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JOINT COMMITTEE ON THE ENVIRONMENT, HERITAGE AND LOCAL GOVERNMENT debate -
Tuesday, 24 Mar 2009

Social and Affordable Housing: Discussion with Department of the Environment, Heritage and Local Government.

Members may recall from our meeting on 9 September 2009 when we noted the 2007 annual report of the Housing Finance Agency that we agreed to discuss the issue of social and affordable housing and access to credit.

Officials from the Department of the Environment, Heritage and Local Government have been invited here today and I welcome Mr. John McCarthy, assistant secretary, housing division, Mr. Denis Conlan, principal officer, affordable housing section, Mr. Jim Ganley, principal officer, voluntary and co-operative housing section, Mr. Philip Nugent, principal officer, housing policy, finance and social inclusion section, and Ms Rosalind Carroll, assistant principal officer, social housing section. The format of the meeting will be a brief presentation, followed by a question and answer session.

Before the presentation begins, I draw attention to the fact that members of the committee have absolute privilege but this same privilege does not apply to witnesses appearing before the committee. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable.

I invite Mr. McCarthy to proceed.

Mr. John McCarthy

I thank the Chairman and members of the committee for the opportunity to speak on a range of housing issues. I will give an overview of developments across a range of areas including the private housing market, affordable housing and social housing, including the voluntary and co-operative sector. Given the committee's interest in the matter, I will also provide an outline of the role of the Housing Finance Agency.

For the convenience of members, we are circulating a detailed breakdown of activity under the various social and affordable housing programmes on a county by county basis for 2007 and the first three quarters of 2008. There is a vast amount of housing data available on the Department's website which can be accessed at any time.

Like housing markets across Europe, in the US and elsewhere around the world, the Irish housing market has been going through a considerable cooling down process since 2006. This has been evident in terms of house prices, housing output and realised demand for home ownership.

Provisional house price statistics held by the Department, based on data compiled from lenders, show that, nationally, new house prices at the end of quarter four of 2008 had dropped back to levels last seen in quarter three 2005, with Dublin prices now back at quarter four 2004 levels. Prices for second-hand houses, both nationally and for Dublin, are now comparable to prices in the first quarter of 2005.

All the key housing output indicators have been showing clear evidence of a significant contraction in activity in the past two years. Completions, using the 12 month running total, peaked at 93,000 houses in 2006, a level which was widely recognised to be significantly ahead of the annual average 55,000 to 60,000 level required to meet demand in the medium term. Output had dropped back to some 51,000 units last year, although this may over-estimate actual building activity in 2008 given that completions are measured by ESB connections and a portion of the units connected in 2008 may well have been physically built prior to that.

Looking further back through the supply chain, commencements and registrations are also significantly down — by 71% and 82%, respectively. Looking at projections from a range of sources, completions in 2009 are likely to be in the 20,000 to 25,000 range. It must also be taken into account that there is a considerable quantity of newly completed and unsold homes, estimated to be of the order of 40,000. In addition, estimates of the quantum of second-hand properties for sale range from 55,000 to 70,000.

The prospects for the housing market in the period immediately ahead will depend on a range of factors, including the overall economic climate, sentiment towards housing and the availability of mortgage finance. Reductions in price have clearly led to the creation of much better value in the market. For households wishing to become home owners, this price reduction, coupled with other factors, particularly the significant reduction in mortgage interest rates and mortgage interest relief changes, have resulted in significant improvement in the affordability position of first-time buyers. The affordability ratio used by the Department for many years, which gives the percentage of household net monthly income required to service a mortgage, shows that, for the country as a whole, 24% of net income is required to service a mortgage. The equivalent figure for Dublin is 27.5%. This means, in reality, that the national ratio is at 2003-04 levels, with the Dublin ratio now back at 1996-97 levels. It remains to be seen how this position evolves further in the months ahead, arising from any further changes in interest rates and the net income position of borrowers.

Poor sentiment and a more restricted credit environment are now the defining features of the housing market. In terms of availability of credit the Government has taken steps to ease the situation for first-time buyers through the home choice loan scheme and the terms of the bank recapitalisation scheme. The home choice loan scheme, which is designed to facilitate rather than incentivise house purchase, is now operational, providing a line of credit to certain first-time buyers, operating through a small number of local authorities acting on a regional basis. Under the recapitalisation scheme, the participating banks have undertaken to make available an additional 30% capacity for lending to first-time buyers in 2009. It will be some months before the effects of either of these measures can be gauged in terms of their impact on facilitating the realisation of underlying demand.

I will now focus on social and affordable housing. Responding effectively to a range of housing needs remains at the top of the agenda for the Government and the level of resources directed towards social and affordable housing, improvement and regeneration measures amounted to some €2.4 billion in 2008, including some €1.73 billion in Exchequer funding. These record investment levels have enabled record levels of housing needs to be met. It is estimated that the needs of some 19,500 households, in total, were met in 2008 through the full range of social and affordable housing programmes.

The 2008 housing needs assessment showed an increase of some 30% in net housing need since 2005. As highlighted at the time, part of this increase is attributable to efforts to identify particular households who may have been under-represented in previous assessments, including households comprising older people or people with a disability. In deploying the available resources for housing in 2009, priority will attach to meeting the needs of these and other vulnerable groups. In that regard, the Exchequer provision for 2009 will be finalised in the context of the supplementary budget next month, and it is expected that within the more constrained financial environment, a very significant level of investment will still be secured to support activity under the range of housing programmes this year. However, given the difficult fiscal and economic climate in which we find ourselves, and the significant transition that the housing sector is going through, flexible and imaginative approaches are necessary to continue to respond effectively to the diverse housing needs that obtain.

Looking at affordable housing specifically, as a result of significant house price increases in recent years and difficulties encountered by prospective first-time buyers in accessing home ownership, particularly in urban areas of high demand, the provision of affordable housing has been a significant priority for the Government. It is an area that has evolved considerably in a comparatively short period, primarily through the introduction of the Part V mechanism with effect since 2002, and this evolution continues in line with recent major changes in the housing market and the wider economy.

In the context of rapidly increasing house prices in certain areas, the Towards 2016 social partnership agreement set out an ambitious target to deliver 17,000 affordable homes in the years 2007 to 2009. Local authorities responded strongly to this challenge delivering more than 3,500 units in 2007 and an estimated 4,500 in 2008.

However, little more than two years on from that agreement we find ourselves in a very different world. There has been a sharp downturn in the housing market generally, price reductions and expectation of further reductions, increased insecurity concerning employment and income levels and a more restricted credit environment. In terms of the affordable housing market specifically, to all of these factors the further issue of the erosion of the differential between the affordable price and the market price can be added. These developments, coupled with the very strong surge in delivery in 2008, particularly under Part V, have resulted in an increase in the stock of affordable housing units available. In looking at this issue, it is important to acknowledge that it would be normal for authorities to have a certain amount of completed affordable homes available at any given time, principally comprising units either being prepared for or in the course of sale. At the end of 2007 when units were generally still selling well this figure stood at approximately 2,200 homes available nationally. It is also important to note that there have been significant sales of affordable housing during 2008; some 2,750 across the country.

It is now estimated that the number of affordable units available nationally has risen to somewhere in the region of 3,700 units. These are not spread uniformly across the country; there are a number of high delivery areas where the stock levels have increased, while there are other local authority areas that do not have a significant stock. Despite the current difficulties, many of the units available are already in the process of sale or will be sold in the coming months. Local authorities estimate, however, that approximately 1,800 of the units already available may be difficult to sell in the current market. We expect that a further 2,270 homes will come into stock this year, some of which will be well placed and priced to sell even in the current climate, but others may be more difficult to sell.

