Seanad Éireann debate -
Wednesday, 25 Feb 1998

Vol. 154 No. 9

House Prices: Motion.

Mr. J. Doyle

I move:

That Seanad Éireann deplores the failure of the Government to produce a housing strategy capable of addressing the problems of first-time house buyers, deplores the lack of investment in public sector housing and calls upon the Government to implement as a matter of urgency the Fine Gael proposal to exempt first-time buyers of second hand houses from stamp duty.

This is a timely motion in view of the increase in house prices. A recent survey carried out by the Irish Auctioneers and Valuers Institute revealed that house prices had risen by 50 per cent in the last three years and will increase by over 12 per cent in 1998. Prices have soared to an all time high and have increased by 26 per cent in the past 12 months, with prices for houses and apartments in Dublin outstripping the rest of the country.

Demand is fuelled by potential house buyers being compelled to buy now because they are worried they will be unable to own their own house if they postpone purchasing. Increases in take home pay following the budget and falling mortgage interest rates have led to recent substantial house price increases. Already the average price of a modest, second hand artisan dwelling in the capital is over £100,000. In the past year prices rose higher than anybody could have forecast, confounding the experts. At public auctions houses have often been sold for twice the guide price.

The nature of the boom is underlined by the fact that it is not simply confined to Dublin. House prices have also risen in Cork, Galway and Limerick. The price of second hand houses grew by over 25 per cent between 1994 and 1996. A colleague told me a few days ago that in a village outside Dublin a two-bedroomed house on the main street was sold at auction for £250,000. That gives the House an indication of the enormous increase in house prices.

Increased take home pay, falling interest rates and the unparallelled willingness of financial institutions to give loan approvals are not the only causes for house price increases. The extremely favourable demographic trend must also be taken into account. The age group of 24 to 39 years is the crucial house buying age group and, by virtue of our high birth rate in the early 1970s, people in this age group are flooding the residential property market today. A recent survey carried out by the Society of Chartered Surveyors indicates that demand for housing in Dublin will outstrip supply well into the millennium. This will increase pressure for more zoning of lands and will force up the prices of houses in the suburbs.

When the Minister of State addressed the House on social housing recently, he said he was aware of the significant shortage of affordable housing and, having regard to the trend in house prices as a consequence, he would appoint consultants to undertake a study of the factors underlying that trend. The study would involve an analysis of the main factors influencing increases in house prices since 1994, with particular emphasis on the Dublin region. This study is a waste of money. We are already aware of the cause of increased house prices — demand outstrips supply. As a result, modest houses are sold at exorbitant prices. That trend gives young couples no chance of buying their own homes.

Another factor generating the current level of house prices is the shortage of zoned serviced land in Dublin. Many of my fellow councillors have been severely criticised for going against the advice of planners and rezoning land where services were not available. They were right to zone lands for housing and there is a grave responsibility on Government to provide the necessary finances to service zoned land. It is not a shortage of land but a shortage of serviced land which is causing the escalation in house prices and the provision of serviced land should be one of the Government's priorities. A fund has been initiated to assist local authorities to increase the supply of serviced land but, in the current situation, that funding is inadequate. The construction industry, too, has identified the lack of suitable serviced land for development as a contributing factor to the escalation in house prices. There is a grave responsibility on Government to provide more serviced land as a matter of urgency.

Another factor which has not helped housing supply is the punitive rate of stamp duty on second hand houses. It acts as a disincentive to vendors trading up. In an attempt to ease the burden on first time buyers of second hand houses, my party has proposed the abolition of stamp duty for the first £100,000 spent on such houses. This concession would save cash strapped first time buyers up to £6,000 on the purchase of their homes. At present, stamp duty is a massive disincentive to the purchase of a second hand house and is driving young people to live further from urban centres and, probably, their place of work. The removal of stamp duty on second hand houses will stimulate the second hand market and relieve the current enormous demand on new houses.

The Minister should also consider implementing effective measures to encourage the rental of houses. At present, families are unwilling to rent houses because a landlord can ask them to leave at one month's notice.

These are some of the issues the Government should address to ease the problems of first time buyers and make housing slightly more affordable for young people. However, I recently became aware of another practice which affects houses being built outside Dublin and which the Minister of State should ask builders to explain. In some estates houses are built in phases and there can be a price differential of £20,000 between, say, the first and third phase. Building costs could not have increased by that amount and the cost of land would have been included in the first assessment. This price hiking does not happen in Dublin. The Minister of State should address it.

In addition to the lack of affordable houses there is a short supply of social housing. My local authority, Dublin Corporation, carried out an assessment of housing needs in 1996. It revealed that there were 3,000 people on the housing list, 300 senior citizens, 143 homeless families and 500 homeless single persons. Taken with the 900 applicants in private rented accommodation supported by the Eastern Health Board, it produced a total of approximately 5,000 people on the housing list. After 1 November 1997 the corporation revised upwards the number of applicants on the list and there are now more than 6,000 applicants on the housing and transfer list.

This increase has been fuelled by the phenomenal growth in house prices in recent times. A number of young people on modest incomes bought houses in Dublin over the past number of years. However, young people today are unable to do so and find themselves on local authority housing lists. I am sure the same trend has occurred throughout the country. For example, 60 to 70 points are required to obtain a modest one bedroom flat in Dublin. Dublin Corporation also finds itself in difficulty in that when it will provide the 700 extra units in the house building programme over the next number of years it will have run out of building land and will then be unable to provide further housing. Our only hope will be with the Dublin Docklands Authority.

We pride ourselves on being a nation of owner occupiers but, unfortunately, this has become something of a myth. While we enjoy the benefits of the Celtic tiger economy there are disadvantages. We appear to be developing a compensation culture and our roads are more clogged with cars. Above all, the huge increases in property prices means that average house prices cost £50,000 more than the person on an average wage can normally borrow. There is an obligation on the Government to provide a mechanism to ensure that the price of new houses will remain within the reach of young married couples. I commend the motion to the House.

Mr. O'Dowd

Cuirím fáilte roimh an Aire go dtí an Teach arís agus tá súil agam go mbeidh díospóireacht maith againn. I second the motion. This is an important resolution. There is nothing more basic than the provision of decent accommodation for oneself and one's family. There are two categories involved — those who can buy their own homes and those who must rely on the State to provide them. I am concerned at the outset with those who are trying to have a family, build their lives and make the best of what they have.

Speculation in the market is one of the reasons why prices have increased so much. The value of building land is rocketing. It is out of control in County Louth, County Dublin and elsewhere and is putting the capacity of people to buy or build their own homes beyond their reach.

The Government must be seen to act on this matter. Land banks which are under the remit of local authorities should be made available at a reduced price to those who wish to build their own homes. Couples with under a certain income should qualify for a site from a serviced land bank at a knock down price equivalent to or less than what the local authority paid for it. This would assist them in building their homes.

The question of rezoning applies to councillors and local authorities who are working on development plans. While it is desirable to continue to rezone areas where there will be a need for future development, there should be no windfall gain to the owners. We should either tax them or fix the price at which the land can or will be sold to the unfortunate person who wants to build a home.

