. I know the scheme is in being but what is intended in this is that the Minister has signalled the beginning of the end of SDA loans. Despite all the verbiage and the many explanations, when you look at the reality of the scheme from now on it is the beginning of the end of SDA loans. From now on a person seeking an SDA loan must hawk his or her financial credentials around to a building society or a banking institution to have them vetted. If a person is found not to be a sure risk for a building society or a bank and is rejected by them, he will then have to go to the housing section of Offaly, Laois, Mayo or some other county council. Local authorities are now expected to take up the financial rejects of the lending agencies. No local authority housing officer can be expected to pick up the tabs in such cases. Local authority housing officers and county managers have said quite clearly that this is inoperable, that it will not work and that they will not work it.
One of the salutary statistics within the estimates which are now in the process of discussion and completion at various local authorities is the fact that every local authority already have massive arrears in relation to SDA loans, accumulated as a result of job losses in some cases and, in other cases, because people tend to piggy back on the needy. If some people see that there is a tendency to be lenient or flexible or that there is a general inclination on the part of the powers that be to restructure loans or to put repayments in abeyance for a period until somebody gets back again into the mainstream of earning a living in this tossing economy, they tend to jump on the band wagon.
The vast majority of people who now find themselves in financial difficulty in relation to the repayment of loans are genuine and decent people. When they negotiated their contracts they were in a position to see things through within their earning capacities. Local authorities cannot be expected to take on board more lame ducks or to take into the net, in an open-minded fashion, people who for very good financial reasons have been rejected by bank managers and building society managers. This is an area which cries out for redress, rectification and amendment. The Minister should seriously look at this because the implications, in terms of housing numbers, are going to be devastating. People will undoubtedly be put in the position of having to stay in local authority houses whereas, given the scheme that was in operation and given, in particular, that interest rates have fallen from 12½ to 9¾ per cent during the past two years, they would have been increasingly induced to move in the direction of borrowing to buy their own houses.
I never cease to be bewildered at the stereotype bureaucracy which sets confines, restrictions or deadlines. I notice that the two gentlemen sitting beside the Minister are smiling at my remarks. I am convinced that bureaucrats very often tend to be overly rigid in relation to guidelines and regulations when a little flexibility might have the desired and productive effect. I am referring, in particular, to the threshold in respect of the area of a new house in terms of the grant, that is, 1,346 square feet. This is what the threshold has been and looks like remaining at. Therefore, if a person's house is at or under that dimension, he will qualify for the £2,000 new house grant but if his house is larger than that area he will not qualify for anything. There are before the Minister and his Department pathetic pleas from people who, through no fault of their own but because of a minor aberration on the part of a contractor, went marginally over the limit for qualification. The Minister should look seriously at the possibility of having some kind of penalisation clause, a kind of quid pro quo, whereby if somebody errs by a margin of one foot, one metre or ten feet there should be a commensurate reduction in the amount of the grant rather than a total demolition of the grant.
The Deputy is straying a little from the foundations of this legislation.
Marginally, but I am about to revert again. The Bill is intended to create greater energy, activity and industry in the housing sector. I am merely adding the minor ancillary point that if the Minister or his Department could agree that there should be no upper limit in relation to qualification square footage for a new house grant, this might have the desired effect of providing an added impetus at a time of extreme recession. Somebody who builds a house which covers 2,000 square feet uses more materials and has more input tradewise. There is more value added tax and more activity involved and a longer period is needed to build the house so that throughout the duration of the construction of that house there is a greater sense of activity. Because it will not cost the Department anything, they should move in this area. If the Minister or the Department decide at some stage to introduce some type of property tax this would obviously have a commensurate knock-on effect.
The Housing Finance Agency scheme is an excellent one. There is no doubt that it has enabled many people who would not otherwise have been facilitated with a loan elsewhere to have income-related loans with a view to providing their own houses. I welcome the general thrust of the scheme but I still maintain that if all of the other blocks that have been in place in the construction industry were dislodged, it would be seen that there has been a very significant reduction in the level of construction in this country. Today I got statistics from the Central Statistics Office in relation to local authority and private housing during the past number of years. In 1983, 6,190 local authority houses and 19,948 private dwellings were constructed; in 1984, there were 7,002 local authority houses and 17,942 private dwellings constructed; in 1985, 6,523 houses were built in the local authority sector and 17,425 houses in the private sector and in 1986, 5,517 houses were constructed in the local authority sector and 17,163 houses in the private sector. So there has been a consistent pattern right through. The local authority sector averaged between 5,500 and 7,000 and the private sector averaged between 17,000 and 17,900 houses built over the four year period. There has not been a great deviation over the period.