As the economic climate and housing market changed in recent months, the Department in co-operation with the Affordable Homes Partnership and local authorities has been monitoring the situation closely. The holding costs to local authorities of unsold units are considerable in addition to the obvious undesirability, for many reasons, of leaving these homes unoccupied. At the Department's request, the Affordable Homes Partnership, AHP, has already examined the position in detail and met the local authorities in the ten highest delivery areas to identify actions that might assist in the sale of these units. The position in all authorities has been reviewed as part of the recent series of housing action plan meetings which have taken place between the Department and local authorities. In February, the AHP held a seminar for all local authorities to provide specific updated advice on the marketing and sale of affordable homes in the current climate. The priority now is to ensure that available affordable homes are utilised and the units available are brought into use as soon as possible in the most appropriate and effective way. The first priority of local authorities is to sell these units to those eligible for affordable homes and, in many cases, this is what is being done successfully throughout the country. However, the indications are that selling a significant number of affordable homes is difficult. This is happening particularly in areas where significant reductions in open market prices have eroded the discount on affordable units.

The Department is finalising a circular to all local authorities which will be accompanied by a sales strategy prepared by the AHP setting out the options that authorities should consider in addressing the matter. Local authorities are being asked to identify those units most likely to sell and refocus their sales efforts on these developments.

In tandem with the focus on sales, authorities are also being requested to consider alternative options for the use of affordable units which may not sell at this time. The other options to be included in the circular being finalised include sale at market value on the open market, the transfer of affordable properties to the rental accommodation scheme for a temporary period, sale to local authority tenants under the incremental purchase scheme and the use of affordable properties as a temporary social housing support under a leasing arrangement where appropriate.

In the coming months, the Department will continue to monitor and support local authorities' work to address these challenging issues, review progress on the priorities identified and adapt and develop the approaches involved as necessary in the evolving housing market and economic climate. Members of the committee will also be aware of the proposed changes to the sales of affordable housing to be provided for through the Housing (Miscellaneous Provisions) Bill 2008. This will provide for the introduction of a new affordable homes purchase scheme which, in the longer term, will facilitate the purchase through a single equity based mechanism of property under the various affordable housing schemes. Deputies will have an opportunity to discuss this matter further when the relevant legislative provisions are tabled by way of Committee Stage amendments to the Bill.

As with affordable housing, the response in recent years to the very ambitious social housing targets set out under the social partnership agreement has been very strong. Under the Towards 2016 agreement, a target was set for the delivery of 27,000 social housing starts over the period 2007 to 2009, including 2,000 units in each of the three years from the voluntary and co-operative sector. That target was met in 2007 with almost 7,000 local authority starts delivered — the highest level of output under the local authority programme in more than a decade — adding to the 2,200 record voluntary housing starts. The final data for the number of local authority starts in 2008 is expected to show a reduction, but it is estimated, nevertheless, that some 7,600 housing units were completed or acquired under the main local authority and voluntary and co-operative housing programmes last year.

Activity under the rental accommodation scheme has been increasing steadily with 6,900 households transferred from rent supplement in 2008, significantly exceeding the 5,000 household target. The total number of households now accommodated through the scheme either directly in RAS or in other social housing options was 18,011 at year end 2008. It is estimated that local authorities will achieve another 7,000 transfers in 2009 and it may be possible to extend this further, given the current market conditions and the potential for deploying unsold affordable housing units under RAS type arrangements.

The period ahead will present many challenges in the housing area. Most significantly, we have seen, on the one hand, a considerable increase in social housing need and, on the other, we are seeing the level of resources available to tackle that need coming under pressure. This demands that we continue to make every effort to make more efficient and effective use of the finite resources available to us. Specifically, it requires that the social housing supply programme is, in the short term, refocused away from construction in recognition of the more constrained state of the public finances and the good value presently available in acquisitions and other market-based arrangements. Through the careful implementation of the new leasing arrangements being introduced this year, the Exchequer can avail of the opportunity to meet increasing social housing need in the most cost-effective way available. It is hoped that this initiative will deliver at least 2,000 new homes in 2009 alone and we would anticipate it actually has the potential to allow for a significant increase in social housing supply in the next few years notwithstanding shrinking resources. However, these arrangements will take time to bed in and are seen as a long-term, cost-effective solution to social housing provision.

The Housing Finance Agency plc, HFA, is a company limited by shares under the terms of the Housing Finance Agency Act 1981, as amended. The principal objects of the company are to advance funds to local authorities to be used by them for any purpose authorised under the Housing Acts and to borrow or raise funds for these purposes. All of the issued share capital of the agency is beneficially owned by the Minister for Finance. The agency operates as a company and is therefore subject to usual accounting disciplines. The legislation under which it was set up enjoins it to at least break even in its operations and it operates without Government subvention.

The agency lends to local authorities primarily for the purposes of carrying out their functions under the Housing Acts. In that regard, local housing authorities use the funds they borrow from the HFA for the various housing schemes that are available to assist low-income households to achieve home ownership such as the shared ownership and affordable housing schemes. They also borrow from the HFA for on-lending to various approved voluntary bodies to enable such bodies to provide rental accommodation under the capital loan and subsidy scheme and towards the acquisition of land to enable them to provide accommodation to meet their own social housing needs.

The HFA's powers were extended in 2002 to provide loans for local authorities for purposes authorised under the Sanitary Acts and Waste Management Acts and to lend directly to voluntary bodies. However, state aid clearance is required from the European Commission to use these powers. While the Commission approved the HFA's lending to voluntary bodies in July 2004, the agency is in consultation with the Commission on lending to local authorities for water and waste purposes.

In 2008, gross loan advances amounted to €1,062 million. Advances net of repayments and redemptions were €621 million and at year-end the loan book reached a total of €4.44 billion. The Housing (Miscellaneous Provisions) Bill 2008 contains a provision to increase the agency's borrowing limit from €6 billion to €10 billion.

It is clear that the world around us has changed very rapidly in the past 12 to 18 months. All areas of the housing market have been profoundly affected by those changes and the challenges presented are considerable. The Department is committed to working in collaboration with our partners in local government and in the voluntary and co-operative housing sector to ensure we position ourselves to be able to continue to respond flexibly and effectively to new challenges. At the same time, we are mindful of the need to keep an eye on the future so we can continue to adapt our approaches as fiscal and economic conditions evolve.

I thank the Chairman for the invitation to attend this meeting. My colleagues and I are happy to respond as fully as possible to questions from committee members and will follow up later with responses to queries we cannot deal with today.

I thank Mr. McCarthy. He said the Department is finalising a circular to local authorities on a sales strategy. What is the likely timescale?

Mr. John McCarthy

We hope to be able to publish the timescale in a couple of days. I will forward a copy to the committee.

Mr. McCarthy might not have the information but does anybody know what the figure for housing starts will be in 2009? Do the witnesses know how many houses were started but left as abandoned building sites? How many houses on which planning permission has been granted have not been built? Is there a way of knowing what is in the system?

Mr. John McCarthy

Data are collected and published by the CSO on a quarterly basis relating to planning permission for housing and other developments. In recent years, an average of some 80,000 were built per annum. Commencement notices served to local authorities track the volume of new houses and the data show that activity is declining considerably. On a year-on-year basis, commencements are down by approximately 80%.

Is that on last year's figure? Last year the figure was approximately 50,000, so does that mean there will be 10,000 commencements this year?

Mr. John McCarthy

It is more difficult to determine the number of commencements. Completions are easier to identify but commencements will be significantly reduced if they remain at their present level.

I welcome the officials to this discussion. We have 60,000 on waiting lists.

Mr. John McCarthy

There is a net need for 56,000.