As a society we have values and aspirations. We should do everything to assist young people to buy or build their own homes. Some years ago builders were encouraged to build what were known as starter homes. The shell of the house was constructed and the occupier was expected to finish the job. However, a radical approach is now required. Couples face the reality that if they buy their own home both of them will work for most of their lives. That is not something which every couple wishes and it is not desirable that it should be a necessity.

Because of the current levels of interest rates, it has never been cheaper to borrow. However, ten years ago, interest rates were twice their present levels. People are borrowing more today because of the increases in house prices. When interest rates increase, as will inevitably be the case over the period of any mortgage, couples who have borrowed to the hilt will be crucified. This is will arise in three or four years.

I recently heard it proposed on national radio that the housing density limit in built up areas should be increased from eight to ten houses to the acre to ten to 12 houses. While I cannot speak for Dublin city, this would be a retrograde step. If smaller houses in greater numbers are built, whether private or public, the amenity values of the area will be decreased and will reduce the potential quality of life to which the occupiers of such houses are entitled. We should adhere to current regulations on the number of houses per acre that can be built. Indeed, we should keep the density as low as possible to enable occupiers fully enjoy their amenities.

Every county councillor and Senator is active in the area of public housing. We can never build enough houses. A continuous building programme is required. Following the birth of their first child, young families in Drogheda wait at least three years before they get a local authority house. In the meantime their community welfare officer will assist them with the rent of their accommodation. The amount of money spent on rental subsidy in the past two years in Counties Louth, Meath, Cavan and Monaghan has increased from £2.2 million to £3.3 million.

I understand — the Minister of State can correct me — that approximately £60 million per annum is spent on subsidising rents nationally. Large sums are spent on subsidising people on the housing list when more could be invested in the building of houses. More houses built will mean less spent on rented accommodation resulting in a better quality of life for those involved. Some of the rented accommodation in County Louth is disgraceful. It is rat infested, damp and wet and the children are often ill. We must look at the social problems created by longer local authority waiting lists.

Many elderly people wish to move out of three bedroomed local authority housing into purpose built OPDs. Others wish to release the equity of their private homes so they can purchase smaller flats or apartments. All citizens over the age of 65 who wish to sell their homes to provide funds for their retirement or because of ill-health should receive tax relief and be exempt from stamp duty.

I commend the motion to the House.

Mr. Walsh

I move amendment No. 1:

To delete all the words after "That" and substitute the following:

"Seanad Éireann, conscious of the impact of the recent increases in house prices on first time house purchasers, welcomes:

— the commissioning by the Minister for Housing and Urban Renewal of a study into the factors underlying the recent house price increases particularly in the Dublin area and likely future developments;

— the measures taken by the Government in advance of the results of the study, including the special £15 million fund to assist local authorities service additional land for housebuilding, and the improvements to the terms of the social housing measures announced by the Minister in November last; and

— the Government's commitment to a continuing house construction programme by local authorities and voluntary groups and the increased financial provision for these programmes in 1998."

Aontaím leis an Seandóir agus cuirim fáilte roimh an Aire. The Fine Gael Party's motion is disingenuous and opportunistic. I will make specific criticisms and refer to its flaws later. Members have a shared concern about the impact of recent increases in house prices, particularly on first time purchasers. I am sure our concerns are shared by the Government. It is correct that an issue such as the impact of rising house prices is fully teased out and debated. It is also necessary that appropriate action is taken. However, it is important to choose our words and proposed solutions carefully. Ill-judged statements, arising from understandable concerns, have the capacity to exacerbate rather than help the situation. Members of the House and other public representatives should not indulge in knee jerk reactions or proposed remedies which display a lack of understanding or analysis of the real position.

I welcome the Minister of State at the Department of the Environment and Local Government, Deputy Molloy, who has responsibility for housing and urban renewal, to the House. Members should acknowledge that this is the third occasion on which he has addressed housing matters in the Seanad since his appointment. The Action Programme for the Millennium emphasises the Government's commitment to the deeply held ideal of many people, home ownership. We can be proud that Ireland is one of the leading nations in terms of home ownership. We must strive to preserve and improve this record. Nobody wishes the aspiration of home ownership to be threatened by rising house prices.

The Minister of State has arranged for the carrying out of a major consultancy project to examine the factors giving rise to recent house price increases and assess the likely future developments. It is on this type of planned approach that we are more likely to base the foundations upon which proper remedial decisions can be taken. We are aware of many of the factors underlying the significant increase in house prices. The economy is performing extremely well and there is increased demand for accommodation. There is a large increase in employment and in incomes. Interest rates are low and further reductions are predicted. In addition, mortgage finance is readily available. The supply side is responding well to increased demand. New records for house completions have been set in each of the past three years. I look forward to the Minister of State's comments on this issue.

The Fine Gael Party motion is opportunistic and lacks credibility, particularly in light of that party's record on stamp duty on housing. The previous Government's action in increasing stamp duty from 6 per cent to 9 per cent on many houses flies in the face of what that party is now proposing. Political credibility is involved in this issue. If parties and politicians say one thing in Government and the contrary in Opposition, it fuels the public's disenchantment and lack of respect for the integrity of politics in general. This does not help the democratic process.

The removal of stamp duty is much more likely to benefit vendors than purchasers. In the past, when housing grants were available, there was a perception that they allowed builders to increase prices. As a result successive Governments have rolled back from trying to assist first time house purchasers through grant aid. When in Government the Fine Gael Party introduced the seaside resort scheme. My perception is that, as a result, house prices in general escaled to unrealistic levels. Houses with less than 1,000 square feet, which probably cost approximately £40,000 to build, are sold for £90,000 or £100,000 giving developers more than 100 per cent profit. It is an inflationary scheme which has added to the escalating price of houses.

I have sympathy with the need to address the requirements of first time purchasers and I accept part of the principle behind the motion. I am sure the Minister of State and Government will also take it on board. Interest rates are particularly low at present and, as a previous speaker said, if there are difficulties regarding the implementation of EMU, they could have an adverse effect on the rates. Economists and commentators predict that there will be a continual stabilisation and probable reduction in interest rates. However, if they go in the opposite direction, it will be extremely painful for many people.

One of the issues which could be considered is the reintroduction of full mortgage relief for first time purchasers at their marginal rate of tax rather than at the standard rate. It is incongruous that there are schemes which involve tax breaks for investors who acquire and rent out section 23 and section 26 properties. These schemes have been successful in ensuring the provision of good private rented accommodation, but it is inequitable that the same position in terms of tax allowances at marginal rates are not afforded to first time purchasers in particular. People who have houses often have a capital profit with which to buy their next investment. However, first time buyers will find it increasingly difficult to purchase a house and this aspect should be examined.

The role of housing co-operatives should be considered. It is interesting that people who were highly critical of the rezoning of land in the past are now of the view that the failure to rezone more land is contributing to the escalation of house prices. A more pro-active role for local authorities in the provision of private serviced sites would be a beneficial initiative in terms of assisting the system. Perhaps our traditional outlook on the length of mortgages, from ten to 25 years, should change. For example, in the United States people take out mortages over much longer periods of time and often look to the next generation to complete them. Perhaps this idea could be investigated.

