Private Members' Business. - Home Purchasers (Anti-Gazumping) Bill, 1998: Second Stage (Resumed). – Dáil Éireann (28th Dáil) – Wednesday, 7 Oct 1998

Private Members' Business. - Home Purchasers (Anti-Gazumping) Bill, 1998: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

Mr. Stagg

I wish to share my time with Deputy Penrose.

Acting Chairman

Is that agreed? Agreed.

I welcome the opportunity to speak on this Bill. This timely legislation attempts to address a problem which recently emerged as a result of an overheated property market, an unprecedented level of greed and profiteering by those in the building industry and paralysis on the part of the Government in the face of that crisis. Elements of the Bill will need to be addressed through amendments if it passes Second Stage.

While a booking deposit is merely an indication of interest by a purchaser in a particular property, it is always accompanied by a verbal agreement to purchase, which is set aside by gazumping. I accept that the motivations behind the Bill are well meaning. I am glad to support it because I have met large numbers of home buyers, particularly young, first time buyers, who have been gazumped in the recent past. It is nothing short of heartbreaking to see the disappointment and frustration of such buyers who invest hope and plans in a property and find they have been gazumped by a ruthless vendor.

Gazumping is an unacceptable feature which has crept into our housing market. Unscrupulous vendors are taking advantage of our housing shortage by abusing the notion of a booking deposit. Until recently a booking deposit meant that the sale of a home was imminent and, indeed, in the past once a deposit had been placed the purchasers regularly engaged legal advice for arrangements to give notice for their current abode. However, gazumping has broken the tradition of trust that has served the housing market well in the past. There is need to put a safety net in place for purchasers, particularly at a time when housing is scarce. People face huge difficulties when attempting to purchase a home. Young couples attempting to buy their first home have been driven out of the market as a result of high property prices and a housing shortage.

There is urgent need to invest in new measures which will ease the pressure currently faced by first time buyers and those seeking public housing. This year the Government has a massive revenue surplus, which should be used in part to make a special allocation to local authorities. This allocation would enable local authorities to establish land banks for housing development. I envisage that sites could be released for the purpose of public and social housing and private development. The latter would be allowed access to the land bank on a restricted basis and only after satisfying specific conditions such as the advanced provision of amenities, compliance with safety and recreational requirements and a commitment to finish all work on the estate.

The public finds it incomprehensible that building costs and wages have risen by an amount that is only a fraction of the increase in affordable housing. This leads to the inescapable conclusion that the take for those selling in the housing market is at an unacceptable level of exploitation. It is calculated that the profit per unit since 1993 has risen from between £5,000 and £7,000 to between £25,000 and £30,000.

There is also a crisis in the public and private rental sector. There is need to devise a scheme of public and mixed development in the rental sector to provide affordable housing in response to this. I urge the introduction of a time limit on residential zoning to relieve pressure on the housing market. This would put an end to the practice of people who currently own such sites holding them for speculative purposes. There should be a levy on such sites, which are abused for such purposes.

There should also be a system of clawback in taxation of speculative gains. The crisis is of such proportions that we cannot afford any wringing of hands. While a commission to investigate every aspect of the housing problem is welcome it should not be used as an excuse for not introducing measures before the end of this year when we will have the highest revenue surplus in history. Action is required and the end of year surplus provides a unique opportunity of spending capital moneys in a way that would contribute to the relief of the housing crisis. The advantage of such expenditure is that it would also contribute to economic growth and would be non-inflationary.

The facts identified in the Bacon report are but one part of a most serious political challenge facing us. How can we accept that two incomes are now insufficient to service a mortgage for a modest home; waiting lists for housing are heading for record levels; there is a shrinking public rental sector and a private sector that is driven by the speculation in the main housing market, raising the question of whether some rentals should be capped in line with the rise in inflation?

Everybody awaits the Government response as the budget preparations and the Estimates discussions move to conclusion. I urge the Minister and his colleagues in Government to consider the concerns and suggestions we have put before the House. The economic boom means nothing if people cannot afford a house, something which was, in the past, considered to be part of life.

Mr. Penrose

I welcome the opportunity to speak on the Bill and compliment Deputy Hayes and his party for introducing it. It is timely and opportune because unfortunately people who had an opportunity to regulate themselves have not done so and we must see whether it is amenable to a proposed statutory framework. Action is needed on a number of fronts in regard to the housing crisis, which will present more difficult problems and obstacles in the years ahead. While the Bill is undoubtedly in need of refinement — Deputy Hayes accepts that — one could not but be persuaded that its thrust is correct and that the practice of gazumping, which is prevalent, has left many young people in tears and misery. The Government must realise there is a pressing need to address this problem and where voluntary selfregulation is not working the problem must be addressed and focused on by statute.

I wish to address housing needs generally. The problem is that people, even with two reasonable incomes, who could afford houses during bad times, cannot afford them now. Many of them will be placed on the waiting lists of local authorities, which will escalate out of control. We will then return to the bad old days when no local authority housing could be built. There is a substantial revenue surplus this year and we have an obligation to send some of those moneys to local authorities, which are at the coalface in terms of ensuring people are provided with adequate and affordable housing. It is opportune to make a special allocation to local authorities in this regard.