Some 44,000 houses remain unsold, not including second-hand houses. Many people will wonder why we cannot marry the 60,000 on waiting lists with the 44,000 houses that remain unsold after the boom, to assist families without being financially irresponsible. Has the Department reviewed its strategy or has it instructed local authorities to review their strategies in light of the depressing picture Mr. McCarthy has painted, which is now very different from when those strategies were agreed?

Mr. McCarthy provided information on commencements but it does not give much hope that the private sector will address the problem of people on housing lists, which also include people whose homes have been repossessed. Is there likely to be any take-up of the home choice loan scheme, for which there has been minuscule demand? Most local authorities show results in single figures for take-up of that scheme. The scheme has some potential but when does Mr. McCarthy see that being realised?

Can the Department update us on the new leasing programme proposed by the Minister? Is there a likelihood of it being taken up? I am concerned about leasing and purchases in private estates by people who may have criminal records. What figures are projected for social and affordable housing for 2009? Circulars were recently issued by the Department on the subject of its financial position but projects have been approved and signed. Are we in a position to meet them? Part V was fine in boom times but, now that the market has declined substantially, what role does the Department see for its future, if any? Should it be reviewed?

Local authorities are prevented from borrowing now, the limit of €200 million having been reached. What impact will that have on output?

I thank Mr. McCarthy for his presentation. It is a very comprehensive — although frightening — report on the social and affordable sector. At the end of the report the term "single equity" is used. Can he give a definition of that?

My other question is on qualifying income levels for the social housing lists of various local authorities around the country. Does the Department give guidelines to local authorities for determining the maximum income which a couple can receive to qualify for social housing? Do local authorities pull the figure out of the sky themselves?

Mr. John McCarthy

Affordable housing is sold subject to a 20-year time limit and a clawback which tapers away from year 11 to year 20. The single equity proposal will replace the clawback system by the State taking an equity share for the value of the discount provided. That will be repayable and will be recycled and it will apply in the same way for all schemes. When the proceeds are realised from the equity stake being bought out they will be reinvested in the further provision of affordable housing. It seems a more equitable system and is designed to assist more people across the board.

Local authorities have wide discretion on qualifying income levels for social housing. The Bill which will come before the committee in the next session provides for the introduction of a more robust system for assessing housing need. We in the Custom House do not want to make decisions for individual local authorities but we want to put in place more robust national parameters within which local authorities will operate. It is evolving and will develop as the Bill is progressed.

The answer to that question is critical to what we are discussing. Can Mr. McCarthy indicate what the figures to be included in the Housing (Miscellaneous Provisions) Bill 2008 will be? Will the parameters be between €40,000 and €60,000 or €30,000 and €50,000?

Mr. John McCarthy

We are not at that level of detail yet but the Bill will set out, in broad terms, the criteria which should inform how waiting lists are compiled. They will be fleshed out in detail in regulations after the Bill is passed.

The report indicates three critical factors affecting the housing sector, namely, the economic climate, sentiment towards the housing market and the availability of finance. "Affordable housing" is a relative term. When I purchased my first house affordability meant three times one's income, with the income of one's partner added on, over a 20-year schedule. Until recently affordability meant between ten and 12 times a person's earnings over 35 years. The affordable housing scheme operated in that sphere in recent years and there are several reasons the scheme is in its current situation. First, young couples are making a calculation that a property at which they are looking might depreciate by between €10,000 and €15,000 in the next 12 months, making it cheaper next year. They also ask how much it will cost to rent in that period, given they will get tax relief on the rent paid. The calculation is simple and it boils down to whether a saving of approximately €10,000 is preferable to buying a house.

Purchasers of affordable housing have another difficulty. It is illustrated by one case which has been brought to my advice centre but I have heard of other instances. Most local authorities require that applicants have a mortgage in principle so that, at the end of the process, the purchase does not collapse. A couple received a mortgage in principle of €250,000 for an affordable home valued at €260,000 which, following deductions, was to be sold to the couple for €220,000. When the couple went to draw down the mortgage one of the three lending institutions which have signed up to the affordable housing scheme valued the property at €196,000, or €14,000 below the sale price. Banks, which did not carry out their business particularly well until recently, are now taking a more measured approach when valuing properties but this means the couple to whom I refer could not proceed with the purchase of the home. This will be an ongoing theme in the next 12 months when property values fall by between 5% and 15%, as is predicted.

The numbers show an increase from 2,000 affordable homes to 4,000 and that number could be exceeded during 2009 because of the fact that banks are now valuing properties at a different level from that of local authorities. In the meantime, the Minister proposes the home choice scheme, which amounts to double jeopardy for first-time buyers of affordable housing. He is proposing to provide a mortgage for people who have been refused by two lending institutions but people will be refused a mortgage if they cannot prove they can repay it or if the property is overvalued.

There are two other concerns around this matter. One is that the increase in lending from €4 billion to €6 billion will be used to create the double jeopardy to which I referred. The other is the possibility of performance-related bonuses to local authority staff in this area, on which the Minister has not given a clear answer. The idea that a staff member of a local authority receive a bonus payment for completing a certain number of transactions throughout the year is very questionable. Does the Department feel it is a practice that should be encouraged? Should a direction be given to the Minister to the effect that under no circumstances should bonus payments be paid to staff members of local authorities who are engaged in facilitating mortgages under the home choice scheme?

The other issue relates to the third quarter of 2005, which shows that the housing market has yet to normalise. We were approaching the peak of the property market in the third quarter of 2005 and in 2006, so property values have to come down further. The Department states that 24% of net income is required to service a mortgage. Is that based on a 20-year schedule? A return to normalisation in the housing market will involve a return to 20-year schedules, rather than 35-year schedules.

Mr. John McCarthy

It refers to 20-year schedules.

The State recently acquired Anglo Irish Bank, which I imagine has a host of assets in the form of land banks at pre-planning stage, those which have gained planning permission and others which are at the end of the development process. Has any examination been carried out by the Department of those assets, given that we now own the bank and, by extension, its assets?

I will return to the shared equity provision. Stock in hand is increasing and will probably reach 4,000 at the end of the year and a circular letter will soon be sent to the Department or the local authority. If I were a prospective purchaser of an affordable home I would be watching this issue like a hawk. At the moment I can buy 100% of a house outside the shared equity scheme for €200,000 with a 20-year schedule. If the affordable homes scheme is flipped over to the shared equity scheme, as has been recommended, I will only have to buy 40% of the house and 2% of the equity will be returned to me every two years in which I live in the house. If I take out a 30-year mortgage, at the end of the schedule the remaining 60% will be returned to me free of costs. A person would have to be completely mad to buy an affordable home at present when this offer is coming down the line in a couple of months. The Department needs to be sure about this issue because I will advise constituents not to buy an affordable home in the next couple of months if they will only have to pay 40% under the new scheme.

I do not see any reference to the affordable homes partnership. The prices were agreed two years ago at a time when values were increasing. I predicted in 2006 that there would be a decline but the predictions were based on a rising market and these properties will not sell based on the calculations made at the time. Has any thought been given to going back to the developers and asking them to reduce prices? A loss is not made on the properties but it is an entirely different ball game now in the property market. The resistance builders and developers had to Part V two years ago is gone. It was like trying to squeeze blood out of a turnip to get the 20%. They would give 100% under Part V now if they could, so there is scope for negotiating and agreeing a better price from developers.

Another worrying theme that seems to be developing in the Housing (Miscellaneous Provisions) Bill is what we define or categorise as social housing, or what people understand to be social housing. The rental accommodation scheme is classified as social housing and voluntary housing is not classified as such. The voluntary sector is looking to redefine what classifies as social housing under the new housing Bill. What is worrying about today's report is the long-term lease arrangement, which was, in effect, a bail out for developers, as it will be classified as social housing also. The State will take a 20-year lease on these and if one considers the maths of the transaction, it would possibly be cheaper to buy the properties if they were taken at cost value from developers. These premises will be defined as social housing as well.