The Government's initiatives so far in the housing area have been productive and positive. There is a 19 per cent increase in expenditure on local authority housing this year and a significant increase in capital funding for water and sewerage schemes. These will assist the sector and I urge the Minister of State to continue these types of initiatives. I look forward to the publication of the report and a debate on it in the House when substantive suggestions based on proper research can be made.

Miss Quill

I second the amendment. Although there is nothing of merit in the motion, I welcome it in so far as it provides another opportunity for the Seanad to discuss housing. It is interesting that this is the third debate on this subject in less than three months. There was no significant debate on this area during the past three years in the other House.

Housing is a huge issue which must be confronted in a well planned and systematic way. I am very encouraged by the attitude and approach of the Government since coming into office. The Minister was right to commission a study in order that future policy initiatives and directions can be based on the best available research and projections. This is the way in which to proceed. I have seen many half-cocked ideas from political parties on the issue of housing since I joined a local authority in 1979. For example, the £5,000 grant given to those who handed back their local authority house and moved into the private sector had disastrous consequences on communities in Cork. It was a matter of flying by the seat of one's pants. As with the motion before the House tonight, it was not examined in terms of its implications.

I congratulate the Minister on the number of initiatives taken by him since his appointment. I look forward to the report he commissioned. Decisions made in future will at least be based on the best available information. I welcome the significant increase of 18.9 per cent on monies allocated for housing in 1998 over 1997. In advance of the findings of the study it is a very good idea to provide £15 million specifically for the provision of serviced land. The provision of additional resources for An Bord Pleanála and planning was long overdue. Delays in planning resulted in delays in house building and consequently pushed up costs.

These are among the measures I welcome and which confirm that the Government is taking the issue of housing very seriously, as it ought to. Like every other citizen, I am very concerned about the direction in which house prices are going. I do not have the solution to the problem — if I did I would not be here. We are in a free market economy and we can only do so much. I am very concerned that young people are committing more of their income to servicing mortgages than they can carry through over a prolonged period. I wonder who will suffer? Many young people may be leaving hostages to fortune. I do not know if we have the culture to enable us spread a mortgage over two generations, given the mobility of young workers. I know many young graduates with high earning power who wish to go abroad for a number of years. Therefore, while spreading a mortgage over two generations may be an option, I do not see it as a measure to relieve the problems young people are taking upon themselves. I ask young people to ensure the commitments they take on do not place too great a burden on them or their children or make it impossible for them to afford to have children. That would be a horrible scenario because a house is a home. Young people must think through the implications of their decisions.

There is great merit in the shared ownership scheme as administered by local authorities. It enables low income families to own their own houses after a given period. I would like the Minister to examine the possibility of further extending the scheme and providing more resources for it. It is a guaranteed way in which families on low incomes can own their own houses without inflicting too many wounds on their family budgets.

A feature of Irish life is the desertion of cities as places in which to live. There is a huge amount of vacant space over shops in city centres. One sees lights in every window of first and second floor rooms over shops when travelling at night through Paris and most other European cities because people are living there. I do not know why we scurry out of shops at 5.30 p.m. and leave the remainder of the building vacant for the rest of the day. There is great potential in the enormous amount of empty space over shops. We could tap into it if we designed schemes based, for example, on proper security, as living in a city centre without proper security is not an attractive option.

There must be many single people such as myself who would be delighted to live in the city centre. It would enable us walk to the library, have coffee and do all the things people like to do when retired. It would also mean living in much less space, but units would have to be properly designed and secured. I would like this issue to be investigated by the Minister. In Cork there are one or two pilot schemes which are working exceptionally well. These schemes should be evaluated to see how they could be extended. City centre living is becoming fashionable. Twenty years ago everybody rushed headlong to the suburbs, using up valuable land and funds in servicing land.

I am pleased that local authorities — at least the one of which I am a member — are buying all sorts of vacant sites in order to build in-fill housing schemes. Local authorities must accelerate the pace at which they buy vacant houses, renovate them and make them available to those looking for housing.

I am very concerned by the manner in which the rental subsidy scheme administered by the health boards is working. It is a terribly costly scheme and I am certain it is not yielding good value for public money. Senator O'Dowd pointed out that £60 million has been spent on it, which is dead money. The housing stock would be added to if it were used to buy houses. However, we are adding nothing to the public housing stock by spending this money. A further concern is the lack of a proper inspectorate or anybody to oversee the quality or value of the scheme. I ask the Minister to evaluate the scheme and to examine whether the money could give a better return in the context of people earnestly seeking ways and means of addressing the needs of those looking for public housing.

I commend the Minister on his work. There is great scope for doing more. I am uncertain about the answer to the problem of escalating prices — perhaps it will be taken care of by the market.

Minister of State at the Department of the Environment (Mr. Molloy)

Ar bhealach amháin cuireann se ionadh orm go bhfuil mé anseo arís chun cursaí tithíochta a phlé; seo é an tríú uair a bheith anseo i dtrí mhí. Is mó a chuireann díomá orm go bhfuil rún curtha síos ag Fine Gael a chaitheamh anuas are polasaisí an Rialtais ó thaobh tithíochta de. Ag éisteacht leis an oráid on tSeanadóir Doyle a mholann an rún seo are son Phairtí Fhine Gael, tá sé do-chreidthe go mbeidh sí anois ag caitheamh anuas are rudaí a mhol an cheanaire nuair a bhí se ina Thaoiseach, rudaí atá déanta agam ach nach ndearnadh sé féin, cé go ndearnadh sé cinneadh é a dhéanamh ach níor chuir i gcríoch é, ach tá mise ag chur i gcríoch é. Cuireann sé ionadh orm agus caithfidh gurab é an cúis leis an rún seo ní hamháin go bhfuil imní ar a lán daoine faoi praghasanna tithe, ach an rud is mó, is dóigh, gur cúis leis ná go bhfuil fo-toghcháin ar siúl in áiteacha agus gurab é sin an mhothaíocht—

Mrs. Taylor-Quinn

Tá an t-Aire ana ciniciúil.

Mr. Molloy

——na Seanadóirí an rún seo a chuir os chomhair na Tí.

Mrs. Taylor-Quinn

Tuigim thú.

Mr. Molloy

This is the third occasion in as many months that I have addressed the House on major areas of my responsibilities as Minister for Housing and Urban Renewal. We have had very constructive and well informed debates on housing policy and homelessness. On one occasion Deputy Quill put down a motion on housing, but only one Fine Gael Senator spoke on it. There is a renewed interest now because of political events.

Mr. Burke

We were evaluating it.

An Leas-Chathaoirleach

I ask the Minister of State to continue.

Mr. Molloy

Unfortunately, the terms in which the motion before the House is cast do not augur well for the today's debate and show, as I shall demonstrate, an unwelcome degree of opportunism and misinformation.

Mrs. Taylor-Quinn

The cynicism.

Mr. Molloy

The facts will stand for themselves. The motion calls upon the Government to implement, as a matter of urgency, a Fine Gael proposal on stamp duty which was described in one of last Sunday's newspapers as "yet another badly thought out plan in a long running series of blunders inflicted on Irish home hunters". If anyone thinks I am misquoting the article it is here.