I concur with the proposal put forward by my colleague, Deputy Stagg, that such an allocation should be utilised by local authorities to establish significant land banks which in turn could be utilised to make a major contribution to the supply of service sites for affordable housing. Building costs and wages have risen by only a fraction of the increase in the selling price of houses. One must conclude that exorbitant profiteering is taking place. While it is recognised that risk takers are entitled to a profit, nobody is entitled to charge what they like and increases with such profit margins are unacceptable.

It is incumbent on us to explore all avenues to deal with the housing crisis and ensure young people are given the opportunity to make a start in life. Rural depopulation and degeneration is a huge problem and I made a proposal a number of months ago which may help the overall problem. I asked the Minister for Finance to provide a once-off grant of £15,000 in the forthcoming budget to purchasers of unoccupied homes in rural Ireland. Auctioneers were the first people to rubbish that proposal. There are many vacant homes throughout the midlands and the west which were left by people who emigrated. Many of them include small farms, and small farmers would be delighted to dispose of them.

A once-off grant of £15,000 with strings attached would be an appropriate way to deal with this. It would bring people back to rural Ireland and eliminate planning permission problems which plague people in rural Ireland. Everyone objects to new housing and local authorities do not want people to build in certain areas. The houses to which I refer only need refurbishment. However, the grant should not be given to everybody because when grants were administered a number of years ago speculators built lovely houses but then disposed of them having been given a grant. The grant should only be payable to purchasers who are committed to living in the dwelling for a minimum of seven years. Should the property be sold within that time a proportionate sum of the grant would be repaid. All grant applicants would be subject to income qualifying criteria to assess whether their need for a grant or assistance is genuine. The rural areas, which would benefit from such a targeted scheme, would be clearly identified through an examination of the population drop between the 1991 and the 1996 Census of Population. Such a targeted scheme would represent a positive development for rural regeneration and would arrest the slide of rural depopulation.

Mr. O'Flynn

I wish to share my time with Deputies McGuinness, Conor Lenihan, Noel Ahern and Hanafin.

An Leas-Cheann Comhairle

That is agreed.

Mr. O'Flynn

This Bill is fundamentally flawed. It has a range of constitutional and other legal defects and, if passed, it is likely it will create numerous and potentially serious practical difficulties. As the Minister of State, Deputy Molloy, indicated last night, the fact that reservations were expressed by the Director of Consumer Affairs and various parties involved in the housing market about the approach proposed in the Bill is very telling.

The Bill seems to represent a major incursion into the constitutionally guaranteed right to private property. While it is valid to seek to address problems such as gazumping in the common good, there is a serious risk the courts would determine the Bill is an excessive attack on property rights, having regard to the nature of the problem. We must remember that while occurrences of gazumping can create serious difficulties for some home buyers, it is not a widespread problem nor is it practised solely by vendors. I have no knowledge of it happening in Cork.

Mr. Gilmore

It does.

Mrs. Barnes

We will all buy in Cork.

Mr. O'Flynn

When the market falls, purchasers frequently engage in the practice. The Bill displays a serious lack of balance and proportionality in failing to take due account of these facts. This is particularly evident in the way it proposes to make the practice of gazumping a criminal offence with quite inappropriate penalties.

Any genuine effort to address the issue of gazumping must also be based on a realistic understanding of the process of selling a property. The Bill displays considerable confusion in that regard. It appears to give an impression that payment of a booking deposit is a preliminary agreement between the purchaser and the vendor whereas it is a fundamental principle of conveyancing law that a booking deposit gives a purchaser no legal interest and it does not commit the parties to a contract.

The attempt to impose unrealistic and artificial time limits is further evidence of the Bill's failure to take account of the realities involved in the process of the legal transfer of property. The procedures involved in property transfer are designed above all to protect the interests of all parties concerned. An ill-conceived measure which could result in short cuts being taken in investigations and in legal preparation is likely to operate to the detriment of the buyers and the sellers. The Bill seeks to confer quasi-contractual status on the booking deposit process, but a consequence of that is the various legal and practical requirements involved in entering into a contractual relationship would also have to be satisfied at that stage. The illogical consequence of this Bill is that the parties to a transaction would need to be in a position to make the type of legal and financial commitments at the booking deposit stage or very shortly afterwards which they are required now only to make much further down the line.

The attempt in the Bill to confer unwarranted status on the booking deposit procedure is not only flawed on legal and practical grounds, but it could have the opposite effect to that intended. There is considerable danger that the Bill would result ultimately in an abandonment of the booking deposit system. At one level it could be argued that if booking deposits were not taken, buyers would not be at the risk of being gazumped. That is like saying if CIE did not publish a timetable, the buses would never be late.

