When is it proposed that the operations of the agency will commence?
Housing Finance Agency Bill, 1981: Committee and Final Stages.
I would hope that the agency will be able to invite applications for loans in the next five or six weeks and that the first bonds will be issued in about three months time.
On the rate of interest, will it be a fixed or a variable rate? If money is lent to local authorities, what rate will it be lent at to the authority and at what rate will the borrower be able to borrow it from the local authority?
If at any stage in life the borrower went through a difficult patch and could not meet the repayments, what is the provision for such an eventuality?
The purpose of this agency is to attract funds that would be inflation proof as far as the lender of those funds to the agency is concerned. That interest rate will have to be above the inflation rate of the moment. Because the agency must be self-financing, that would be reflected in the interest rates being charged to the borrower. But the borrower is protected from that inflation rate by the fact that he will be paying only a fixed percentage of his income throughout his lifetime. Each individual transaction will be different because of different incomes and the length of time of the loan.
In regard to Senator O'Rourke's point, if a person falls on hard times or loses his job, the period of the loan can be lengthened; it is unique in that respect. The SDA loan does not take any account of that nor do the building societies. With the SDA loan as with a building society loan one is committed to the repayment contracted throughout the lifetime of the loan no matter how one's circumstances change during that 20 or 25 years. Under the agency one is committed to repaying the loan of course but one can reorganise the loan if one falls on hard times; the 18 per cent will apply to the new lower income.
I apologise for not being here earlier to have heard the Minister's speech but I have read it. On that point, the Minister says that the £3,000 mortgage subsidy presently operated would go back to the lending agency to be spread over the operation again. I fear that the full value of it would not be applicable to the applicant again as it would be directly now. Has the Minister a fear that this agency will push the prices of houses through the roof?
The applicant who is entitled to the grant will get the full benefit of it and as it is paid out by the Government, not as a £3,000 grant but over a period of time, it will be credited to the account.
An actual credit.
Yes. There is always some fear that the price of houses will rise as more money becomes available to people to buy them. Until we can get the supply of houses to exceed the demand, as long as there is competition for houses and the money is there to fuel that competition, then the price of houses will move ahead. As long as two people are looking for the one house and they both have money then the price of that house will go very high. But if there are two houses with only one buyer then the price of those houses will come down. We are continually striving to get ourselves into that position where the supply of houses will be greater than the demand. That would be the real brake on the inflation in house price. But as long as demand exceeds supply the tendency will be, unless we continually bring in controls such as the CRV system, for the price to move ahead. We must be continuously on guard against that. Also individuals must be on their guard to ensure that, in their enthusiasm to become house owners, they are not paying more than the house is worth.
Does the Minister not think that he will drive thousands of people towards local authority houses? Would he not agree that this scheme is directed completely towards the more well-off people in our community? What about the man who gets into bad health and has to go on social welfare? Will he have to pay the same 16 or 18 per cent or Whatever the rate is? Does this not leave all sorts of loopholes for a man who is working today getting a reasonably large loan from this authority of £22,000 or £23,000, going on social welfare immediately and staying on it for the next 25 or 30 years and having his mortgage completely taken care of?
I would hope that there would be more discernment used in the issuing of these loans than to give them to somebody like that because no other agency would issue loans to people like that. Contrary to what Senator Kiely is saying, this will not drive thousands of people towards local authority houses. In fact, it might be beneficial in taking people off the local authority housing lists, people who are on them now purely because they cannot put together a deposit to buy their own house. In that regard, it will have the reverse effect. For the same reason it certainly is not geared towards the better-off. In fact, the better-off would have no interest in a scheme like this. It is the people who cannot put together a deposit, or people who are not willing to pay or, indeed, could not afford to pay 43 to 45 per cent of their income every year to a building society who would be attracted to this scheme. The better-off will still go to banks, insurance companies or building societies.
The Minister mentioned the question of supply and demand. On the question of availability of houses, under the present schemes of local authority housing the Department make it very attractive for the tenant to purchase that local authority house. I have always been of the opinion that it would be better if the Department made it more attractive for that tenant to build his own house, having been a tenant for so long. There are at the present time some additional advantages that the local authority tenant has in so far as instead of getting £14,000 he can avail of an £18,000 loan.