Mrs. Taylor-Quinn

The Minister of State does not believe everything he reads in the newspapers.

Mr. Molloy

Another fine mess from Fine Gael.

An Leas-Chathaoirleach

The Minister of State without interruption.

Mr. Molloy

The article went on to say that "Fine Gael's proposal, if implemented, would actually contribute to even more mayhem than usual at the very heated lower end of the second hand residential market". The reference in the motion to the lack of investment in public sector housing is equally wide of the mark as is the suggestion that the Government lacks a strategy to address the problems of first time purchasers.

I and my Government colleagues are acutely conscious that we inherited the difficulties which rising house prices have caused and are causing for first time purchasers from the outgoing Government. It was for this reason more than any other that I commissioned the study into the factors underlying recent increases in house prices, with particular reference to the situation in the Dublin area. I am particularly concerned about the implications for first time buyers, and affordability for house purchasers is among the matters being specifically examined in the study. The results of the study will inform Government decisions in relation to tackling the problems arising from increasing house prices. I anticipate this study will be concluded by the end of March.

Senator Doyle condemned this study, describing it as a waste of money. Yet it was the leader of Senator Doyle's party, while Taoiseach, who said that such a study should be undertaken. This shows the cynicism and opportunism behind this motion because of the by-elections. How can a measure be advocated while in Government yet be condemned when a succeeding Government has the foresight to implement it?

Mr. D. Kiely

That is nothing new.

Mr. Molloy

It is nothing new to me, but it is astonishing because one does not find it happening in the Seanad too often. I do not know where Senator Doyle stands regarding his leader's position——

Mr. J. Doyle

The Minister of State should not worry about that. I will not stab him in the back.

Mrs. Taylor-Quinn

How many party leaders has the Minister of State served under?

Mr. Molloy

It must be embarrassing to draw attention to this.

An Leas-Chathaoirleach

The Minister of State without interruption. Senators will have an opportunity to reply.

Mr. Molloy

It is difficult for those caught in the bind of rising house prices. We should work together for a solution and not play petty politics.

In advance of completion of the study, the Government has taken positive action to increase the supply of housing, most notably through the £15m special provision for servicing land and also by significantly increasing the various limits for the voluntary housing and shared ownership schemes. These initiatives have been referred to already in the debate and Senators will be aware that steps have been taken in this area. The Government has also acted to reduce delays in the planning system through additional staffing resources and new legislation to increase the number of members of An Bord Pleanála. As indicated in the amendment to the motion, the Government is working hard across the range of housing issues. Not only are we committed to a continuing house construction programme by local authorities and voluntary housing groups, but we have significantly boosted investment in this area in 1998. Contrary to the scurrilous terms of this motion, which states "That Seanad Éireann deplores the failure of the Government to produce a housing strategy. . . " the Government acted instantly on coming into office, in sharp contrast to the inactivity of those who went before.

Few topics have generated as much recent discussion and debate as house prices, which is perfectly understandable. Housing is one of the most fundamental human needs and the purchase of a house is by far the most significant financial commitment in most people's lifetimes. That is why I appointed consultants to examine the factors underlying the recent increases in house prices, particularly in the Dublin area. We should be wary about falling for simplistic and ill-considered ideas like the current suggestions to trick about with stamp duty rates, particularly when the party floating these notions was part of a Government that saw fit to suddenly jack up stamp duty rates from 6 per cent to 9 per cent on certain houses last year.

Mrs. Taylor-Quinn

Some houses.

Mr. Molloy

They said at the time that it would help to reduce house prices. Far from doing this, it may, in fact, be contributing to the problem as high stamp duty rates may operate to reduce the number of houses coming on the market and thus mobility in the housing stock. That has been the subject of a number of recent newspaper articles.

Mr. Burke

The Minister of State reads too many newspapers. Those are journalists' views.

Mr. J. Doyle

The Minister of State is speaking for developers.

An Leas-Chathaoirleach

The Minister of State without interruption. Senators will have an opportunity to reply.

Mr. Molloy

Like most Senators, I read with great interest last Sunday reactions to Fine Gael's proposals in this regard. Rarely, if ever, have I seen a proposal to reduce taxes been so comprehensively rubbished by commentators. Stamp duty is, of course, primarily a matter for the Minister for Finance. This, however, does not prevent us from having our own views on the subject and I will personally admit to having some sympathy towards prospective purchasers of second hand houses in relation to the costs which stamp duty impose. However, the Fine Gael proposal is naive and not necessarily the best way forward. It was quite obvious that there was an absence of real consideration when the proposals were being formulated.

Some key questions must be asked of Fine Gael. Is it genuinely concerned about the plight of young house seekers or are we being treated to brazen by-election gimmickry?

Mrs. Taylor-Quinn

What cynicism.

Mr. Molloy

What initiatives did Fine Gael take in Government to halt spiralling house prices? House prices were spiralling when we came into power. Why did Fine Gael increase stamp duty on certain houses and make thousands of houses inaccessible to young buyers as a result? This sort of half baked proposal gives politics a bad name. It smacks of the worst kind of opportunism, but the voters of Limerick East and Dublin North will not be fooled. It is extraordinary that a party which left Government last July should now come up with a proposal which is the exact opposite of what they did in Government. The stamp duty hike was the brainchild of the Labour Party Minister for Finance, Deputy Quinn. We all know how Fine Gael was brainwashed by the parties of the Left when in Government. I hear there are merger talks between Democratic Left and Labour.

Mr. Costello

This is diminished responsibility.

Mr. Molloy

I do not see why Fine Gael should be excluded. It must be galling for long standing Fine Gael supporters to see its policies on lower taxation and enterprise being implemented by the Progressive Democrats in Government. Fine Gael seems to have passed off all its policy cloning at this stage and is trying to corner the market in political stunts. It used to stand for something, but now it stands for election and anything goes.

Mrs. Taylor-Quinn

Will the Minister show us where this is in his speech? Is it on an additional page?

Mr. D. Kiely

The Senator has the edited edition.

Mr. Burke

We did not lose 50 per cent of our seats.

Mrs. Taylor-Quinn

May we have the full script?

Mr. Molloy

Any reasonable person can only form the view that this Government is seeking to confront the problem of rising house prices.

Abolition of stamp duty on second hand houses purchased by first time buyers has been estimated by the Department of Finance to cost somewhere in the region of £40 million. One question immediately springs to mind. If the State were to forgo these funds, would the prospective purchasers benefit or would the vendors? That is a crucial question which Fine Gael ignored in this rushed policy. The proposals are in stark contrast to the little known but well targeted exemption from stamp duty that is available to shared owners, mentioned by Senator Quill, who purchase second hand houses. As this scheme is available to persons of limited means, the exemption helps people who need it most and does not distort the market.

The Government's priority is to promote conditions conducive to an orderly and healthy housing market. The consultants' report will help us in doing that, but it cannot be expected to conjure up magic responses to the complex interplay of market forces that determine house prices. What it should do is bring greater clarity to an issue that has been bedevilled by a deal of misinformation, misguided speculation and sheer hype. The study will help to inform policy and I and the Government will review all available options in the light of its conclusions.