The system of booking deposits has worked quite well and has helped to provide an orderly method of property sale. However, the fact that occurrences of gazumping arise indicates there is scope for improvement. Two improvements could be made. First, there is a considerable degree of misunderstanding among house buyers, especially first time buyers, about the status of booking deposits. That is understandable given the extent of confusion about the matter in the Bill. While it would not be a solution to the problem of gazumping, it would be helpful to provide prospective buyers with better information. It should be made clear that payment of a booking deposit does not give the buyer a legal right to insist on completion of the transaction or any legal guarantee in relation to price. Whether the provision of that type of information should be given statutory backing might be considered in the context of any examination by the Law Reform Commission, to which the Minister of State, Deputy Molloy referred.

A second and more important requirement is to implement arrangements to prevent abuses in the sale of houses, especially new houses, where the majority of cases of gazumping tend to occur. The approach being pursued by the Minister of State, Deputy Molloy, to have a voluntary code of practice adopted by builders is the correct one at this stage. This approach is appropriate given that the booking deposit procedure is informal and does not have contractual effect. It is also appropriate having regard to the problems that would arise if we tried to impose blunt legislative measures to deal with this complex area of law. I was encouraged by the progress report given by the Minister of State, Deputy Molloy, on the formulation of a code of practice. I look forward to such a system being in operation at an early date as it would help greatly to eliminate the problem.

Apart from any specific measures to deal with gazumping, I hope we are seeing a cooling down in the housing market which should put an end to such practices. I agree with Deputy Hayes and other Members that the level to which house prices have risen is a serious problem. However, we have witnessed a concerted attempt to hype the issue in the run-up to the start of this Dáil session. That was disingenuous given that most commentators in recent weeks reported a noticeable slowing down in the rate of house price increases.

I reiterate my opposition to the Bill, which is ill-conceived and potentially damaging. I support the practical measures taken by the Government to address the issue of gazumping and to restore order and balance to the housing market.

Mr. McGuinness

The Bill represents at best a knee-jerk reaction by Fine Gael to the difficulties faced by some house purchasers in the recent overheated housing market. As the Minister for Justice, Equality and Law Reform, Deputy O'Donoghue, demonstrated last night, the Bill contains fundamental constitutional and other legal flaws. The Bill is not legally feasible, it is unworkable in practice and it is grossly misleading for house buyers. As the Minister pointed out, it is all hinged on the booking deposit procedure. It gives a false impression that the payment of a booking deposit gives a buyer some legal guarantee, but that is not the case. The booking deposit is purely an informal arrangement and the attempt in the Bill to confer it with a status which it does not have is an exercise in delusion which will only compound the problems for house buyers. Fine Gael would serve house buyers far better by clarifying misconceptions in this regard, which can result in buyers being aggrieved, rather than perpetuating them by adding confusion to the legal process of house purchases.

As the Minister remarked, while the practice of gazumping could hardly be categorised as a criminal offence, it is grossly unfair. It is recognised that gazumping can become a feature of a rising property market. There is no doubt that Ireland has a very strong and, up to recently, over-heated property market. We need only consider what happened in Dublin last week when more than 150 apartments were sold. When 50 were sold the remaining 100 went up by £10,000 per unit and they were purchased netting the developer £1 million. It would serve us all far better if we were to exercise our minds and energy in trying to formulate a code of practice to address problems in this area rather than engage in a limited exercise in relation to the practice of gazumping.

House price inflation is not a recent phenomenon. Since 1995 house prices have risen steadily. That trend has potentially serious implications for the economy. On taking office last year the Government immediately recognised there was a need for urgent action in this area and it quickly commissioned a detailed study of the problem. A comprehensive examination of the housing market, the factors that are driving up house prices and the implications of various policy options was carried out by an independent economic consultants, Peter Bacon and Associates, who submitted an early report to the Government. The Government's prompt response, "Action on House Prices", was published on 23 April and a special finance Bill to implement the fiscal measures was enacted shortly afterwards. Seldom, if ever, has there been a more immediate and full response by any Government to such a report.

Mr. Peter Bacon's analysis of the housing market highlighted the complex nature of the housing boom and the problems facing the Government in tackling house price inflation. The study provided a detailed analysis of the factors behind house price inflation and a sound basis on which to formulate policies and address the situation as far as possible.

A combination of economic growth, low interest rates and demographic factors are the main forces driving demand and the effect of these is being re-enforced by other factors, notably investor demand and price expectations. Added to this on the supply side, the land bank has been eroded faster than anticipated. Infrastructural constraints in some areas were restricting developments and supply was also affected by other factors, such as relatively low Dublin densities and the effect of stamp duty levels on the second hand market. A point was made earlier about planning permission, particularly in rural areas. This has had a serious effect on housing and must be addressed by the Government.

The Government's action plan on housing contained a comprehensive package of measures to address these factors in an effective and balanced way. The package addressed both supply and demand. In the short-term it was essential to take immediate action to cool down excessive demand. However, the Government also recognised that this must be backed up by action to boost housing supply in the medium and long-term. Both of these issues are provided for in the package of measures in addition to a third essential ingredient, action to improve the position of low income house buyers who have been badly hit by the cumulative effect of price rises over the preceding few years.