There is another scheme, the low-rise mortgage loan. If, instead of actually losing the house to the local authority, the Department encouraged the tenant to build his own house by added incentives, so that when the tenant would be leaving that house it would be the property of the local authority again, that would alleviate some of the great housing problems that there are. The unfortunate thing is that, very often, the local authority house is purchased by the existing tenant thus tying it up for good and all. But if there was an added incentive of financial assistance to construct his own house the tenant could vacate his existing tenancy and make it available for future tenants.
I see the point Senator Burke is making. He is suggesting that when a tenant who has been a tenant-purchaser moves out into a private estate the local authority should step in and buy that house from him at the market rate. Is that correct?
No. At the present time there are very attractive schemes for the tenant to purchase the house. Therefore he stays in that house and it is never available thereafter.
The logic of what Senator Burke is saying is that we should withdraw these special schemes for local authority tenants to purchase local authority houses——
And transfer the money to more attractive individual construction purposes.
I will look at that.
Does the house area change under this Bill? The Minister mentioned something about a ceiling of 1,246 sq. ft. that exists under the SDA scheme. Does that change?
Under the SDA loan scheme repayments can be made on a 6-monthly basis or on a monthly basis. Does that change? If an individual inherits a home and thereby becomes the legal owner of a dwelling which may be in very poor shape, is he deemed to be a first-time purchaser when he applies for one of the new loans under this heading? Has the question concerning the spouse been cleared up? Or does the same regulation as was introduced here recently obtain whereby one must either be married or must get the signature of one's spouse on all the documents being prepared? Does that still obtain or do I take it that this is not necessary under the new scheme? I hope this is so.
In subsection (5) about default it is mentioned that in the event of default the house would go back to the housing agency as landlord. What would be the terms of the tenancy there? Would it be an ordinary local authority tenancy with differential rent and so on?
-Subsection (6) seems to indicate that the agency or authority may use the house for purposes of its own and dispose of it as it thinks fit. Is there any security of tenure for the person in the event of default such as in the case a Senator mentioned, where a person becomes long-term unemployed and cannot afford the repayments?
With regard to second-hand houses and persons who would be at present eligible for the mortgage subsidy scheme which replaced low-rise mortgage, would the same system of judgment of that person's eligibility for low-rise mortgage scheme now be used for the mortgage subsidy? I am referring to that on behalf of people who are living in overcrowded conditions or bad circumstances. Will the same conditions pertain for the suitability of that person for a loan under the housing finance agency as at present pertains under the SDA loan scheme from the county councils?
There is quite a good trend, and an admirable one, where couples start off, perhaps, in a lower-priced house and, to use the fashionable term, through upward social mobility they are able to better themselves. As their circumstances improve they improve their housing. Under this new scheme, for them to sell their house and buy another would not be as attractive and not as realisable as in the earlier SDA loan scheme, whereby after ten or twelve years the repayment amount is not so much and, therefore, they are able to see and cash in and buy again as perhaps their family would grow larger or as their circumstances would get better. Does the Minister think that this scheme will strictly limit persons for their lifetime perhaps to one house regardless of how their circumstances might change.
I will take Senator O'Toole's point first. In regard to the repayment period, that would really be a matter for the agency but I would imagine they will operate a choice of paying six monthly or monthly. This option will be available. It will be a matter for themselves. I answered the point about the square footage. There is no limitation on the square footage of a house but, of course, there is a limitation in the sense that most of the people who will be applying for money through the agency will also be looking for the grant and there is a limitation on the grant. There is a limitation in the sense that most of the people who apply for money through the agency will also be looking for the grant.
Even if a person is building a house?
Yes. The Senator spoke also about a person who inherits a house. The scheme states that they must be first-time purchasers, not first time owners or occupiers. The person who inherits a house will be making his first purchase through the agency and, therefore, he will qualify. As regards the spouse, I was hoping to avoid politics — this is a much gentler place than the other House.
I did not include it as a political ploy. I should like to have it defined.
In my case, she is about 5'7". The inclusion of a spouse's income for the purpose of an SDA loan goes back to last March.
On a point of order, the new regulation——
It is not a point of order but the Senator is entitled to make a contribution.
