I wish to share some of my time with Deputy Eoin Ryan.
The importance of the issues being addressed in today's debate cannot be overestimated. These issues are some of the most fundamental affecting our society. We are considering where our growing population will live and how people will get from their homes to work, to school and to other amenities which are central to our quality of life.
The Government recognises the challenges that lie ahead. Rapid economic growth has telescoped these challenges so that even though we have doubled housing output in four years we know that more than 200,000 additional houses will be required over the next five years. These must be planned for and the necessary infrastructure put in place to ensure that bottlenecks are avoided as far as possible in relation to key factors, particularly serviced land. It is necessary not only to build the houses but to do so in a planned and integrated fashion providing the necessary transport infrastructure and amenities in order to form viable new communities or integrate new housing successfully into existing communities. The decisions about where this housing is to be built and how best to manage this process are fundamental, both to our future economic success and to the kind of society we wish to develop.
The debate is very timely because the Government is bringing forward a range of developments covering housing, transport and strategic planning which are complementary and which require integrated thinking and implementation both within my Department and between my Department and the Department of Public Enterprise. The Government, in its recent statement, Action on the Housing Market following the second Bacon report, clearly placed the range of measures the Government is taking to secure balance in the housing market both within an immediate and a longer term perspective of strategic development.
In the past, strategic planning has tended to be treated almost as the academic end of development policy. This has contributed to a disproportionate amount of our population being concentrated in the Dublin area. The capital has tended to sprawl, making efficient and cost-effective public services – especially public transport – very difficult to achieve and community identities hard to preserve. At the same time, some towns outside the greater Dublin area have stagnated to a degree. We cannot afford to allow this unplanned and unconsidered approach to continue. Unless we now implement an effective development strategy, unbalanced development of the Dublin area will impose a heavy cost, both economically and socially. Moreover, the progress we are now making to increase the supply of land for housing in the Dublin area will be largely eroded in five or six years if demand for housing is not more evenly distributed in the medium and long term.
Therefore, strategic planning guidelines, launched by the Government last week, will form the basis of a development strategy for the overall Dublin and mid east area. We will ensure that the strategy in the regional guidelines is implemented effectively at sub-regional level by local authorities through their development plans. We have also indicated agreement in principle with the recommendation in the second Bacon report to draw up a national spatial development strategy which will help the formulation of policy in this regard.
I also welcome the recently published ESRI report on national investment priorities for the period 2000-2006 and particularly its recommendations regarding the priority to be afforded investment in public physical infrastructure. The recommendations regarding investment in social housing and roads, public transport and sanitary services are already being reflected in the Government's policies to date and will remain at the top of the priority list for investment in the forthcoming national development plan.
Housing is the key part of this strategic approach. The challenge facing this Government is to provide sufficient housing that is affordable, available to people at the tenure of their choice and make a positive contribution to the built environment and the building of communities. We have to deliver on all these needs at a time of unprecedented demand for housing. The Government has faced this challenge head on and has actively sought to increase housing supply where it is needed and in ways that ensure access to adequate housing for those unable to afford it from their own resources. No one is under any illusions about the difficulties of this task. The housing market inherited by the Government left us with much to do. However, we have risen to the challenge, taken the necessary actions and the indications are that those actions are now bearing fruit.
The Government's Action on House Prices, launched last April, was designed to curb serious overheating in the housing market and put in place measures to secure continued increase in housing supply. Further important initiatives have been undertaken since then, including a new section 23 type scheme for student accommodation, the new urban renewal scheme, a new local authority affordable housing scheme, the publication of draft planning guidelines on residential density and the strategic planning guidelines for Dublin and the mid east region.
We announced a further range of initiatives in the housing market on 9 March in response to a second report on the housing market by Dr. Peter Bacon. The Government's response to that report sets out how all the various measures and initiatives that have been taken in the past year will, taken together, play a major role in helping to secure house price stabilisation, an adequate supply of housing and balanced development in the future.
The overall policy framework within which all these housing measures are being pursued incorporates three key objectives: to secure sustained house price stabilisation as quickly as possible through accelerating housing supply; to target key issues, notably housing affordability and the role of the private rented sector; and to provide an effective strategy for development in the medium and long term.
The emphasis is unequivocally on measures to maximise and accelerate housing supply. This in turn necessitates ensuring that land is made available for housing as quickly as possible by removing infrastructural constraints. Furthermore, where developments are proposed they must not be delayed unnecessarily by bottlenecks in the planning system which have arisen from the extraordinary levels of growth throughout our economy.