Another area which should be examined is local authority housing lists. These have grown in almost every constituency and much needs to be done in that area. In the Kilkenny part of my constituency, 750 people are on the housing list but there will be only 45 house building starts this year. This is not good enough. In Carlow, there are 500 people on the list, but there will be only a similar number of house building starts. This area is not being dealt with in the context of the efforts to solve the housing problem. Perhaps we should start with the housing lists.

The question of the affordability of housing has been correctly highlighted during the debate. Measures to assist first time buyers form a major element of the action being pursued by the Government in relation to house prices. The package will benefit lower income buyers by helping to dampen price increases and restore better balance between supply and demand. In addition, there are a number of specific measures in the package which are specifically designed to help improve the position of first time buyers, for example, removal of incentives for investors, stamp duty reductions and increased shared ownership limits over £20,000 for the shared ownership scheme.

The full effect of some of the measures will be seen only in the medium term, particularly those designed to promote housing supply. The main indicator is trends in house prices and there are now signs that the Government's measures are having the desired effect as evidenced by views expressed by various commentators. There has been some easing in house prices, speculative investors have been largely eliminated from the first time buyer end of the market and there are increasing numbers of second hand houses coming on the market as a result of stamp duty reductions. This is particularly important because the single biggest factor affecting prices and the affordability of housing is the supply of houses on the market, both new and second hand.

In terms of output of new houses, record levels of new house completions have been achieved in each of the past three years. I am sure a new record will be set again this year, given the estimation of more than 40,000 units. The proposed measures in relation to gazumping are not satisfactory in terms of the overall problem. I support the views expressed by the Minister and the Minister for Justice, Equality and Law Reform.

Mr. C. Lenihan

Deputy Hayes is, if nothing else, eager and I am glad he introduced the Bill. It sends a certain signal to people who are concerned about gazumping, but a charitable interpretation of the Bill would be to regard it as a well intentioned if misguided effort to deal with one symptom of the problems that have arisen in the housing market in recent years. When one considers the obvious flaws and impracticalities in the measure, one must conclude that it also bears the hallmarks of a hastily contrived publicity stunt. This is most unfortunate because we are dealing with a real problem that some people, thankfully a small minority, have faced because of rising asset price values.

Deputy Hayes gave away the game last night when he said this is a political issue. Clearly, a key motive in bringing forward the Bill is to make political capital from dramatising the problems and traumas affecting some home buyers who found themselves in the unfortunate situation of being out-bidded for a home. The Opposition has tried in recent weeks to hype and politicise the issue of housing and house prices as well as the issue of infrastructure. All these problems are related to the successful economy which successive Governments brought about.

The issue of house prices is not primarily political. One only has to read the summary of the Bacon report to note that the fundamental factors are social and economic and they have been compounded by the lack of serviced land. The lack of such land is the simple denominator which decides house prices. Mr. Seán Lemass correctly said years ago that if serviced land is available, house prices will even out to a proper market level.

If there is a political dimension to this issue, it is the failure of the previous Government to address the problem of house price escalation which grew weekly before its eyes and, in particular, its failure to do anything about the underlying supply factors. This Government tackled that matter with the serviced land initiative soon after coming into office. Already there are clear indications that the measures taken by the Government are having an effect in reducing the scale of price increases. This is likely to become increasingly evident as the measures to boost supply, which have a longer timeframe, kick in. This more than anything will help to eliminate distortions of the market that are manifested by abuses such as gazumping. This, in conjunction with the action being pursued by the Minister of State, Deputy Molloy, to have an effective code of practice implemented, will help to ensure that the practice of gazumping will be effectively eliminated.

Regarding the Bill, most of the issues have been covered by the Minister and the Minister of State. It is clear from the response of the Minister for Justice, Equality and Law Reform, Deputy O'Donoghue, that the Bill is defective on constitutional and other grounds and it is incapable of being rectified by way of amendment. I remember a time when the Fine Gael Party could draw on a vast pool of resources in terms of lawyers and professional people to advise it. It is surprising that the party for once has got the legal technicalities wrong. That is deeply disappointing. Perhaps the lawyers are beginning to see sense and realise that there is not much point supporting the party.

The State is constitutionally bound to protect the property rights of every citizen from unjust attack and, in the case of an injustice having been done, to vindicate those rights. The Constitution also encompasses a guaranteed right to transfer specific items of property, such as a house or a plot of land. The Bill would interfere with those rights. Therefore, as the Minister for Justice, Equality and Law Reform, Deputy O'Donoghue, and Deputy McGuinness pointed out, it is essentially constitutionally flawed. Its purpose is political and it is unfortunate to reduce such an important issue to drama for political purposes.

The Bill makes little allowance for the fact that vendors and purchasers can have legitimate reasons for withdrawing from property transactions, such as changes in family or financial circumstances. It focuses on the problem of gazumping where the vendor takes advantage of a rising market to sell at a higher price to another buyer. However, when the market trend is in the opposite direction, the vendor will be in a vulnerable position. We must be even-handed in our approach to this matter. Buyers and sellers deserve to have their rights vindicated.