The fundamental demand and supply factors in the market are fairly obvious: the number of people seeking houses; the finance they can raise for that purpose and how much it costs them; the supply of houses and how it is distributed relative to demand. As commentators such as the Central Bank have pointed out, house price increases are a by-product of our recent economic success. However, there are also more intangible forces influencing how the fundamental demand and supply factors interact to determine prices. The perceptions, views, aims and expectations of buyers, builders and lenders have a major bearing on the decisions that are taken in the market-place. I am concerned that these have in recent times been influenced too much by hype. We have all seen headlines about prices going through the roof. The message being given is that one had better get in now or be faced with much higher prices in a year or even six months time. While prices have risen steeply — at some locations particularly so — the last thing we need is the promotion of panic buying.

Another example of harmful hype is doomsday prophecy about scarcity in the supply of houses and building land. House buyers are being encouraged to believe that if they do not buy now, at whatever cost, they may lose the chance of ever owning their own home. The fact is that housing supply is responding well to demand. We have set new records of housing output in each of the past three years in succession. Last year 38,842 new dwellings were completed. This represents an increase of over 80 per cent in output since 1993. Another record level of output is in prospect for 1998 and the medium term supply outlook is, therefore, positive.

As regards land for housing, the Government has not waited for the consultants' report. We gave a commitment in An Action Programme for the Millennium to developing serviced sites to accelerate the supply of new houses to meet rising demands. I wrote that into the Government programme. To give effect to this commitment and address concerns about the availability of suitably zoned serviced land, a special fund has been established to assist in the provision of water and sewerage services to open up land for residential development. The 1998 public capital programme contains a sum of £5 million as the first tranche of a £15 million fund which will be available over the three year period commencing in 1998.

My Department wrote to local authorities on 11 December 1997 asking them to nominate, by the end of January this year, proposals already with the Department or to submit new proposals for water and sewerage schemes to be partfinanced under the initiative. I am pleased that a significant number of proposals have been received and are currently being evaluated in my Department. We expect to be in a position to make an announcement approving proposed schemes under the initiative within the next few weeks.

Mrs. Taylor-Quinn

Before by-election day.

Mr. Molloy

Schemes will be approved at a rate of 40 per cent of the cost approved by my Department with the balance being provided by local authority contributions, ultimately funded through development levies. When these contributions are taken into account, a total of £37.5 million will be provided for the delivery of water and sewerage services under the initiative. In all, this should provide about 37,500 additional sites over and above serviced land already available or in the pipeline.

As well as the funding provided under this initiative specifically for the purposes of opening up land for residential development, a further £172 million in capital funding has been provided under my Department's water and sewerage services investment programme for 1998. This funding will continue the ongoing programme of works to increase water and waste water treatment capacity and extend and upgrade water distribution and waste water collection systems. Work is underway this year on major waste water treatment works in locations such as Dundalk, Drogheda and Wexford. The Dublin Bay project will commence this year and Galway, Cork and Limerick waste water treatment works are due to be completed by the end of 2,000. Major water schemes are also underway in Dublin and water conservation schemes costing £50 million are underway or due to start in 1998 in 14 locations, including all the major urban areas. In total, it is estimated that about £885 million will be spent over the 1994 to 1999 period on water and waste water services. The provision of the funding and the expansion of the investment programme year on year is providing the water and waste water capacity and services to facilitate, among other things, the construction of additional housing.

We are also working to maximise the use of existing brownfield sites as part of the alternative to unsustainable concreting of green fields. For example, the Dublin docklands are projected to accommodate an additional 25,000 population. We will be exploring how more people can be given the option of living in quality surroundings closer to the centres they want to access for work and leisure instead of being forced into expensive and unsustainable commuting.

A further example of misleading information is the suggestion that prices are about to be driven to new heights by plummeting interest rates. We have had very low mortgage rates, on a sustained basis, for several years. As regards fixed rate mortgage loans, which now represent 70 per cent of all mortgages taken out, we have already largely converged with Europe. The mortgage rate for a ten year fixed interest loan in Germany is only fractionally below what is now available here.

I am concerned also that lending agencies should adhere to prudent lending practices and that they should not succumb to the temptation, in the current highly competitive climate, of departing from their own stated polices or adopting an over aggressive approach to lending, particularly for investment in housing. There are some indications that high demand for housing as an investment is contributing to price increases and making things more difficult for first time buyers. Encouraging persons to borrow to buy additional houses can only serve to add further heat to the market as well as the risk that some individuals, blinded by the hope of future appreciation in value, may find themselves over-stretched.

I regret to say that misinformation is not confined to house prices. The motion before the House seems to have overlooked the significant increase in funding for social housing in 1998. The facts do not support the contention that there is a lack of investment in public sector housing. Investment in the local authority housing programme is at its highest level for years. A sum of £214 million has been provided for the local authority housing programme this year — an increase of £34 million or 18.9 per cent on the estimated expenditure for 1997 and an increase of 22.5 per cent on the 1993 provision. The provision will enable local authorities to meet commitments on their ongoing programmes and to fund a programme of 3,900 new starts or acquisitions in 1998. The capital provision for the current year is a clear indication of the Government's commitment to local authority housing as the mainstay of the overall response to social housing needs. All local authorities were notified of their housing programmes for 1998 on the 5 January — some six weeks earlier than last year. Local authorities are, therefore, better positioned to prepare and progress their 1998 housing schemes. My Department will be monitoring progress throughout the year. If satisfactory progress is not being achieved in any areas, I will be making adjustments to ensure that the full programme is started in 1998.

It must be remembered that the local authority housing programme of the 1990s is fundamentally different in character to that of previous decades. A key policy consideration is to provide housing in a manner which does not contribute to or reinforce social segregation. Local authorities are now providing housing in small, well designed schemes often on infill sites and without recourse, as in the past, to large estates on greenfield sites at the edges of our cities and towns. This approach can be crucial in redeveloping rundown areas of our towns and cities and providing a quality environment for residents, especially older or disabled people, in close proximity to shops, churches and other services.

The local authority housing programme also provides the means to provide housing in rural areas, either in small schemes or on a once off basis where individual circumstances so require to meet the needs of these areas. This can be a significant factor in maintaining small rural communities and ensuring the viability of local shops, schools etc. The local authority housing programme is well placed to continue to meet people's need for housing, for good living conditions and to contribute to the improvement of the physical environment of urban and rural areas.

At the same time as the expanded local authority housing programme, the range of social housing measures has been greatly developed and expanded to meet a variety of housing needs and to increase the options available to those who cannot afford to house themselves from their own resources. In November last, I announced improvements to the various social housing schemes to help shared owners and other low income house buyers and to enable voluntary housing bodies to meet increased tender prices. These improvements were strongly welcomed. I believe they will revitalise voluntary housing activities on behalf of people with special housing needs and low income households. I am also pleased to say that preliminary indications suggest that activity under the shared ownership scheme has increased since last November. I will be monitoring progress under the social housing options on an ongoing basis.

The local authority programme together with output from the complementary social housing measures, including voluntary housing schemes, shared ownership and vacancies occurring in the existing local authority housing stock will enable some 10,000 households in need to be catered for in 1998.