Prior to this, single persons were eligible to apply for loans.
No, that is the point I am making.
The directive of 27 July——
No, the directive of 6 March.
There is confusion on this.
Prior to the Coalition taking office a single person could apply for a loan and get it.
That was a regulation brought in after June and not in March. That is what I want the Minister to define. Are single people eligible for this?
I thought what Senator O'Toole was referring to was the fact that for the purposes of an SDA loan a wife's and husband's income are combined. They get special treatment inasmuch as they are entitled under this to get loans up to £27,000.
Senator O'Rourke made the point about people who have been accustomed to making a profit through the sale of their house and purchasing a new house. It will not be as attractive for them to do that now because they are not paying debts they owe in the first years of their mortgage and transferring them forward to later years. It is an accumulated debt as far as they are concerned and if they sell their house the profit they make from the purchase time to the selling time would not be as great as if they did not owe this money.
Senator Bruton spoke about subsections (5) and (6). The same situation applies to SDA loans. If somebody defaults on their debt the agency will have the right to repossess the house. The person will have no right of tenure at that stage but would have a right, because of being dispossessed, to apply for local authority housing.
Is the Minister speaking about evictions?
There is no point in introducing that note at this stage. I am not talking about myself or of the Senator as a county councillor or as a Member of this House evicting anybody from a house. The normal practice is that if somebody cannot meet the repayments on his debt, be it a county council loan or bank or insurance company finance, the holder of the papers of that house is entitled under the law to repossess the house. There is no point in trying to throw in an emotional phrase like eviction which is eighteenth century in concept as far as the Irish mentality is concerned.
It was not meant that way. What I meant was that if a person gets into difficulty, which will happen in this case — for example, a person with a big income could become ill and be unable to meet his repayments — is there a guarantee that the agency will put him on the differential rent system and guarantee him his tenancy for life?
They cannot guarantee his tenancy in that sense because he entered into a contract with the agency to repay, in the prescribed manner, funds which he borrowed from them to build a house, nor can the agency stop him selling the house as long as the funds are repaid. There is contractual right on both sides. If a man becomes ill he can go the agency and renegotiate with them the terms under which the loan will be repaid, for example, at the same percentage of a lower income over a greater number of years. If that cannot be done he can be taken on as a tenant of a local authority house but not the same house.
I should like to make a point that Senator O'Rourke made earlier. Every time SDA loans are increased the price of building goes much higher than inflation at the time. The famous £1,000 grant did exactly the same. The Minister, in reply to Senator O'Rourke, said that where there are two houses for sale if there are three, four or five people to buy them, naturally the price will be much higher. Building, for some unknown reason, perhaps for want of money, has eased off. Nobody seems to be buying houses. That is understandable because money is not available. I am afraid that when this money becomes available the price of a house will increase substantially over inflation. In the past 12 months our inflation rate was around 20 per cent. If it was, I guarantee that in the building business there were price increases of at least 25 per cent if not more over the same period. When the money becomes available these prices will go even higher than 25 per cent. It has happened. I do not know what can be done to prevent it from happening. There should be some machinery within the agency to monitor prices.
Each time the SDA loan rose, from 4½ per cent to 7 per cent to 9 per cent, the price of a comparable local authority house that a person might buy rose accordingly. It would rise over the inflation rate at the time. People will get the idea that because there is so much money available to a borrower the price of the house will go up. We will be in a situation where the price of a house will be above the £22,000 envisaged as the loan.
I share the concern of everybody about the prices of houses and how quickly they reflect other cost increases. The prices of houses over the last seven or eight years have increased somewhat over the rate of inflation but not to a great degree. There is a certificate of reasonable value administered by my Department. This will be strictly administered to try to prevent what Senator O'Rourke and Senator Reynolds are saying, that when more money is made available it drives up the prices of houses. I suppose we will never have a perfect world where that will not happen. I will instruct the agency and sharpen up the CRV section of my Department to ensure that this does not happen. The rules will not be relaxed in any way when the agency starts to work.
In the case of a certificate of reasonable value being available for a new house, if the loan is used for the purchase of a secondhand house will there be some corresponding certificate of reasonable value and will the certificate of exemption still be available for a person who builds his own house?