All right minded people will sympathise with prospective house purchasers who find themselves gazumped. I have received representations in my constituency on this issue and it is a deeply traumatic experience for people. It is difficult to explain to people that a booking deposit does not equal a deposit. This is the plain fact and there is no way to change it. We must remember that incidents of gazumping represent only a tiny minority of sales, even in the context of the current electric sellers market.

The old adage that hard cases make bad law is worth recalling during this debate. I agree with the Minister of State, Deputy Molloy, that the most effective way of preventing the occurrence of gazumping is to remove the market conditions that allow it to happen and to implement a realistic and effective code of practice that will deal with the problem without creating a legal minefield.

I am conscious that Deputy Hayes is a member of a local authority. He and all Deputies who are members of local authorities should strongly support rezoning motions to make serviced land available to build houses. In the past the Labour Party opposed rezoning in the city of Dublin in an almost ideological and orthodox manner. We are now reaping the harvest of bad decision-making on its part. It caused house prices in Dublin to escalate.

Mr. Gilmore

It was the Deputy's party which rezoned the land.

Mr. C. Lenihan

The Government parties have not had control of any of the new councils in Dublin for many years.

Mr. Gilmore

They control all the councils.

Mr. C. Lenihan

It was Deputy Quinn and the Civic Alliance — an interesting gathering of left and right wing groups — which opposed the rezoning motions. There is a need to rezone land, particularly in towns in the eastern region. That is a major responsibility for members of county councils.

Mr. N. Ahern

Gazumping is an unfair and immoral practice which is hard to justify in the absence of a huge increase in the cost of materials where houses are sold off the plans. It is wrong and should be stopped. It is a question of whether this should be done by legislation or otherwise.

As I am not a legal expert, I bow to the wisdom of my colleagues——

Mr. Hayes

Neither are they.

Mr. N. Ahern

——who have highlighted the problems with the Bill.

The housing market is strong. In many respects we are paying for the baby boom of the 1970s. Many of that generation are now setting up their own homes, perhaps having returned from abroad. Why did the demographic experts tell us that this would happen or we did not listen? We were caught unprepared.

This legislation would tie everybody's hands. In some instances it is the purchaser who drags his or her feet in closing a deal and in others it is the seller. The legislation, therefore, may not have the desired effect. Despite what others may say, many builders are decent and members of the association. The best approach is for the association to voluntarily set its own standards and out-law practices such as this by agreement.

The housing market is in difficulty. The measures taken by the Government following the publication of the Bacon report have been effective. From the figures produced by the Department and estate agents the problem has not got worse since May or June. It is a question of supply and demand. There is no doubt that insufficient serviced land was available on which to build houses. Certain parties opposed rezoning in every instance on ideological grounds, introducing a form of social apartheid.

I will not mention any names but in recent months there has been much hype on the part of estate agents. I am not referring to the glamorous properties about which one reads on the property pages every Thursday and Friday but one estate agent has been pretending they have received bids. They would not get away with this in normal market conditions but they have been able to cash in. In current market conditions many people have become greedy.

There is no simple solution to the problem. There are 5,000 to 6,000 refugee families in the city. This has an effect on the private rental market. Local authority housing lists have also lengthened. While there has been much emotive talk about young couples, they are not on local authority housing lists. Twenty five out of 27 houses allocated to date by Dublin Corporation in a new estate have been allocated to lone parents. If I was to visit that estate next week or next month, I know I would not come across 25 houses which did not have a man in them. We are being made look like fools. Local authorities are not securing proper rents to maintain properties.

Ms Hanafin

Many people in my constituency are glad that the size of the lotto jackpot has been increased as it is the only way they will be able to afford to buy a house in Dún Laoghaire. Even if one did manage to win the jackpot there were times in the past year when one would not have been able to afford to buy some of the houses on sale. Former council houses are now selling for £120,000 putting them beyond the reach of the average couple. An apartment of less than 930 square feet has been advertised for sale today at a price of £250,000. I, therefore, share the concerns which have been expressed. The numbers on the local authority list and the homeless list in Dún Laoghaire are heading towards 2,000. Where local authority houses are vacated money should be provided from an emergency fund to finance their immediate renovation. We should not allow them to be vandalised or fall derelict.

The rent supplement does not go anywhere near facilitating those families who have to rent private accommodation for which they are being forced to pay up to £600 per month. We are all concerned about families with young children who are seeking to build a home and community rather than invest. While gazumping is an immoral practice, for legal and constitutional reasons we cannot accept the Bill.

The banks and financial institutions are largely to blame for the spiralling costs. The price of a house bears no relationship with the cost of the materials used or the value of the land. In advancing large loans the banks and financial institutions are determining prices which are being hiked to unrealistic values. The banks and financial institutions are treating young couples in the 1990s in the way they treated small farmers in the 1980s. Often the same branch offered different amounts to farmers to bid against each other for the same patch of land. This ensured modest prices were replaced by exorbitant prices. The banks and financial institutions are throwing outlandish sums of money at young couples, ignoring the true value of the house and their ability to repay.