The critical aspect of any social housing provision is tenant purchase. This does not apply to the rental accommodation scheme or in the voluntary sector, although there are indications that the Housing (Miscellaneous Provisions) Bill may go down that way. The long-term lease programme certainly does not have a right-to-buy or tenant purchase application within it. The property will be returned to the developer in 20 years and the rents accrued during the period will be spent on maintaining the property over that time. There are many questions hanging over that as an option and there is also a serious question as to whether the Department will define the property as social housing.

What we ultimately want to do is normalise housing. The sector became abnormal in the past ten years and there must be a social housing strand that considers the development of social housing in dispersed mode rather than cluster mode. With the long-term leasing programme, the four local authorities involved are making applications to the Department to acquire some portion of the €20 million set aside. Has some direction been given to them as to how they will go about leasing the properties? Are they being directed to lease them at a cluster level or at a dispersed level?

There are two significant differences between cluster and dispersed modes. A dispersed mode relates to social housing integration but cluster modes relate to social housing in a circular area — one could use the word "ghettoisation". Will the witnesses give some indication of the direction given to local authorities on the matter?

I want to give other Deputies an opportunity to contribute, so the witnesses should keep a record of the questions as best they can. Deputies O'Sullivan, Scanlon and others have indicated their wish to contribute.

I have a few points, although Deputy Ciarán Lynch has covered most of what we all would like to say. We must take advantage of our current position if at all possible. With regard to affordable housing, now is the first time in a long time when we could say housing is affordable. Up until now it was not affordable. We should make all efforts to give a chance to people who otherwise would not be able to even consider buying a house.

With the fall in house prices, the banks and others could fall into line. My experience is that they are not coming on board in the way they should, and it remains to be seen in the next couple of months whether they will contribute. It is vital that we make finance available to people who would now have the chance to buy an affordable house.

I have a problem with the way people are assessed for affordable and social housing. Perhaps different local authorities have different ways of rolling it out but I can point to a few instances where, for example, if a person permanently lives in a town but works away from it — perhaps driving to the nearest city for work — it can be held against the person in the way he or she is assessed for social or affordable housing. That is unjust. If a person has to move from a town to work, he or she is brought down on the points system used.

I do not know if that is applied across the board in local authorities but if it is, it should be looked at by the Department. People born and reared in certain towns and villages are being discriminated against as far as I am concerned in getting on the affordable or social housing ladder. In some instances people who are not even native to a place may be on social welfare and they score points because they live permanently in the town rather than going outside the town to work.

How is the rental accommodation scheme, RAS, working? The criteria indicate a person must be 18 months on the housing list for it to apply. Is that correct? That is creating many problems for people who may be on the housing list, although they may have the opportunity to get on some scheme that will get them out of the housing problem they have. The 18 months of waiting should be looked at again; perhaps it could be reduced to six months, as this would be more reasonable.

Some people who took out mortgages over the past five, six or even ten years had no problem in the world in getting money from the banks, who were nearly rolling the funding out the door to such people. They may now find themselves in serious difficulty with repayments and in some instances they would have to walk away from the house they have lived in and were paying for while times were good. We have an opportunity for the Department or another body to consider such a scenario, possibly on a case by case basis. Something could be done in the line of partnership, shared ownership or another system. There will be many such cases becoming evident in the coming months and years and people will be back on the council housing list.

Perhaps the witnesses would respond to those points. I may come back in later with another question.

I thank Mr. McCarthy for his presentation and the witnesses for coming here today. I have a few issues I would like to raise but I will not go back over what has been said. One figure strikes me as being very strange, as it indicates that Leitrim County Council in 2007 constructed in total four houses for social housing purposes. Is that a mistake?

It has been indicated that 60,000 people are on the housing list but I question this from time to time. I know people are on housing lists for different reasons but it is mostly so that they can get a rent allowance. There are people on housing lists who may never take a local authority house even if they were offered one. Can a check be made to see how many will need a house?

Mr. Ganley comes from the same county as me. Social and affordable housing schemes work in popular areas. In Strandhill, Rosses Point and areas north of Sligo town such schemes work very well. However, in rural areas south of that region they do not work. In my home town ten social and affordable houses were built as part of a development but they had to be taken back eventually and allocated as county council houses. Social and affordable housing schemes work in some areas but not others.

Local authorities have many Part V houses on their books, many of which will not be completed this year, next year or the year after. I hope they are not depending on them. Owing to the house building climate, these houses will not be built in the near future.

The rental accommodation scheme does not operate in Sligo but does in County Mayo. It has caused many problems where people were housed in an estate. It has devalued the property of hard working individuals who worked hard to have a deposit and get a mortgage to buy a home. Two families, the names of which I can provide later, were housed in an estate and it has caused nothing but hardship and grief for those who live on the estate.

The home choice scheme will do much good. It will work but the one problem is that the income level of €40,000 is too high. This goes against what other members have said. In the north west, from where I come, one can buy a three bedroom semi-detached house for €145,000 or €150,000. People do not need the sum of €200,000. If the income level was set at €30,000, the scheme would have much potential. The position is different in Dublin but where I come from people can buy houses at the prices I mentioned. This issue should be examined.

The shared ownership scheme worked very well for a number of years. I got many people on the housing ladder when I worked as a councillor but that was fine when property prices were rising. Yesterday I spoke to a person who had bought a house with a 50:50 split with the county council. Her income is €29,000 and she is paying almost €300 a month in rent. Her income is not high enough to take out a local authority loan to buy the house. People in that position should be given a local authority loan because the person concerned is paying a mortgage and rent which amount to more than what one would pay for a mortgage. People are caught in that trap. As there are not many in that category, I ask the delegation to examine whether anything can be done for them. It is unfair that they are paying more than they would for a mortgage.

Local authorities in Sligo will not build or purchase any new houses this year. No rural cottages will be allowed to proceed. Will the delegation confirm that this is the case?

In the past the rate of interest charged to purchasers by the Housing Finance Agency was high. Some of those in situ for a long time are still paying at this rate. I do not know what steps were taken to notify them that they should switch to a more affordable loan.

Planning and housing are linked. Until we address the issue of planning we will never address the issue of social and affordable housing. In the current climate we must examine regional planning guidelines and county development plans and tweak them to suit the environment in which we find ourselves. People are being refused planning permission and being added to the housing accommodation list. They could be accommodated by adopting a more flexible approach to planning in county development plans. The local need criterion should be re-examined. It is not sufficient that we will build 20,000 to 25,000 houses; we must built up to 50,000 each year in order to keep the housing stock at the level it should be. We must have a supply of houses to keep prices at an affordable level. When there is a commodity shortage, prices go up.

The differential between market value and the price of an affordable house is not sufficient to entice people to buy. They are going for market value because of the restrictions attached to affordable housing. It is cheaper to buy a house at market value. Everyone aspires to owning a house and, while there are incentives to acquire a house, most want to live in a house they will eventually own. Social housing provided by the council is by far the best means for people to acquire their own house. Are the officials satisfied that local authorities are using the resources available to them to provide the maximum number of houses? In each local authority an allocation is made annually. Is this allocation being used or are local authorities returning some of it to the Department? If it is returned, is it being given to other local authorities which have used up their allocation or is it returned to the Department's fund?

Is there a recommendation the officials make in respect of planning? The presentation refers to flexible and imaginative approaches. Does the delegation have flexible and imaginative approaches it will propose to local authorities to promote housing developments? Where local authorities once provided one-off housing for indigenous persons from the countryside who wanted to continue to live there, there is now a reluctance to provide such houses, even for those who are better suited to living in the countryside.