With historically high levels of new housing output we have been using up our supply of serviced land at unprecedented rates. The Government, under the serviced land initiative, is providing £39 million to assist projects costing about £100 million to provide serviced land for housing and thereby to remove this crucial bottleneck. The balance of the cost is to come from local authority contributions funded mainly from development levies.
A total of 161 water and waste water projects has been approved under the initiative in two tranches which will provide serviced sites for more than 100,000 housing units, equivalent to two and a half years additional housing supply. I intend that the vast bulk of these additional sites will be delivered between this year and next. My Department continues to press for progress on the initiative and five schemes have already been completed. Ten schemes are at construction. A further 74 schemes are at advanced planning stage and will provide around 40,000 sites when completed. I expect the majority of these to be completed this year.
It is vitally important to ensure that there is adequate serviced land available for housing. It is also vitally important to maximise the potential of this land. This necessitates appropriate levels of residential density which will secure the efficient use of serviced development land and, at the same time, further the objectives of sustainability and help reduce the problem of commuter-generated traffic congestion, especially in the Dublin area. The recently published planning guidelines on residential density will make a major contribution to securing these objectives. Local authorities have been asked to implement them, even in their draft form, and I emphasise that they and An Bord Pleanála will be obliged under law to have regard to the guidelines when they are formally issued.
To cope with rapidly changing developments in the housing market it is essential for proper monitoring and policy evaluation of the housing situation to be carried out on a regular basis. I have asked the major financial and mortgage lending institutions to provide my Department with provisional house price data on a monthly basis. This will provide a more immediate indication of market trends and will complement the Department's wideranging compilation of associated data, much of which is published in the quarterly and annual housing statistics bulletins. The results of the monthly analysis of house price trends will be made available to all co-operating lending institutions. This type of information and analysis will assist my Department to counter any adverse developments in the housing market and to assess the effectiveness of the current measures being undertaken.
Preliminary indications received to date for the first two months of 1999 show reductions between January and February in house prices in Dublin, for both new and second hand houses. This latest information supports my Department's – and indeed Dr. Bacon's – analysis that the rate of house price increase has peaked and should moderate significantly this year. New house completions in January were up on last January's completions. With record planning permissions granted for houses in 1998 – up over one third on the previous year's total – and significant increases in home bond registrations in 1998 and in the first two months of 1999, all the indications point to another good year in terms of housing output. Housing output last year set another new record at over 42,000 units and the hope is that we can surpass that again this year.
The increased price of houses over recent years has, however, inescapably resulted in some households of modest income, who might previously have bought their own house, now believing they are priced out of the housing market. However, it is important that aspiring first-time buyers are not discouraged by the average house prices. Average house prices, whether new or second hand, include many houses sold to people on significantly above average incomes.
The first-time purchasers market is different. There continues to be large numbers of houses available at less than the average house price and first-time buyers are finding them. The average price paid by a first-time buyer is in the order of £85,000 to £90,000. This compares with an average new house price of £106,500 and an average second-hand house price of £116,400 for the December 1998 quarter, according to my Department's published data.
Measures introduced under last year's action on house prices are helping to assist affordability for lower income house buyers, particularly through withdrawal of investor incentives, reduced stamp duty which has improved liquidity in the second-hand market and improvements in the local authority shared ownership scheme. Further innovative approaches to the issue of housing affordability are now being pursued, including the promotion of a better mix of affordable type units in new developments and the recently launched local authority affordable housing scheme.
Under the terms of the new affordable housing scheme, local authorities will provide additional new houses on land available to them in or near centres where house prices have created an affordability gap for lower income house purchasers. The houses will be offered for sale to eligible purchasers at cost price and, accordingly, at a significant discount from the market value of comparable houses in the area. Purchasers will be offered mortgage finance at favourable interest rates and a subsidy will reduce further mortgage repayments for households with incomes of up to £16,000. While the primary emphasis of the scheme will be on urban centres where house price increases have been most marked, I am conscious that there are other areas where particular factors such as demand for holiday homes have created an artificial market and where local authorities might usefully intervene to provide affordable housing under the new scheme.
This scheme will bring an additional dimension to Government efforts to address the problems that have developed in the housing market. An essential element of the scheme is that it is directly linked to the delivery of additional new houses by local authorities and will, therefore, not adversely affect house prices. A number of local authorities are already developing proposals which will fit into the new scheme.