While I welcome the reduction of 0.5 per cent in interest rates, if the banks and financial institutions, which are holding the market to ransom, were prepared to say that a particular house was worth only £90,000, not £190,000, and that they would only advance that amount, the house would not be put up for sale at the higher price. I will not blame them for all the problems in relation to housing but it is their fault that we now have a situation where a modest semi-detached house costs the same as a small castle would have cost a decade ago. This issue should be dealt with on a wide scale but I share the concerns expressed in Deputy Hayes's Bill.

Mr. Gilmore

I wish to share my time with Deputies Timmins, Stanton, Barnes, Finucane and Farrelly.

An Leas-Cheann Comhairle

Is that agreed? Agreed.

Mr. Gilmore

I welcome Deputy Hayes's Bill which I will support and I congratulate him on bringing it before the House. The Bill is a reflection of the serious crisis that exists with regard to housing. A number of Government speakers decried any suggestion that this might be a political issue. Housing is a political issue because irrespective of the causes of the housing crisis, the Government is failing to deal with it. The programme for Government states:

Fianna Fáil and the Progressive Democrats in Government are committed to the deeply held ideal of so many Irish people — home ownership. We believe, and our policies reflect, our commitment to providing a suitable standard of accommodation for all our people.

That is the declaration of the current Government. There is no other area of Government policy and administration which has been such an abysmal failure. This Fianna Fáil-PD Government is presiding over and responsible for the worst housing crisis for at least 30 years. This is the Government which is making home owner-ship a luxury. This is the Government which is telling the young generation, whose efforts, energy and enterprise are making this economy what it is, that they will now have to rent rather than buy.

Housing has now replaced unemployment as the country's worst social problem. While the Government trumpets the country's economic successes and the property pages of the newspapers get increasingly excited about the so-called strength of the property market, more and more families and young workers are becoming increasingly frustrated and bitter about their inability to put a roof over their heads.

For the first time in the history of the State, a young teacher married to a nurse cannot afford to buy a home in this city. Unable to buy, they are confronted with rents of £600 to £700 per month for a modest flat or house. Young workers, students and others who have traditionally rented accommodation can no longer afford the rents now being demanded for an ever-declining supply.

More and more families are being pushed into applying for council housing. There are now more than 40,000 applicants on council housing waiting lists, the largest number on such waiting lists in over 20 years. In addition, there has been an explosion in homelessness. More evictions are now taking place in the country's traditional flatland than occurred during the land war in Michael Davitt's time over 100 years ago. Evicted tenants, young families forced out of their homes and returning emigrants are now clogging the health board homeless hostels and bed and breakfast establishments.

The Government seems to be almost unaware of this problem. It certainly appears to be uncaring and paralysed as far as action is concerned. Time and again the Taoiseach, and the Minister with responsibility for housing last night in this House, replied that they are implementing the Bacon report. Surely they know by now that the Bacon report is not the answer to the housing crisis. It may have addressed the distortion of the market by large scale investment buying, but it is not a substitute for Government policy and it is unfair to Mr. Bacon and his associates to suggest that it is. They were asked to examine a particular aspect of the market. They did that and produced a good report, although the Government did not implement all of the recommendations in the report. It is unfair to Mr. Bacon and his associates to attach to their report responsibility which should rest with the Government.

The Government is now 15 months in office and to date it has not produced any coherent policy to address the housing crisis. The measures taken on foot of the Bacon report have done more to help and further subsidise builders than to help home buyers or families on the waiting lists. Urgent action is now needed. The first action needed because of the numbers on the housing lists is to increase substantially the money available for local authority housing. At a minimum, in this year's Estimates there should be a doubling of the starts which will take place in 1999. There must also be reform of the shared ownership scheme and other schemes to assist people to buy a home of their own. There should be greater flexibility in its use and a widening of eligibility designed to enable people purchase a home for the first time.

We need major reform of the housing construction industry to take account of planning, land speculation and the cyclical nature of the industry. I want to nail the lie about supply of land being the problem. An aspect of construction which has received little attention is that the construction industry in the housing area is at capacity. It is almost impossible to get a builder or a tradesman in this city, so regardless of the amount of land a person has or where it is serviced, there seems to be a limit on what the industry can cope with.

There is need for some structural reform of the industry to eliminate some of the cyclical nature of it. In some years there is little or no activity and building workers are on the dole while in a boom period prices go through the roof. The Government should discuss that problem with the construction industry and devise methods of intervention to ensure a stable housing construction industry and a more stable market.

The regulations in the private rented sector already in place need to be enforced. New legislation is necessary to provide security of tenure for tenants in the private rented sector and there must be some control of house prices. It is outrageous that while the cost of building is increasing by only 3 or 4 per cent per year, the price of new houses is increasing by 25 or 30 per cent. At a minimum, the Government should show its intent that it is serious about tackling the housing crisis by accepting Deputy Hayes's Bill which deals with one particular aspect of the crisis. It is time we had a comprehensive policy on housing from the Government and some proposals were brought before this House to deal with the problem in its totality.