The figures for 1987 show the writing on the wall because for the first three months the number of local authority houses constructed was 701 and the number of private dwellings constructed was 4,145. For the second three months up to June 1987, the number of houses completed in the local authority sector was 1,002 and the number completed in the private sector was 3,360. Therefore, for the first six months of this year the number of local authority houses actually completed is a mere 1,803, far below the average for the previous four years of 5,500. The number of private dwellings constructed during the first six months of the year was 7,500, substantially below the average figure of 17,000 for the previous four years. The signs are ominous. There are grounds for pessimism. The portents are, given the massive scaling down and withdrawal of investment this year, that there will be a substantial reduction in new house numbers in both the local authority and the private sectors when we review the input of the new Housing Finance Agency (Amendment) Bill.
The wholesale disillusionment, dismay and despondency so prevalent in the construction industry will be considerably exacerbated this time next year. Recently Mr. Tom Reynolds, managing director of the Construction Industry Federation speaking on behalf of the industry said as reported in the Irish Independent:
The impact on the industry next year will be savage and devastating: and will result in widespread job losses, company closures and yet further emigration. Public capital expenditure has yet again borne the brunt of the reduction in overall Government expenditure but it only represents 13 per cent of overall expenditure — despite accounting for nearly 60 per cent of the total cuts in all public expenditure being proposed for 1988.
It is obvious that a sector which has always been a mainstay of employment, labour intensive and providing much needed employment when other areas of the economy were reeling from job losses and economic devastation is, for the first time in its life, totally on the broad of its back. If we are to revive the industry and give it the necessary injection to stop the emigrant boat again draining away the life blood of the country, it will take far more than the increase in the borrowing requirement of the Housing Finance Agency as envisaged in this measure. I appeal to the Minister, in the name of Heaven, to examine the key components which were so vitally part of the construction industry and to put them back in place again.
I have never subscribed to the idea that the construction industry of itself was a productive sector. Generally speaking, the construction industry is a barometer of the economic health of the country. It responds to economic activity. At a time when jobs are being devastated, when people are being forced out of the country, having been lured into the open, legitimate taxation market, and when families are in total disarray and do not know where the next penny will come from, as I see it the construction industry is the only sector in the short term that could provide the necessary safety net to save the family and social structure. While I wlecome the Bill, I believe it is too little, too late.
First, I thank all Deputies for their contributions. The debate has been wide ranging and has covered more areas than the provisions in the Bill. I can, therefore, understand that it is a very fundamental issue.
This Bill is, of course, a technical measure designed to increase the borrowing limit of the Housing Finance Agency and to validate the payment of grants to the agency. It is, nevertheless, a very important Bill in that it reaffirms this Government's commitment to the principle of private house ownership and it established firmly the Housing Finance Agency's role as the primary source of State funds for private housing.
I would like to make it very clear straight away that, contrary to what Deputy Boland alleged in his contribution, there will be adequate funds available for house purchasers on modest incomes in 1988. In fact, the commercial lending agencies have funds available which can be used to finance loans for a substantial number of house purchasers in this sector. The Government have harnessed this money and devised arrangements which will enable the agencies to depart from their normal requirements and limitations so as to meet the needs of people on lower incomes. These arrangements will enable the Government to reduce the published Public Capital Programme provision for local authority loans in 1988 while at the same time maintaining the availability of mortgage funds for house purchasers on modest means. Under the new package the building societies and banks will increase their funding to this segment of the mortgage market by up to £70 million in 1988.
The local authority loan schemes account for about 25 per cent of all house purchase loans. Both by historical and international standards the public sector is currently funding an exceptionally high proportion of mortgage lending. An analysis of local authority borrowers shows that many of them would be quite capable of obtaining loans from other lending agencies especially since interest rates have fallen significantly. Indeed, the agencies were already servicing part of the market. Given these facts and the healthy funding position of these agencies, the arrangements are a logical extension of the Government's drive to reduce public borrowing and expenditure. Contrary to Deputy Boland's allegation, the new arrangements will not reduce the capacity of people to house themselves. The Public Capital Programme provision for 1988 will be £100 million and together with the £70 million additional funds——
Minister, I must interrupt and ask you to move the adjournment of the debate.
Debate adjourned.