A recent development has been the use of the local authority housing programme as a mechanism to regenerate existing housing in major urban areas. The redevelopment of areas of older housing, mainly flats, experiencing social problems and physical decline, sometimes associated with the nature of the housing itself, is underway in a number of areas. The most prominent example is Ballymun where the redevelopment of the housing is the focus for the social and economic regeneration of the area as a whole. Another example is that of Rahoon in Galway where Galway Corporation is working in tandem with a private developer to replace the flats with standard housing with the aim of eliminating long standing social difficulties. These area based regeneration initiatives are making good use of available capital funding to restore the physical fabric of established areas and support local communities.

The 1998 provision for local authority housing includes £20 million to get the redevelopment of Ballymun underway. This is tangible and real evidence of this Government's commitment to improving the housing and economic prospects of an area of Dublin that has regrettably been neglected over the years. I think it relevant to point out that, while the decision to redevelop Ballymun was made by the previous Government, they provided no funding for this purpose. Like many of the announcements of the last Government, they never provided the wherewithal to ensure these measures could be implemented.

Mrs. Taylor-Quinn

A fundamental policy commitment was made by the last Government.

Mr. Molloy

New housing to replace the existing flat complexes will be the key element in an integrated strategic plan for the social and economic regeneration of Ballymun as a whole. The redevelopment project will transform Ballymun into a vibrant new town capable of contributing to and benefiting from our current economic and social progress. The aim of the plan is to establish Ballymun as a town which caters for all local needs, attracts public and private investment, provides employment and embodies a better mix of housing in a rejuvenated physical environment. A new company, Ballymun Regeneration Ltd. , has been set up by Dublin Corporation and is currently overseeing the preparation of the strategic plan in consultation with the local community who are represented on the board of the company and who will be involved at all stages in the implementation of the plan.

It is important to appreciate that investment in existing local authority estates is not confined only to special projects such as Ballymun. I wish to reiterate the importance that the Government places on the general improvement of standards in the existing stock of some 100,000 local authority dwellings throughout the country.

We are determined to maintain maximum progress under the remedial works programme which continues to provide practical assistance to local authorities to improve the standard of inadequate housing and assists in the rehabilitation of rundown estates. The programme enables authorities to carry out major essential improvement works to designated estates. Over 9,500 dwellings have refurbished to date and £173m has been paid to authorities by my Department. The 1998 provision for the programme is over £19m and allocations will be notified to authorities shortly. Under the special bathroom programme, £16.5m has been allocated to local authorities that provide bathrooms, toilets or showers in any of their rented dwellings lacking these basic and necessary facilities.

In addition to these funds provided by my Department the authorities themselves are spending some £100m annually on the management and maintenance of their dwellings and have full discretion on how they spend this money in the upkeep of their housing stock.

In conclusion, therefore, the motion before this House is ill founded in facts and ill conceived in its proposals.

I commend the amendment to the House.

Mrs. Taylor-Quinn

It is wonderful to hear the current Minister of State in the Department of the Environment and Local Government give such a great dissertation to the House, particularly when one remembers he was the Minister for Local Government in 1977. It is amazing a man with such great experience has to undertake a study to find out why houses are so expensive. It is incredible that a former Minister for Local Government, with in excess of 30 years experience, needs a study to establish the basic facts why houses are so expensive, particularly in the larger towns.

Mr. Walsh

It is all due to stamp duty.

Mrs. Taylor-Quinn

The Minister has obviously just come from Limerick and is under pressure due to the by-election. He seems preoccupied with by-elections. This motion is about a national issue, of no interest to any one constituency more than another. It is despicable and unfair of the Minister to bring petty politics into this debate. His tactics this evening resembled those of the Deputy Bobby Molloy we knew as a Fianna Fáil Minister for Local Government in 1977. His contribution was that of a good old time Fianna Fáil politician. We thought that once he made his wonderful move to the Progressive Democrats that his thinking had changed dramatically and had become open and progressive. He has, unfortunately, lost the run of himself again and now that he has fallen into the embrace of Deputy Bertie Ahern and company he is reverting to his old style of political thinking. He is well supported this evening by his Fianna Fáil colleagues. They may be anxious to bring him back into the fold. His speech showed all the signs of a desire to move in that direction.

Deputy Molloy is obviously greatly influenced by the Minister for the Environment and Local Government, Deputy Dempsey. I am disappointed that the Minister chose to give a dissertation on his Department's developments in local authority housing and the provision of water and sewerage facilities. He has merely put on record the work of his predecessor, Deputy Howlin. Nothing in the Minister's speech suggests anything new or different from the work of the previous Minister.

The Minister is particularly critical of the stamp duty element in the motion. He bases his criticism on reports in the national newspapers. The Minister is obviously totally convinced by everything he reads in the papers. If the papers say something is not a good idea then the Minister thinks it is not a good idea.

Mr. Walsh

Deputy John Bruton thought it was a good idea.

Mrs. Taylor-Quinn

The Minister has not given our proposal any detailed analysis. Others have been able to establish that this proposal might cost the Department of Finance £40 million. The Minister is concerned only with the cost to the Department of Finance. He does not give us the grounds on which he came to his conclusions.

Mr. Molloy

It increases the profit to the seller.

Mrs. Taylor-Quinn

Coming from a mixed urban and rural constituency, the Minister must be familiar with the huge degeneration of properties in small towns and villages. This proposal would make it attractive for a young couple to buy a secondhand house in the middle of a small town or village, regenerate or reconstruct it rather that build a new house which would place extra demands on services and be a cost to the State. I hope the Minister will give more careful consideration to this element of the proposal.

Buying a house for the first time involves a major decision and brings major responsibility. Because of the current high cost of houses many young couples find it impossible to buy any sort of house. They are forced to continue renting for a number of years. Our proposal is designed to encourage first time buyers to buy second-hand houses. This would be advantageous to the purchaser and to the environmnent. I know that the Minister has an affinity with developers and builders but I would ask him to focus on the ordinary people of Ireland who wish to buy houses. The Minister has mentioned the remarkable number of house purchases in recent years. Many of these have been purchased by wealthy people who are in a position to pay top dollar and are pricing young people out of the housing market. This issue must be addressed.

Mr. O'Donovan

I would like to share my time with Senator Kiely. I welcome the Minister's frank and open speech and I commend the suggestions he has made. The motion represents a knee jerk, ill thought out reaction on one issue and will not solve the problem.

Mr. J. Doyle

The Senator must have learned that line by heart.

Mr. O'Donovan

The outgoing Government increased stamp duty from 6 per cent to 9 per cent. In the Dublin area this means an increase of £6,000 on a second-hand house of £200,000.

Mr. Burke

What first time buyer can buy a £250,000 house?

Mr. O'Donovan

That increase in stamp duty was not given proper consideration. I agree with Senator Taylor-Quinn when she says that this is not merely a Dublin problem. My own areas of Bantry, Skibbereen and Schull are affected. The question must be addressed in a sensible fashion. Reducing stamp duty alone will not solve the problem. The vendor and not the purchaser would get the benefit of this policy. I support the Minister's proposal to examine this problem in a sensible and level-headed fashion. Deputy John Bruton proposes to deal with the question from the top of a bus. If he came down to ground level he would realise that this knee-jerk solution will not solve the problem.