Mr. Timmins

I congratulate Deputy Hayes on bringing forward the Bill. Currently there are 2,000 people on the housing waiting list in Wick-low. During the current housing boom, house prices have increased by 140 per cent in the county. That is unequalled anywhere in the country. Many theories have been put forward as to the reason for this and there is an element of truth in all of them. In a free market it is difficult to fault the producer of a product for seeking the maximum price. Indeed, anyone selling their house privately will look for the optimum take and no matter how Christian we think we are or the claim we may lay to having a social conscience, I have yet to encounter a man or woman who will undersell their property. As developers and builders squeeze the market for as much as they can, so too will the numerous individuals who purchase from plans and sell on before the building is completed.

In refusing to accept what the proposer of the Bill referred to as a small measure to assist the consumer, the Government has placed self-pride and arrogance above the needs of people seeking to purchase a home. In his contribution, the Minister of State, Deputy Molloy, referred to the fact that the Bacon report stated that the practice of the phased release of new developments, where this approach is used to ratchet up prices, the return of booking deposits and the subsequent gazumping of prices and instances of excessive staged payments is not widespread. If the Minister of State drives around Knocknacarra and Rahoon over the weekend and reads the advertising hoardings, he will see that they all refer to phase 1, 2, 3 and so on. He should take the trouble to ring the various estate agents to check the prices of each phase, and as a final exercise he could ask the new homeowners if they feel there should be legislation on gazumping. Can the Minister hazard a guess as to the reply?

Governments should make laws for society's good and not to satisfy certain sectional interests. The Minister went on to outline several reasons he could not accept the Bill, mentioning concerns expressed to his Department by mortgage lending and auctioneering interests. He mentioned the possible implications for family law, yet he also stated that he did not want to totally exclude the possibility of there being scope for action in the legislative area. Can we take it that he may bring forward a Bill similar to this?

The Minister for Justice, Equality and Law Reform used Article 43.1.2º, which encompasses a guaranteed right to transfer specific items of property, as the main reason for not accepting the Bill. He said the Bill would interfere with those rights. However, if the Minister had continued to read Article 43, he would have seen that Article 43.2.1º states:

The State recognises, however, that the exercise of the rights mentioned in the foregoing provisions of this Article ought, in civil society, to be regulated by the principles of social justice.

Article 43.2.2º states:

The State, accordingly, may as occasion requires delimit by law the exercise of the said rights with a view to reconciling their exercise with the exigencies of the common good.

A Supreme Court judgment in 1957 in the Attorney General v. Southern Industrial Trusts case referred to Article 43, private property rights and the assessment of what the common good required. That judgment stated that those were “matters primarily for the consideration of the Oireachtas.” Mr. Justice Kenny, in the case of the Central Dublin Development Association v. the Attorney General in 1970, stated that, among other things, when dealing with these Articles the exercise of these rights ought to be regulated by the principles of social justice. He also stated that the State may, accordingly, by law restrict their exercise with a view to reconciling this with the demands of the common good.

Deputy Hayes' Bill has sought to apply the principles of social justice and to reconcile their exercise with the exigencies of the common good. Unlike the Minister, who chooses to hide behind the Constitution, he gave full consideration to the constitutional parameters.

Mr. Stanton

I thank Deputy Hayes for bringing this Bill before the House and I commend him for his work on it. It is timely, as we have a serious problem in this area. This Government is failing. It is failing to deal with the crisis in agriculture; it is failing to deal with the crisis in the health service, where waiting lists are growing by the day; and it is failing to deal with the traffic situation, not just in Dublin but all over the country. It does not surprise me that the Government will now fail to deal with the problem of gazumping.

The Government is a failure. It cannot manage the current prosperity, and the job of the Government is to manage. Deputy Hayes' Bill is full of common sense, which is lacking on the Government side. The Minister is relying on laws going back to 1695 and earlier. The statute of fraud was mentioned; we know who the frauds are.

The Government's approach has been a milky, watery one. The Minister said it was important to be flexible, but what he means is that he is procrastinating. He wants to do nothing and is the champion of mediocrity. The Minister mentioned a voluntary code. How does he expect people to adopt a voluntary code when, as Deputy Hanafin said, they can make millions of pounds in profits by adding zeros to the price of property? How does he expect people to say: "We will give all this up and adhere to a voluntary code"? Things do not work like that.

The Government is hiding behind the consultant's report. The consultant did a good job, but the Government also has a job. The country cannot be run by consultants. The Minister for Justice, Equality and Law Reform huffed and puffed last night and said that we cannot always punish bad behaviour by using criminal sanctions. The behaviour was called immoral and reprehensible, but the Minister for zero tolerance does not want to do anything to stop it.

Government Deputies have spoken all night about the crisis in housing; there are 40,000 people on the waiting lists, but there are local authority houses in east Cork boarded up. Why? People are crying out for houses. Why are housing officers not carrying out inspections? Why is there a huge outcry about waiting lists? People do not know where they stand on waiting lists because there is no transparency.