The presentation refers to a sale strategy but unfortunately it will be very difficult to buy, irrespective of the strategy in place. People are waiting to see. If one wants to buy a house to make money, now is not the time to do so but if one wants to invest in a home for the long term, it is a good time to buy. There is value to be obtained in the Dublin market, especially in the city centre and the docklands area.

The presentation provides four sale alternatives open to local authorities, including sale at market value on the open market. Could a system not be put in place under which local authorities would buy houses and then allocate them as social housing units? The fourth option is a leasing arrangement. I wish to ascertain the reason a local authority cannot simply buy a house. Has the Department considered this option? Have any of these options been adopted from other countries or from where did the idea originate? Have local authorities at any level been trying them out?

I apologise for leaving the meeting but I was obliged to raise a matter in the Dáil under Standing Order 32.

I welcome the personnel from the housing division in the Department of the Environment, Heritage and Local Government. I heard Mr. McCarthy's presentation which was interesting and informative but it did not provide much solace for the housing programme. Access to affordable housing should be a basic right for all. Many young people who purchased houses at the peak in 2005 and 2006, when prices had spiralled out of control, now face serious negative equity. Are measures being considered by the Department to help such persons, given that we were able to bail out the banks to the tune of €7 billion? Is there a possibility of providing a once-off grant for those caught in that position? Those who purchased when house prices were at their peak could be given a once-off grant of €100,000, as some of those who bought houses for €450,000 or €500,000 at the time definitely need assistance now. Such persons arrive depressed into my clinics on a regular basis and I believe some form of once-off assistance should be provided for those caught in that position. I would appreciate the officials' views in this regard.

The format of the application forms for local authority housing changed three to five years ago from being two-page documents to being nearly 20 pages long. At the outset of my local authority career, a simplified application form was used in applying for a house to the local authority. Much bureaucracy and red tape has developed in the intervening years because one must have one's application forms updated every 18 months. It is highly frustrating for those not considered to be a high priority for housing to be obliged to go through such a process every 18 months. Some of the persons concerned such as single people, single men in particular, who are not deemed to be a high priority by their local authority will have been on the housing list for seven or eight years. It is sickening for those who have been on the list for many years to be obliged to so do. Moreover, if by some chance they do not fill in the further information form or allow it to slip through the system, they will discover they must start again and make a fresh application for a local authority house. This entire system must be examined by the Department because some local authorities sometimes apply the rule to the last point of the law.

There is much substandard accommodation in which old age pensioners are being forced to live. Seven to nine years ago two schemes were in place which extended back for the 20 years that I had served on a local authority. One was the essential repairs scheme administered by the old health boards. Both subsequently were amalgamated and now are being administered by the local authorities. Many frustrated elderly people who require improved accommodation urgently are receiving letters from their local authority. I have had sight of letters dating from as far back as January 2009 asking the recipients to reapply in September. This is highly unfair. Some form of emergency funding should be made available because people who have given a life's service to the community and built up the State, etc. now require a little support in the evening of their lives. Some assistance should be provided. The Department should prioritise such persons, for whom there should be a special allocation.

I encountered a case last year in which a section of the roof of an elderly lady's home had been blown off. She secured a bridging loan on the understanding that she subsequently would receive grant assistance in September. However, on completion of the necessary work, she was informed that as it had been completed, nothing could be done and the grant could not be backdated. Common sense must prevail in this regard. The guidelines are far too restrictive. Some leniency should be shown for those in such a position. This issue must be reconsidered.

The repatriation housing programme for elderly or retired people returning from foreign parts in America, Europe and elsewhere should stand on its own within the local authorities because it is subsumed into the overall housing application programme. Special concessions should be made for those who were forced to leave the country in hard times and now wish to return and retire. It is unfair that they are not given priority within local authorities. The repatriation programme should stand on its own within each local authority or a certain allocation should be made to rehouse returned emigrants.

As for the information provided for members by the officials on voluntary and co-operative housing, I note there has been no uptake on the voluntary and co-operative housing programme in the midland counties. For instance, zero units were provided in Cavan, Leitrim, Tipperary north, Roscommon and Westmeath, while seven were provided in County Longford. The officials should elaborate on the absence of a take-up of the scheme in the midlands.

On the voluntary and co-operative housing schemes, national bodies such as Respond develop such schemes, while at county level small community groups have become involved. Although a number of those concerned would like to be in a position to purchase their house, something in the regulations prevents this from happening. Does the Department plan to allow such persons to purchase their house?

I will ask one question of Mr. McCarthy before he addresses the issues raised as best he can. Quite a number of those on the housing list are adequately housed in private rented accommodation and in receipt of rental subsidy. Mr. McCarthy might provide members with figures as to the number on the housing lists who live in poor or overcrowded accommodation or are in need of housing. Some do not wish to move from the private estate in which they live in private rented accommodation. This is important because there is a perception that 55,000 are seeking social housing. However, the vast majority are comfortably housed to their own satisfaction and receiving subsidies for private rentals. The officials probably know this. The phrase being used in County Laois is that practically everyone on the county council's housing list is only on it to receive a rental subsidy. They do not have a housing requirement and are adequately housed.

A problem arises in this regard for people living in rural areas.

They do not wish to move out of the new house they are renting into a council house.

No, I refer to those who grew up and spent most of their lifetime in a rural area. Such persons do not wish to move into town. This is where a problem arises; some priority should be given to the rural dweller.

Mr. McCarthy must have a general idea in this regard, although I will not tie him to precise figures.

Mr. John McCarthy

Of the 56,000 in net need, 21,000 are in receipt of rent supplement.

That has given me a picture. Mr. McCarthy should address the various issues as best he can.

Mr. John McCarthy

I thank the Chairman and members for a wide range of questions, which we will do our best to answer. If we cannot answer something, we will revert to them happily.

Deputy Hogan was the first to raise the issue of available property in the market, housing waiting lists and the ability to marry them. We are conscious of this issue and, through the leasing initiative, for example, we are trying to engineer the marriage. In the short term, we must be able to meet the contractual commitments placed on local authorities by their programmes. We are telling them that we must move from the traditional emphasis on construction programmes to either acquisitions, where resources are available to them——

I must be excused, as I must be elsewhere. With the committee's agreement, Deputy Fitzpatrick will take the Chair.

Deputy Michael Fitzpatrick took the Chair.

Mr. John McCarthy

Where the market has value and capacity, be it for acquisition purposes or through leasing, local authorities should look to take such opportunities. In the short term, their capacity to do so will be limited by the extent to which many of them are carrying commitments through Part V and their build programmes.

Housing strategies were also mentioned. At housing action plan meetings and elsewhere, we have told local authorities that the Planning and Development Act 2000 requires them to keep their strategies under review and to update them where local circumstances change significantly. Given the reality of the world surrounding us, we will reiterate this point in the circular we intend to send to local authorities within the coming days. As part of a development plan, housing strategies are designed to look six years into the future, but we are bearing in mind that looking six days into the future can be difficult.

Our 2009 projections will depend on the funding we secure, which will not be finalised until next month's budget and Revised Estimates. We have a better idea of the projections for affordable housing, which is not as contingent on funding as other areas. Rather, it is more an indication of what is coming through the system. Some 2,300 affordable units are expected to come on stream this year. What comes through on the social side will depend on the outcome of the Revised Estimates, which we will know in a couple of weeks time. The Revised Estimates will be tabled before the select committee in due course.

Deputy Hogan raised the issue of borrowing limits. As it is not my area of expertise, I would confuse rather than enlighten members. In so far as housing is concerned, general Government balance-type borrowing is usually only an issue in respect of land acquisitions, given that we use capital funding to fund the programmes in their entirety. Generally, local authorities do not need to borrow to match the funding. My point is subject to the health warning that this is not my area of expertise.

