I move amendment No. 9:
In light of the serious concerns expressed by the Department of Public Expenditure and Reform, the Economic and Social Research Institute and the Central Bank regarding the impact of the proposed Shared Equity Loan Scheme on house price inflation and in the absence of details on the scheme including whether private banks will be participants in the scheme, whether the Central Bank would approve such participation, what the interest rates on the shared equity loan will be and what the regional price caps will be, the Committee calls on the Minister to remove this scheme from the Affordable Housing Bill and to reprofile the €75 million allocation for the scheme provided for in Budget 2021 to the Serviced Sites Fund and/or Cost Rental Equity Loan.
More than any of the other amendments, this amendment speaks to the key issue of this Bill. We have to find ways of delivering homes at prices that working people can genuinely afford, both to rent and particularly to buy. The shared equity loans scheme does not do that and, therefore, should not, in my view, be called an affordable housing scheme and should not be included in this Bill.
It is significant to note that this is the one element of this Bill that was not under consideration and development by the outgoing Minister, Deputy Eoghan Murphy, and his departmental team. Both cost rental and the serviced sites fund had a long gestation under the last Government and, in fact, no political party advocated a serviced sites fund during the general election of last year, when we all had different propositions around how to deliver affordable purchase homes. The origin of this proposal lies in two documents that were developed by two industry lobby groups, Property Industry Ireland and Irish Institutional Property, which came and did a round of meetings with housing spokespeople between February and May 2020, after the general election, and I was one of those spokespeople. Both of those lobby organisations had very well developed propositions and called on the Government to introduce a shared equity loan scheme based on, and similar to, a controversial and unsuccessful scheme that operates in Britain, and which they wanted the Government to do here.
It is very clear that the proposition the Minister is developing, because he has put so much of it into the public domain, albeit through leaks and unofficially, is based on these two lobby documents. This is the clearest example I have seen in all of my time in the Oireachtas of private industry writing the policies of Government. Because of that, it has proven very controversial. We heard, for example, from the ESRI that it had very significant concerns about this scheme as it is currently proposed. We received written correspondence from the Central Bank outlining, again, very significant concerns in terms of the scheme as it understands it. The former Secretary General of the Department of Public Expenditure and Reform, in a freedom of information request that I received has widely criticised the scheme. They are all saying the same thing. They are all saying this is a demand-side scheme that will push up house prices at a time of limited supply.
Our problem at the moment, particularly in the context of Covid, is that supply is even more limited. If it was sluggish before the pandemic and the closure of, and then restrictions on, construction activity, it is even more sluggish now. What we are proposing is to put a pot of money into a fund that will allow hard-working people, desperate to own their own home, to take out a secondary loan, and that secondary loan will be used to buy unaffordable, overpriced houses up to €400,000 in Dublin and lower prices elsewhere, according to the Minister. There will also be an interest charge and that interest charge will be set at 15-year intervals and will increase over that time. By my calculation, on the basis of the information that is in the public domain, if people were to take the full shared equity loan of €100,000 on a property of €400,000 in Dublin, by year 30, if they do not pay it down, and there is no obligation on them to pay it down and the Minister has given that commitment, they will have accumulated an additional €50,000 of debt on top of whatever the increased equity value of that 25% stake is.
Thus a person could actually owe not €100,000, not €150,000 but €175,000 or €200,000. What this is doing, therefore, is saddling hard-working people with a very high level of debt. That is why there are a great many people in Fine Gael who are deeply uncomfortable with this scheme. All the Fine Gael councillors on Dublin City Council called for it to be scrapped because it would push up house prices. They wrote to the Minister and urged him to transfer the €75 million of finance allocated for the budget this year into the two other funds we have just been discussing, namely, the serviced sites fund and the cost rental equity loan. We also know from some of the coverage in the newspapers that within both the Department of Public Expenditure and Reform and the Department of Finance there are real concerns, shared by the respective Ministers, about what this scheme will do.
This being the case, I do not understand how anybody who says he or she wants to help working people buy their own home could support such a scheme. If we look at the evidence from Britain, for example, it has pushed house prices in London up by 6%. While it has led to an increase in supply, it did so on the English-Welsh border where houses are not needed. The most independent research into that scheme from the London School of Economics has made it very clear that this is about putting money in the pockets of developers and pushing up house prices and it is putting working people at very significant risk of mortgage default and loss of property into the future.
The last thing I will say is that Fianna Fáil has done this before. The last shared ownership scheme, which members will remember, and which was closed by Fine Gael, was modelled on something similar. It was a shared equity product where the cost of the equity and the interest charged increased over a period of time. That meant people who bought into that shared equity scheme at the end of the Celtic tiger experienced a doubling of their mortgage repayments if they chose to pay it down over a decade and a half. There was four times the level of mortgage default and mortgage arrears among that cohort of borrowers, when the crash hit its depth after 2010, than there was among regular borrowers. This, therefore, is not affordable housing, and any Deputy who supports the shared equity scheme is not doing right by hard-working people. He or she is saddling them with debt and pushing up house prices. I cannot stand over it and that is why the amendment would delete all the recommendations in the report related to shared equity, it would call for the shared equity loan scheme to be removed from this Bill, and it would call for the €75 million to be transferred to the cost rental and serviced sites funds for genuinely affordable homes. If the Minister, when he has finalised the scheme and the Central Bank and European Commission have given their views, wants to introduce a separate Bill, let him come and defend that but he should not title it an affordable housing Bill.