Agencies are starved of resources. The Director of Consumer Affairs has asked for statutory penalties to stop gazumping. The IAVI has stated that legislation should be amended to stop gazumping. Not all vendors will adhere to a voluntary code, though some might. A code of practice was tried in England, but it failed. I ask the Government to cut out the red tape. Government Deputies have spoken of having to carry out surveys and get documents prepared. What is wrong with that? Let that be done before a house goes on the market. Why does a buyer have to wait until afterwards? The thrust of this Bill is that a seller will have to have his house in order, if one pardons the pun, to put his house on the market. Everything would have to be ready; he would have to have his surveys done and his deeds sorted out. Why can we not do this? It would prevent gazumping.

I appeal to the Minister of State to accept the Bill at this eleventh hour so that we can discuss this on Committee Stage. The Bill is not as flawed as the Government side thinks. I think it did not even read it. I commend the Bill to the House.

Mrs. Barnes

It is very appropriate that it is one of our few young Deputies, Deputy Hayes, who is introducing this Bill. He speaks for thousands of young people who cannot even aspire to buying their own houses in the most buoyant economy we have ever experienced. This is very serious, because the economic and social fabric of our society is being seriously damaged when the most basic constitutional unit of the State — the family — is under such pressure and insecurity. It is extraordinary that so many of the obstacles the Government has found in the way of accepting the Bill are constitutional in nature. Is private property once again taking a higher position than the family's position as the basic unit of society? The family unit is considered one of the most important factors in the achievement of the common good. Yet this unit is under serious pressure, particularly when it comes to young people who wish to marry, set up house and create the future of Ireland.

We should be rejoicing in that we can invite educated, skilled people back to join our work-force after the haemorrhages of emigration, but they cannot be accommodated. Those couples who have put together the finance necessary to buy a house face a market whose prices and business practices are out of control. Members from all sides of the House have stated that profit margins on house building are immorally high and that couples are being held to ransom. We, as legislators, must examine this. If we have an immoral society which, on a profit level, works against the rights of people, we have a responsibility to examine that. It is not good enough to reject the Bill as being fundamentally flawed without offering anything in its place.

The Government has failed to put the housing crisis in context. Not alone has the price of houses and rents gone beyond the scope of many people, but it has not been linked to the difficulties experienced by couples with children who have bought houses and are attempting to pay their mortgages. We do not have a high quality child care support system even though both parents are forced to work. The heaviest burden falls on women who juggle home, work and child minding responsibilities to meet mortgage and child care costs. Such couples are caught in a double bind in that they have little chance of buying a house and, when they do manage to buy one — usually at a cost of huge insecurity as highlighted by Deputy Hanafin — they do not have the choice of one partner staying at home, of flexible work structures or even good child minding facilities to enable both of them to work outside the home. This is crucial because it is part of the social and economic context in which the housing crisis must be seen.

I congratulate Deputy Hayes on raising this matter, if only in one specific but serious area. What he and all Members of the House want is a properly planned national programme which takes account of the social and economic demands of the most vulnerable people in the country, young couples and their young children.

Mr. Farrelly

I wish to share my time with Deputy Shatter.

An Ceann Comhairle

Is that agreed? Agreed.

Mr. Farrelly

I welcome the opportunity to say a few words on the Bill. I must declare that I have a vested interest in this area.

The Government's approach to this problem has been to commission the Bacon report and implement part of its recommendations which has taken investors out of the market. That may have reduced the price of houses, although I do not believe it has. It has certainly increased rents by up to £80 per month for families renting houses and the same percentage increase applies to apartments and flats. That is a fact.

The Minister for Justice, Equality and Law Reform said last night that not every problem can be solved with legislation. In Opposition, he complained that not enough legislation was introduced. Six or eight months ago, I introduced a Bill on the licensing of bouncers and he could not accept it. He said it was not the right thing to do. All we are trying to do with this Bill is to protect young people who are finding it very difficult to buy homes.

The Minister of State with responsibility for housing spent most of his time talking about people selling houses, second hand houses in particular. I have not witnessed anyone gazumping a second hand house. Would the Government get real? It is new houses which are being gazumped. This is happening to people who have paid an initial deposit and who find, because of demand, the contract is not sent to them, the deposit is returned and the house costs £10,000 more. I know a number of people to whom this has happened. I heard this evening of a couple who were trying to buy an apartment in town, went to lunch to consider whether they would buy it and returned to find it cost £10,000 more. Admittedly, no deposit was paid.

Will the Government ensure that when a deposit is paid on a house, the price of that house cannot increase? I work for builders and have made it clear that under no circumstances would I gazump the price of a house on a person if I took a deposit at a certain price. Every person in my business should give the same commitment to the young people with whom they deal.

The price of land is being blamed for the increase in the price of houses. The Government took certain actions which have done nothing to reduce the cost to the first time buyer. Young couples cannot afford to buy houses, even at £87,500, the price at which we were selling them in Navan a month ago. A number of them were finding it difficult to raise the money required to obtain mortgages. A similar house in Dublin would cost £20,000 more. The Government has failed young people.

Dáil Éireann debate - Wednesday, 7 Oct 1998