In terms of mortgage lending, a few points were raised regarding income ratios and limits. This territory is more appropriate to the regulator and the Department of Finance, but the mortgage lending issue has evolved with the market in recent years. The appropriate settling point is the subject of some interesting debates, that is, income multiples or loan-value ratios. For affordable housing purposes, the criterion is the 35% of net income rule. If one will use more than 35% of net income servicing a mortgage on a house appropriate to one's needs, one is eligible for affordable housing.

Deputy Ciarán Lynch referred to people's sentiment towards housing and their calculations of the options available to them, the relativity between the options and how they might change over time, which requires making assumptions on what will occur in the housing market. The Deputy also mentioned people who, despite having mortgage approval in principle, find that the mortgage's amount is reduced when they want to proceed with the purchase. A number of local authorities have made this point to us.

That is not what I was saying. The bank will give the people €250,000, but the property's value will be different.

Mr. John McCarthy

Yes. In this context and in terms of the home choice loan, the Deputy stated that people cannot prove earnings or that there are valuation issues. A third matter may be operating under the guise of a valuation issue, as there is evidence of first-time buyers getting mortgage approval of 65%, 70% or 75% of loan to value. Expecting a first-time buyer to produce 25% or 30% of the purchase price is equivalent to a refusal as far as he or she is concerned. The home choice loan was introduced against this background.

Like the general housing market, the affordable housing market is in transition and local authorities must lower their valuations in certain locations. This forms part of the reason for presenting a range of options in our circular to local authorities. The situation differs from area to area. While there are places where the differential between the market and the affordable prices is still sufficient to make affordable housing attractive, this is not the case everywhere. From the point of view of housing utilisation and value for money, the more appropriate response would be to use a mechanism, be it leasing or the rental accommodation scheme, RAS, to put the unit in the social housing sector. The lie of the land could be reviewed in five years' time.

I am tempted to say whether there will be performance bonuses, but I have no indication as to whether the volume of activity under the home choice loan is a criterion. Operating in only four local authorities means that it is limited, but I am unaware of any such criterion being taken into account.

The questions on Anglo Irish Bank and property issues are more for the Department of Finance than for us, since it has been dealing with the banking sector. Until now, our interest has been in trying to quantify the quantum of overhang in the market. The various estimates into which we have tapped suggest the figure to be approximately 40,000. I cannot comment on Anglo Irish Bank's housing stock. I recollect a report on the banking sector published by the Department of Finance that gave some information on Anglo Irish Bank's property portfolio and the extent to which it accounted for land at various stages and how many units were being built.

The Deputy mentioned the changes in the affordable housing sector and how we are moving from a clawback regime to shared equity. To be clear, the shared equity and incremental purchase schemes are different.

Mr. John McCarthy

The incremental purchase scheme is targeted at social housing clients to get them into home ownership whereas the equity approach will be targeted at affordable housing purchasers. It is generally not true to say that——

Mr. McCarthy's report makes reference to sales to local authority tenants under the incremental purchase scheme. That is one of the options being considered. It would be a complete flip if that happens because a tenant will be able to purchase 40% of his or her house and an entirely different economic arrangement will ensue.

Mr. John McCarthy

Such sales will involve social housing tenants, who are in a lower income category than affordable housing tenants.

Mr. McCarthy will recall that my first question was whether guidelines are in place on qualifications for social housing tenants. There is no scope in this regard. Social housing tenants who are concurrently on the affordable housing list have the additional option of flipping over to an incremental purchase scheme in the future. Rather than take advantage of the affordable housing option, these people can choose to wait a few months for the incremental house purchase scheme because under the latter they will only have to purchase 40% of their houses. I have raised this matter with the managers of Cork city and county councils and I am raising it again today because I think it will be at the centre of affordable housing decisions for several months. There is no confidence in the housing market, property prices are decreasing and in the affordable housing sector banks are valuing properties differently to local authorities.

Another variable comes into play in that a house valued at €200,000 under the affordable housing programme will require a substantial mortgage of in excess of €1,500 per month over a 30-year term. However, under the shared equity arrangement, a purchaser would only need a 40% mortgage, or €80,000. That is a substantially smaller sum to repay on a monthly basis, with the additional bonus that 2% of equity is accrued annually. This is the elephant in the room in terms of the affordable housing scheme.

Mr. John McCarthy

The reality of how letting schemes operate is that priority for social housing is given to those on lower incomes.

Mr. McCarthy indicates that the Housing (Miscellaneous Provisions) Bill 2008 will allow people within a specified income range to take up social housing. Will this income range be similar to the threshold for qualification under the incremental purchase scheme? The qualifying income range for affordable housing is between €20,000 and €40,000 per year. I assume that will also be the qualifying band for social housing and the incremental purchase scheme.

Can Mr. McCarthy produce a document for the committee?

In fairness, this matter is too important to put in a document and kick away until next week.

I ask the Deputy to allow me finish. I am not trying to stop the discussion but ask Mr. McCarthy to submit to the committee a document which outlines the details of the matter.

Mr. John McCarthy

I would be happy to do so.

Different income bands apply in respect of social housing, affordable housing and shared equity. The only clear income band at present is that in place for affordable housing, which is between €20,000 and €40,000 per annum for a single applicant. That is a broad criterion for affordable housing applicants and I am sure that the incomes for incremental purchase schemes will also fall within that band.

Mr. John McCarthy

In terms of the income profile of affordable housing applicants, very few earn in the region of €20,000 and in Dublin and certain other parts of the country, affordable purchasers can earn up to €50,000 or more. The traditional local authority income limit for affordable housing loans was €40,000 but with the entry to the scheme of the three new banks, the income profile has changed. I would be surprised if people on incomes of €20,000 are purchasing affordable housing because in terms of income multiples it would suggest that local authorities are offering large loans.

Mr. McCarthy is making my case for me given that, as property values drop, the lower income threshold will come up to meet the price. Somebody who earns €20,000 per year will in theory get onto the affordable housing list but will not qualify for a mortgage. However, people earning between €35,000 and €40,000 who can comfortably qualify for affordable housing are waiting to see whether the market price of homes will drop below the prices locked in under contracts agreed two years ago by their local authorities. Furthermore, the shared equity arrangements provided for in the Bill will allow them to purchase as little as 40% of their houses. From a purchaser's point of view, it makes sense to await the shared equity option. I raise this matter because approximately 3,000 affordable homes are currently available and a further 2,300 are due for completion this year. If the shared equity scheme comes to fruition, these houses will not sell.

Mr. John McCarthy

The majority of affordable purchasers in recent times have been at the upper end of the affordable income range. As they will not get priority on the social housing list, their options will be the new claw back arrangement or the equity arrangement. Incremental purchase will not be a reality for them because they will not be prioritised. An affordable purchaser presented with the choice between the claw back and equity loan arrangements would consider the former as being more advantageous given that the latter option will not allow a 40% purchase.

The Housing (Miscellaneous Provisions) Bill currently allows for a 40% purchase.

Mr. John McCarthy

That is on the incremental purchase scheme.

Let us admit that shared purchase is dead. It is the worst option conceivable. However, incremental purchase schemes which allow 40% of a house to be purchased with a further 2% being released per annum over a 30 year period means that one is purchasing a house at a substantial discount. The claw back arrangements for affordable housing which act as a deterrent to selling houses early also apply in respect of incremental purchase but the purchaser in the latter scheme has the benefit of receiving 60% equity with no end of life payment.

Mr. John McCarthy

I am not sure if I am making myself clear. If a purchaser has a straight choice between incremental purchase and the new shared equity arrangement, he or she clearly knows which to choose. In reality, however, the majority of affordable purchasers will never get into incremental purchase territory because they will not be prioritised for it. The only people who will be prioritised for incremental purchases will be those at the lower end of the social housing income range. Depending on where they are in that income range, they would have to purchase between 40% and 60% of the purchase price.