The provision of serviced sites would help in small towns. In west Cork we recently sanctioned 20 serviced sites in Skibbereen, 18 in Bantry and 16 in Schull. These will provide housing for young couples on low and medium incomes who do not wish to go on a long housing list but build their own houses. This kind of initiative should be praised. One third of the 900 people on the housing list in west Cork are single. These people may be living alone and be on the list for eight to ten years. They have no future unless single units can be built for them. I applaud the work done by those caring for the elderly in social housing.

I do not share the Minister's enthusiasm for the shared ownership scheme. It is cumbersome and impractical and it is not working well in my local authority region. Perhaps it should be restructured but the Minister should look again at how it can be operated to benefit the less well off.

There may be a need for the reintroduction of the essential repairs scheme. This was a Fine Gael scheme launched in 1983 and I thought it was a great idea. However, it was not properly thought out. The initial cost was £9.5 million but within three years the cost had escalated to over £220 million. The scheme was not income linked so millionaires benefited while those who should have benefited did not. It should be reintroduced to help those on lower incomes whose homes need repairing. It should not be available for improving a series of flats. A builder in Waterford renovated 16 apartments and drew the full grant for each dwelling. This was an abuse of a scheme the concept of which is correct. Something must be done about the spiralling cost of houses. However, this motion is a quick-fix solution which is not properly thought out and I do not commend it.

Mr. D. Kiely

I welcome this debate. It is proper that the Opposition tabled such a motion and that facts are aired. House prices are out of control and I am glad that the Minister has established a commission to investigate the problem. We all have solutions — build more houses, rezone more land, install more services and so on. However, many young people are able to buy their own homes. The economy is strong. Many young people lived in primitive conditions in the past but now they have something to which to look forward. That is welcome and this is the best country in the world for rehousing young couples.

One has to look at the number of houses being built by local authorities. I am aghast at the stamp duty on second-hand houses. I visit many villages every week but I do not see many second-hand houses for sale. If they are for sale, local authorities are anxious to buy them as it is more economical to refurbish them for rehousing tenants.

I would welcome the reintroduction of the essential repairs grant. The Minister should examine such a proposal but it should be means tested. This scheme was introduced in 1983 by a Fine Gael-led Government. Because it was insufficiently funded, that Government left a bill of £220 million in its wake. In 1987 the incoming Government spent two or three years paying those who drew money on the scheme. One cannot introduce schemes without the necessary financial backup.

I welcome this debate but I do not agree with the motion. The Minister should come back to the House when the commission has reported so we can have a full debate on how to tackle the problem of spiralling house prices. We all have ideas on how to solve the problem. Many fat cats are getting fatter.

Mr. Costello

The Minister's remarks were entertaining but I take issue with his primary tenet — his opposition to the principle of first time buyers being exempt from stamp duty. Many specious arguments have been put forward as to why they should not be exempt. A vendor will benefit equally whether the house is first or second-hand so that argument does not cut much ice. However, we should concentrate on the principle. Where there is a shortage of new houses we should be anxious to assist the establishment of a level playing field for young couples trying to buy their first house. One of the ways of achieving this is to exempt them from stamp duty whether the house is new or second-hand. The Fine Gael proposal deserves careful examination. It is not the solution but it could yield some benefits.

I wish to draw the Minister's attention to the existing stamp duty rates which are totally out of line. There is no stamp duty on a house worth less than £5,000. There is 1 per cent duty on houses from £5,001 to £10,000. I cannot imagine too many houses in that bracket. Stamp duty is 2 per cent on houses between £10,001 and £15,000. There would not be too many houses in that range either. Stamp duty is 3 per cent on houses between £15,001 and £25,000. It is 4 per cent between £25,001 and £50,000 and 5 per cent between £50,001 and £60,000. The duty is 6 per cent on houses between £60,001 and £150,000. That is a penal rate of stamp duty as this is the threshold rate because the majority of houses cost between £60,001 and £150,000. The rate for this bracket should be 3 per cent and it should increase to 6 per cent on houses over £150,000. This issue needs to be looked at because the rates were put in place two years ago in the context of the residential property tax when houses were less expensive than they are now.

I am very disappointed with the urban renewal designation in terms of its impact. It has been directed in such a way by the provision of tax incentives that it has exclusively benefited investors, speculators and people with large amounts of money to invest. The scheme has been operated in such a way as to prevent the local indigenous population, who do not have substantial nest eggs to invest in property, from getting involved in the development of their own area. This is true throughout Dublin where the landscape has changed but there has been no participation, good, bad or indifferent, by the local population in the housing development in their area. They could only get involved if they had money or if the Government was prepared to make some concessions in terms of loans. Since the refurbishment loans introduced in the 1980s were ended, it has been impossible for people without much disposable income to refurbish their property or get involved in areas where huge complexes are being developed. Outsiders come in who do not participate in the local areas and this has been the experience in Dublin. They socialise away from where the new flats and complexes are established. I would like the Minister to examine a much more integrated approach to tax incentives where development is desirable or at least give the option of loans and grants along the lines of what existed before to allow extensions and refurbishment to take place.

In the centenary of local government, there is much discussion of its reform. We do not have a single social housing authority. There is a joint authority in the sense the health boards deal with many emergency cases and homelessness. This is the time to bring the management of housing under a single authority and the local authority is the correct one for that.

When we previously discussed the issue of homelessness, I suggested the establishment of a task force similar to that established on drug abuse. This would mean a Cabinet subcommittee taking responsibility for dealing with the matter. Sharp increases of the order of 25 per cent to 33.33 per cent are expected when Dublin Corporation formally makes available the new figures in 1998 on the extent of the local authority housing lists and homelessness. This must be examined carefully.

The last Government put together a budget and proposals for the five year period it expected to be in power. Nothing similar to that existed and only a few local authority houses were built prior to that Government coming to power in 1992. Such a plan is needed. It is not sufficient to say the same number of local authority houses are being built this year. More are needed because demand is increasing substantially.

Ms Leonard

I welcome the Minister. It is his third time in as many months to come to the Seanad. It is obvious from the Opposition motion deploring the lack of investment in public sector housing that it was not present some months ago when the Minister announced his increased allocation to local authorities and voluntary groups for house construction.

The issue of escalating house prices has been raised numerous times in the past months. A number of us are house hunting and are aware of this. The problem is how to deal with it. Quick fix solutions do not work and they often come back to haunt a previous Administration. There is a payback on this type of solution. I remember some years ago a Fine Gael-led Administration reduced VAT on food, but I have not noticed the price of food falling since then.

Mr. J. Doyle

There was never VAT on food.

Mr. Molloy

It was in 1973.

An Cathaoirleach

Senator Leonard without interruption.

Ms Leonard

I was brought up in a household where politics was discussed many years after the issue took place. I remember much and there are many matters I could drag up, but I will not go further on that tonight. I could raise the matter of putting VAT on shoes, but I would not stoop to such low levels.