Yes, for the exemption. One could not give a certificate of reasonable value for a secondhand house. The Senator will appreciate that. I hope to have somebody on the board of the agency who will have knowledge of the value of secondhand houses and will be able to give guidance in that regard. The agency will have to get a valuation on second-hand houses as is done normally for lending purposes. Locally the operators of the SDA office will know whether a house is value for money or not.
As regards the money for co-operative housing, in some county councils there is a scheme where the cost of the site of the house under the co-operative scheme can be added to the SDA loan. Does the Minister envisage that the same scheme will operate for co-operative housing under the new agency?
That scheme has finished.
No, January 1980.
Where they had the scheme or are continuing with it, will the Minister allow that?
It is nearly two years ago.
In my county there were already schemes entered into and they allowed them to run. Would the Minister not see that the same scheme should operate for co-operative housing? The cost of the sites was added on to the SDA loans. Could this be done with the new housing agency?
They are getting a much bigger loan than before.
I know they are.
The Senator is looking for something on top of that again?
It was a facility for them.
I would like to help cooperatives and encourage them. That is one of the reasons why the increased loan is available to them. About 80 per cent of their members have incomes under £9,000 a year. However I should not like to move them ahead of people in local authority housing. The attractions of the scheme should be equal for both categories.
Will the housing finance agencies be part of the public capital programme?
No, public sector borrowing.
Does the Minister envisage that there would be an upper limit to the total amount available for borrowing under this agency?
Yes. It is written in at £200 million at present. The agency will also be getting in money as people start repaying mortgages. If, for example, £25 million is borrowed next year, then it may take up to eight years to reach £200 million. During those eight years the agency will be getting money back as people start to repay their loans. So, in fact, they would not reach the £200 million. If in 15 or 20 years time, because of the depreciation of money, £200 million was thought not to be sufficient by the Minister of the day then he can go back to the Oireachtas and have it raised to £300 million, £500 million or whatever figure would be appropriate at that time.
I am unhappy with subsection (1). I accept the principle, which is the general practice, that directors of State agencies should not be Members of either House of the Oireachtas or of the European Assembly. I know this cannot be changed now but perhaps it could be in the future. When a director becomes a candidate he is disqualified from being a director. This is undesirable. There are people on boards of directors of State companies who would have a great deal of expertise to offer if elected to either House. They will be discouraged from attempting to become candidates by virtue of this. If people decide that a person is worthy of being a Member of either House, then of course that person obviously must cease to be a director but should be given the chance of being a candidate.
Can members of local authorities be directors of the agency?
I agree with Senator Manning. As regards people working in the agency, I do not know why it is suggested that politicians are not fit to work in it or in any other body. If the issue is that they are not capable of holding down two jobs, let that be the condition that is written into the law. It is relevant in the Seanad where people are selected for their vocational interests. People from a housing agency or youth employment agency would have invaluable contribution to make in the House.
I do not agree with the last two speakers. I should like to congratulate the Minister for inserting this clause.
I intend to disagree with it.
The Senator without interruption.
This clause is a very good one. It should be inserted into legislation dealing with all State boards and agencies. Members of the Houses could make very fine contributions but, on the other hand, would give a party political input.
I agree with everybody who says that if one is a Member of either House one should not be on a board of directors. I cannot understand why when one is nominated to be a Member of the Seanad one should automatically cease to be a member of a board. The snag is that this is standard and one would have to go to every parish priest in the country and every Government Minister to get it changed. It cannot be done in some legislation but must be changed right across the board. I quite agree that mere nomination to the Dáil or Seanad should not debar one from being a member of a board.
I should like——
The Senator's question would rightly arise under section 2, the formation and registration of the Agency.
How many people will be on this board?
The articles of association state between three and nine. I see them as being representative of the public and private sectors. We have not decided fully on it yet.
I hope that some representative of local authorities will be on this board. I also feel strongly that there should be female representation because housing is particularly a woman's domain.
That does not arise on this section.
The Minister made reference to the way people would be paid. People should be paid about four times. Local authorities, building societies and everyone in the building industry would agree that there are very long delays in payment. The board should do something to expedite payment.
It does not arise under this section.
I take the point but did not want to miss an opportunity to make the comment.