Mr. McCarthy will now hear me say something that one never hears here. I hope I am wrong.

Mr. John McCarthy

Let me finish. Currently, under the shared equity arrangement, one receives an average discount of 25% off the market price. It is envisaged that the State will take equity of 25% and that the purchaser will pay 75%. There are two very different schemes targeted at different ranges.

The incremental purchase scheme facilitates a minimum purchase of 40%; one may purchase 60% or 75%, depending on one's income. As I understand it, people in the group about which Mr. McCarthy speaks still have access to the incremental purchase scheme but they must buy more of the equity, which means they can buy 60% and the other 40% over 20 years.

Mr. John McCarthy

Yes, but on the basis that they have been assessed and deemed eligible for social housing.

Yes. The percentage of equity is based on income.

Mr. John McCarthy

Absolutely. It is between 40% and 60%, depending on income. The vast majority who buy affordable housing are beyond these income categories. For them the choice will be between purchasing now under a claw-back arrangement or waiting until the equity loan is introduced.

I am not arguing against the incremental purchase scheme. I am trying to highlight a problem with selling affordable housing. That problem will get worse, as the incremental purchase scheme comes on stream because it is a better deal.

Mr. John McCarthy

It is but it is targeted at a different group. For many it will not be a choice between one and the other because they will not be in that territory.

Is there an income limit? It would simplify matters if there was in the context of both schemes.

Mr. John McCarthy

That issue will be fleshed out in the regulations once the incremental purchase scheme is given effect under the new legislation.

We will allow Mr. McCarthy to complete his response.

Mr. John McCarthy

Deputy Lynch raised the issue of the extent to which prices could be renegotiated. To a large extent, it comes down to the stage the Part V agreement is at, whether a Part V agreement has been signed off on and a contract entered into. Four or five years ago, in 2002 and 2003, prices secured under Part V were considerably cheaper than those available in 2005 and 2006. That is the way the market turned.

The issue of the definition of social housing was raised also. I think it was Deputy Lynch who suggested voluntary housing would not be classified as social housing.

Mr. John McCarthy

As far as we are concerned, voluntary housing is a central part of the social housing programme. If there is an issue, we can certainly look at it. It is, however, centrally positioned within our social housing response, as can be seen all the way through Towards 2016 and the national development plan. It is very much a local authority and voluntary and co-operative sector response.

The fact that there will not be access to tenant purchase under leasing arrangements in the rental accommodation scheme has been raised. That is the case. What we are engaged in is the development of a more mixed social housing sector that reflects the life-cycle approach signed up to under Towards 2016. We will provide a social housing response to meet people's needs at a particular point in time rather than trying to have a one-size-fits-all local authority housing scheme offering people who are, perhaps, in their early 20s a permanent solution when that is not what they need over the course of their lives. This is about having a flexible range of mechanisms available. Anybody who becomes a tenant in a leased property or a RAS property can apply for transfer to an incrementally purchased property or assignment to a unit that offers tenant purchase.

We have been very clear on the new leasing approach and the issue of clustering versus dispersal which could be seen as integration versus segregation. It reflects the philosophy that runs through Part V, of having social and affordable housing and a wider tenure mix in private estates. Three issues that are paramount in this regard are addressed in the leasing circular we have issued to local authorities and in the communications we have been having with them. The right accommodation must be sourced; it must be in the right location where there are needs, and over-concentration of social housing must be avoided. When we receive proposals from local authorities, we will ensure they tick all the boxes under these headings.

Deputy O'Sullivan mentioned the issue of market opportunities, to which I have responded. In response to the point raised by Deputy Hogan, we are dealing with the issue he raised through leasing and other arrangements and the reorienting of the social housing programme towards taking advantage of market opportunities. That is where we are. There is the issue of the extent to which the local authorities' allocations will have to go first to meet contractual commitments already entered into. The leasing model we are rolling out with local authorities has the potential to source a significant quantity of housing for social housing purposes and make a reasonable contribution towards meeting housing needs in 2009 and thereafter.

The issues of increasing unemployment and uncertainty as to incomes for people who have taken out mortgages were raised. It was suggested a grant or an equity arrangement should be introduced for home owners. Such initiatives would depend on the availability of resources which are much more constrained than they have been in recent years. The Government has taken a number of steps to address the problem of mortgage arrears. A mortgage interest supplement is available through the Department of Social and Family Affairs. As expected, the take-up increased over the course of 2008. The Money Advice and Budgeting Service is available to assist those who find themselves facing arrears. The Government has also taken steps to ensure the banks being assisted under the recapitalisation measure adopt appropriate practices in dealing with people who find themselves in arrears with mortgage repayments. Furthermore, the regulator has finalised and put in place a new statutory code of practice in recent weeks which is equally designed to ensure mortgage holders who find themselves in difficulty will be treated in as fair as possible a way by their financial institution.

Deputy Scanlon mentioned that the Part V mechanism worked well in certain areas but not in others. It is open to local authorities to adopt different approaches in that regard. Some of the Dublin authorities have taken a targeted approach and adopted different approaches in different parts of their area, taking account of whether there is already a large concentration of social housing in an area. The Part V mechanism can be tailored to suit individual locations.

Deputy Fitzpatrick referred to the links between planning and housing. Planning is not my forte, but I make the point that the Part V mechanism was a linchpin between planning and housing. It is a mechanism introduced through the planning process to ensure the response to social and affordable housing needs is contributed to through private housing applications. That was a very important linkage between the planning and housing systems. Deputy Fitzpatrick raised issues about regional planning guidelines. That is not my forte, so I will leave his observations to one side.

The issue of flexible and imaginative approaches, which I referred to in my opening statement, was also raised. I cite initiatives such as the leasing mechanism and incremental purchase. These measures respond to the changed environment in which we now find ourselves. The current environment is financially and resources constrained, and the current housing market is very different. There is now value to be had which would not have been there two or three years ago. We are trying, as far as we possibly can within the resource base available to us, to ensure that our approaches to meeting social housing needs are as tailored as possible to today's world.

Some people in the shared ownership scheme now find the payment on the rented 50% of their home is greater than the mortgage repayments on the other 50%. Can anything be done for those people? They cannot get a standard mortgage from a bank because their incomes are not high enough but their arrangement is costing them more than a mortgage on the entire house.

Mr. John McCarthy

The practice in many areas has been for people to refinance with the local authority and to take the remaining equity in the home through a local authority loan rather than through a bank. What Deputy Scanlon describes is absolutely correct and it has been a significant contributor to the decline of the shared ownership scheme, particularly in the past five or six years. In a low interest rate environment, people could have lower monthly outgoings with a standard mortgage than with combined mortgage and rent payments under the shared ownership scheme.

It is important to note that if people are paying interest on the rental element of a shared ownership property, any interest which is beyond market rates comes off the balance they will ultimately purchase. Therefore, there can be a certain amount of investment involved. It is not necessarily all dead money. In many cases where this situation has arisen it has been resolved by people taking loans from their local authority for the balance of the purchase. I do not know if that is possible in all cases. It would depend on the circumstances of individual purchasers. Generally, private banks have been very slow to enter into shared arrangements between the part owned by the local authority and part mortgaged through the banks. Salvation for those people probably lies with a refinancing arrangement with the local authority itself.

Can Mr. McCarthy comment on the 18 months requirement for RAS?