I am not selling this scheme as the solution to all the problems faced by aspiring first time buy ers. It is, however, an important new initiative to help bridge the affordability gap which rapid house price increases over the past few years have created for many aspiring purchasers. Any measures that would fuel demand through, for example, increased availability of mortgage finance or increased new house grants without a corresponding increase in supply would undo the progress that has been made and inevitably cause renewed price escalation.
The development of suitable sites, including where necessary the acquisition of land and the planning and construction of houses, will, of necessity, require some time to arrange. Nevertheless, I hope some 400 houses may be provided under the scheme this year and between 1,000 and 2,000 houses in subsequent years.
The Government is conscious of the increased level of social housing needs. A combination of house price rises, increases in the numbers of Irish people returning from abroad and changing demographic trends has and will continue to have an impact on the numbers requiring assistance from the State in meeting their housing needs.
The Government has responded by increasing Exchequer expenditure on housing from £220 million in the 1997 Estimates, agreed before this Government took office, to £320 million in the 1999 Estimates. This is an increase of 45 per cent in expenditure in two years. The local authority housing programme has been increased to its highest level in years. Investment in 1999 will be four times greater than in 1993. Indeed, I secured increases of 18 per cent for the programme in each of the past two years. This high level of funding will enable local authorities to meet commitments on their ongoing programmes and to fund the enhanced programme of 4,500 new starts in 1999. The substantially increased capital provision for this year is testament to the Government's commitment to local authority housing as the mainstay of the overall response to social housing needs. I am currently considering how we can enable the local authority housing programme to be even more responsive to identified needs in the coming years.
I am also consulting with voluntary housing bodies to ascertain how significantly increased output from the sector can be achieved over the next few years. I believe that the voluntary housing sector has the capacity with proper support to provide some 4,000 to 5,000 units of accommodation per year and my efforts will be directed towards putting the necessary supports and financial assistance in place to deliver this target.
As Minister with responsibility for housing, I significantly increased the levels of grant assistance available under the voluntary housing capital assistance scheme on two occasions. Since the inception of the scheme these increases of up to 67 per cent represented the most significant increases ever made in the level of assistance. I also greatly increased the levels of grant available under the disabled person's grant and essential repairs grant schemes, with the effective maximum disabled person's grant up from £8,000 to £12,000 and the effective essential repairs grant up from £1,800 to £4,500. The essential repairs grant scheme has also been extended to urban areas, a very significant change.
I have significantly increased funding for the Task Force on Special Housing Aid for the Elderly to bring its funding in 1999 to £6 million, the highest level ever. I and my Department continually press local authorities to respond better to housing needs in their own areas by developing the full potential of the range of social housing and voluntary housing measures now available to them.
A cross-Department team has been established, which is chaired and serviced by my Department, to prepare an integrated response to the many problems which affect homeless people, including matters relating to accommodation, health, education and employment. We have also provided £1 million for the very first ‘foyer' for homeless persons. ‘Foyers' are specifically designed and managed to provide both accommodation and training opportunities for young homeless persons. The Housing (Traveller Accommodation) Act, which I brought through the House last year, will ensure that housing authorities provide a planned, integrated and comprehensive response to the accommodation needs of travellers.
Area based initiatives where the redevelopment of housing is the focus for the social and economic regeneration of the area as a whole are under way in Ballymun, in a number of Dublin inner-city flat complexes, in Rahoon and Ballinasloe in Galway and in a number of estates in Cork. Some £21 million is being provided by Government this year to assist the Ballymun regeneration programme and £6.5 million to assist the inner city flat complexes redevelopment in Dublin. The redevelopment works in Rahoon have a total cost of £15 million and the redevelopment at St. Grellan's Terrace in Ballinasloe will cost in excess of £2 million. These are just some examples of a wide range of initiatives to restore the physical fabric of established areas and to support local communities which are a vital aspect of the housing programme and significant resources have been devoted to them.
It is clear that a range of effective actions are being taken by the Government across the housing spectrum. I acknowledge problems exist. However, we have systematically addressed these problems and the results are beginning to become apparent. Some of the measures will, by their nature, take longer to bear fruit than others. I will continue to evaluate on an ongoing basis the development of further measures that may be appropriate. The Government's housing strategy is multi-faceted, combining a number of programmes of action together to form an integrated response. It is comprehensive, adequately funded and subject to proper political direction by the Government. Housing is high on the priority list of this Government and will remain that way. There should be no doubt that increased investment in housing infrastructure to secure and release land for housing and public transport will be key elements in the forthcoming National Development Plan.