Mr. John McCarthy

In the majority of cases, people applying for rent supplement do so for income related reasons. It was designed to be an income support rather than a housing support. When dealing with applications for the rental accommodation scheme, RAS, as a general guideline we prioritise people who have been in receipt of rent supplement for more than 18 months. They are the people we are most keen to get into local authority accommodation. They are the people who have transitioned from being in need of an income support to being in need of longer term housing support. We use the 18 months as a criterion for identifying such people. If we could transfer sufficient numbers of those who are on rent supplement for more than 18 months into RAS, we could then look at shortening the period. At present however, a significant number of people are on rent supplement for significantly longer than 18 months and have, therefore, a clearly identified long-term housing need. They are the people we are prioritising.

None of these practices are written in stone. Exceptions are made, for example for homeless people who are in receipt of rent supplement. If RAS seems a better option for them they may not have to remain on rent supplement for 18 months for that purpose. It is a question of prioritising those who have the longest established housing need.

The 18-month requirement is causing problems. Some people may take advantage of the scheme but there are also many genuine people who do not qualify for RAS simply because they have not been in receipt of rent supplement for 18 months, although the scheme would suit them down to the ground.

Mr. John McCarthy

Their housing needs can still be assessed by the local authority and if they are sufficiently prioritised on the housing waiting list, other options would be open to them. The rental accommodation scheme is designed for people who have been on rent supplement for long periods of time and have evolved from having an income support to needing a longer term housing support. It is intended to help those people move into social housing operated by the local authority. That is why the 18-month requirement is there as a proxy.

Deputy Chris Andrews wondered if, in the current climate, there is a prospect of affordable home selling. As I mentioned in my opening statement, a significant quantum of affordable homes was sold in 2008 and approximately 1,000 units are in the course of sale. There are still possibilities for sale, particularly in areas where the differential between the market and the affordable price has not been significantly eroded. It would be important for local authorities to move away from very sequential type processes for selling affordable housing. Local authorities say they are finding it difficult to sell affordable houses but they will offer a number of houses to a batch of people and when they do not take up the offer, go to the next group on the list. They should, in the current climate, simply make homes available to people on the affordable housing list and, indeed, to people who might not be on the list but who might be eligible for affordable housing. They should offer the houses for sale and let expressions of interest be made. If the scheme of sales priorities has to come into play afterwards if they are oversubscribed then let it come in at that stage, rather than going through sequential processes which lead to delay. We have been giving this message to local authorities and will be again, in the circular which will issue.

Deputy Andrews also referred to the various options we propose to include in the circular which local authorities could deploy to use available affordable housing. He asked if local authorities could buy those units into stock. In practice, there is nothing to stop a local authority from doing that, except that their allocations are already significantly consumed by their existing commitments. The leasing approach is a more realistic option.

Deputy Bannon mentioned the special housing aid for the elderly and essential repairs grants and their replacement by housing aid for older people. There was significant activity last year under the various housing adaptation grants for older people and for people with a disability, and additional resources were deployed into those schemes towards the end of the year. Between the Department's allocations and matching funds from local authorities, approximately €95 million was spent on the schemes last year, with approximately 12,500 applicants assisted. The schemes have proved very popular in a number of areas. There is a need for local authorities to prioritise and to be mindful of the need for some contingency funding to deal with the type of situation mentioned, where a roof is blown off a house and immediate repairs are required. We said we would review that grants scheme after a year and that review is under way.

There is a problem from county to county. Some local authorities have a very low rates base. For example, counties Leitrim and Longford do not have a great deal of local resources and their local authorities are experiencing discrimination by the Department. City councils derive over 60% of their income from rates and so on but in Longford only 7% of income comes from rates. Such counties do not have matching funding and there is a huge anomaly in the Department's system. Additional grants cannot be drawn down because the local authorities in question do not have the required matching funding; this must be addressed by the Department.

Perhaps we could allow Mr. McCarthy to answer as it is getting rather late. I understand Deputy Bannon's point because he has made it previously on several occasions. I am sure Mr. McCarthy has also heard the point.

Mr. John McCarthy

As I mentioned, the grant scheme is being reviewed and the matching funding requirement is being reduced under the new scheme from 33% to 20% in some cases. This has made the matching funding burden easier for some authorities. I do not believe any authorities were unable to draw down allocations due to matching funding difficulties.

A question was raised about the apparent absence of voluntary housing activity in some midland local authority areas.

In the tabular statement provided it is shown that six local authorities did not avail of the scheme.

Mr. John McCarthy

The Deputy will see that the picture changes between 2007 and 2008. This often occurs due to the stages schemes are at. Schemes start and finish during particular periods and the figures given relate to completions.

The output for 2007 to 2008 is referred to and is similar in each of the six counties mentioned. They are Cavan, Leitrim, Longford, north Tipperary, Roscommon and Westmeath.

Mr. John McCarthy

Very often, in some areas, it will be down to the fact that voluntary bodies are active on housing proposals. I am not sure what the position is in individual counties like Leitrim and Cavan.

Mr. Jim Ganley

Activity is cyclical. For example, north Tipperary, which had quite low figures, has a very high level of activity this year and completions should reach 50, 60 or even more. This all represents a mere snapshot. For example, two weeks ago Leitrim County Council commenced a scheme for 25 new units.

I should make the point that there are two funding schemes. One is for special needs and involves small communities and a wide geographic spread. Such schemes are active in most counties. However, family-type accommodation, which comes under the capital loan and subsidy scheme, is generally associated with urban areas along the east coast and down towards Cork.

Mr. John McCarthy

The issue of returning emigrants was also raised. The Safe Home programme is being supported by the capital assistance scheme under the voluntary housing arrangements and it is specifically aimed at returning emigrants. There is an avenue of support there but there are competing priorities for funding. Returning emigrants are not excluded.

In my part of the country we say these people are being given the "hind teat". From time to time we visit emigrant associations in the US and Britain and this issue is often raised. They feel they are the forgotten Irish. There should be a stand alone programme for these people.

Mr. John McCarthy

No, but in the same way there are not stand alone programmes for old people or people with disabilities. They come under the umbrella of the capital assistance scheme.

Has Mr. McCarthy any statistical information on the number of people accommodated in the past three years?

Mr. John McCarthy

I do not have that information to hand.

Can it be forwarded to the committee?

Mr. John McCarthy

We shall see. I shall not make promises that might come back to haunt me. I will pass on the details that we have to the committee.

I also raised the issue of housing application forms.

Mr. John McCarthy

A similar issue, relating to people updating their details, was raised by another Deputy. We are trying to see that local authorities have as accurate an understanding as possible of needs in their areas. As things stand there is a formal housing needs assessment process every three years. We must move towards real time data on the needs of local authorities at specific points in time. Even if such a process took place every 18 months, updating information is not a huge burden and would ensure that priorities are reflected.

I can give a typical example dealt with in my office this morning relating to an application form that came back from Longford Town Council. The form had been signed by a senior social welfare officer and a Garda sergeant and the individual involved had also presented a passport and driver's licence. In further correspondence, evidence in the form of a gas or electricity bill or a bank statement was sought. I felt this was a case of unnecessary bureaucracy. The person involved had already gone to the lengths outlined in terms of supplying evidence.

Mr. John McCarthy

I honestly cannot comment on that because I do not know the details.

Such situations should be eliminated and a common-sense approach should be taken.

I thank the Deputy.

Mr. John McCarthy

I think I have covered everything. We will come back with further information on the various issues that could not be fully addressed.

One point I raised was overlooked. Do local authorities or the Department determine how the points system applies to people?

Mr. John McCarthy

Generally local authorities have a wide discretion on how they adopt schemes relating to letting priorities. In some cases, time spent on the list can be a significant factor while in other cases whether one is from the area is also relevant.

I thank the delegates for attending today's informative meeting. I am delighted with the information that has been gathered.

The joint committee adjourned at 6 p.m. until 3.30 p.m. on Tuesday, 31 March 2009.
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