I welcome the increased allocation for 55 local authority houses in my county which is the largest in many years. Our problem is obtaining land for the development of these houses——

Mr. J. Doyle

That is not what the motion is about.

Ms Leonard

——because private developers will make more money from private development. Who can blame them?

The motion calls for the exemption from stamp duty of first time buyers of second hand houses. The Minister stated that would cost £40 million. Who would benefit from it? It is certain the purchaser will not benefit. Anything of this nature is based on supply and demand and that is a fact of life. I agree there has been an increase of 50 per cent in house prices over the past three years and that is expected to continue. We can talk all we like but the facts are, there is a booming economy, people are returning from abroad whom we must welcome and the unfortunate aspect for many small rural areas is they are moving to the towns. That is a fact of life and nothing can be done about it.

I agree with previous speakers about house reconstruction grants. Those grants encouraged people living in rural areas to stay there. Many people live in houses 30 or 40 years old which are passed down from generation to generation. If people were given a little assistance to reconstruct their houses, they would stay in the local community and many small rural environments would be maintained. I know there was an increased allocation for essential repairs but it is an area where there is a need for a greater allocation of funds, especially for elderly people.

I support the amendment. We all appreciate that house prices have escalated and no one doubts that. However, it is important to counteract that. Quick fix solutions do not yield results. We all have our views on why house prices are increasing but a consultative study would provide us with factual reasons and we could then deal with the issue in a realistic manner.

Mr. McDonagh

I wish to share my time with Senator Burke.

An Cathaoirleach

Is that agreed? Agreed.

Mr. McDonagh

Cuirim fáilte roimh an Aire go dtí an Teach ós rud é go bhfuil sé chara agus comhleacaí dom le fada an lá. Tá an-mhuinín agam as as ucht an obair atá tosnaithe aige.

Having listened to the debate in the House this evening, it seems the Minister is not the man I knew when we served together on Galway County Council some years ago or the one I admire as a constituency colleague in Galway West. The Minister was always a man who formed his own judgments and stood on his own two feet. However, he appears to have been influenced by responses in local press and journalists' views. He has held up a number of newspapers in this House this evening but The Galway Advertiser, The Connacht Tribune or The Tuam Herald from his own county were not among them. I am sad to say we heard a certain amount of hype in this House this evening.

As it is Ash Wednesday, we may be inclined to think of the Angel Gabriel calling us all forward. The Minister appears to be calling us forward, saying that Fianna Fáil and the Government have brought us all in sight of the promised land. That is not the case. The Minister appears to be in a euphoric mood about the current state of the economy and the housing situation in this country. He is the only one in ecstasy in County Galway. Spiralling house prices in Galway city and county are causing huge problems and are exerting huge pressure on people, particularly young couples.

Any statements which the Minister makes in the local press in Galway should carry an addendum stating that he is carrying on programmes initiated by the previous Government and is glad to do so. I am very pleased he is carrying on such initiatives. However, I would remind him of the huge housing backlog which exists in Galway county and city.

Many people in rural Galway, in areas such as my own, are living in leaking caravans and people seeking houses are queuing at all constituency clinics. There is a huge scarcity of housing in Galway. The price of building land has increased so much in certain areas that in my parish of Lackagh we are finding it impossible to obtain a site for an extension to the local cemetery. The Minister should apply himself to controlling the cost of house and site prices and he should seek to bring more local authority housing on stream. He should also examine planning restrictions in County Galway.

I wish the Minister well but it is pointless for him to speak in euphoric terms about the state of the economy as there are still many problems which must be addressed. Had the previous Government been in office for longer, more initiatives would have been brought on stream. However, it laid the groundwork for the Government and the Minister should respond positively to this very worthwhile motion.

Mr. Burke

I welcome the Minister to the House and wish him well in his portfolio.

I compliment Senator Doyle for tabling this motion and I urge the Minister to accept it and avoid dividing the House. The motion, which seeks that the first time buyers of second hand houses be exempted from the payment of stamp duty, is very simple. The Minister's comments in the House this evening lead me to believe he does not understand the motion. Moreover, I do not think some of the other speakers understand it either.

Mr. J. Doyle

That is a charitable view.

Mr. Burke

Senator Leonard stated she favoured the reintroduction of grants in rural areas. If this motion were accepted, first time buyers would be enabled to buy second hand houses in rural areas and would help to keep those areas alive. The Minister and the other speakers seem to concentrate on Ballymun and other urban areas.

The Minister stated that the abolition of stamp duty on second hand houses purchased by first time buyers has been estimated by the Department of Finance to cost in the region of £40 million. How could that be true if the first time buyer is only going to buy one house? Whether that is a new or second house is irrelevant. A first time buyer buying a new house is not obliged to pay stamp duty. How was the figure of £40 million arrived at?

I urge the Minister to re-examine this issue. I welcome his announcements on developments in serviced sites and sewage services as those initiatives are badly needed. Second hand houses already have the necessary infrastructure such as septic tanks, footpaths, public lights and so on in place. By accepting the motion, first time buyers would be able to buy houses which already have such services. The Minister will effectively put more pressure on his own Department as more funding will be required to provide more services to new houses.

I cannot believe that the Minister does not realise the motion's objective. Speakers on the far side of the House have spoken about stamp duty being payable on houses costing in excess of £150,000. No first time buyer could afford to pay that much for a house in the first instance. There is a great deal of value in the second hand house market for the first time buyer.

Mr. Chambers

I welcome the Minister's approach to his portfolio since taking up office and I welcome the way he has dealt with local authorities on planning, development and housing issues.

There is some substance in the motion before us. This evening's debate reminds me of a discussion which took place recently on road carnage. A Senator on this side of the House suggested that if all cars were obliged to drive at 30 miles per hour, nobody would be killed. That was a reasonable and rational suggestion. The motion to abolish stamp duty is not as reasonable. This problem must be examined carefully. I support the amendment on that basis.

I do not want to be parochial but in my county the tourist resort scheme has been a major influence on the price of houses in places such as Westport. A large number of young people have moved to Castlebar as a result of the scheme and the spiralling cost of land and housing. This matter needs to be examined. Local authorities are having difficulty purchasing land, not just because of cost but the responsibility of housing everyone. Towns on the periphery of cities can provide serviced housing at a reasonable cost. Local authorities must look at the overall development of their counties and utilise the serviced resources at their disposal. They will then build up the infrastructure of their counties and provide reasonably cheap housing, which is what people are concerned about. Direction should be given to local authorities.

I welcome that council staff will ascertain what the development plans are. Progress can be made in tackling the problem of finding suitable serviced sites at a reasonable cost by working with local authorities. The Minister's instruction to local authorities to set out their housing plans is a positive move in that direction and we will see the fruits of it.

There were 38,800 housing starts last year which is an enormous commitment and investment of resources in an area of huge demand. The decision of the Department of Environment and Local Government to accept the full financial lendings of building societies and banks was a positive move. However, in the past, many young people involved in the construction industry provided their own houses in rural areas, got suitable loans from the local authorities and provided much of the infrastructure for young families. There should be some flexibility in that area. We should cater for young people who do not have suitable incomes to obtain mortgages.

I welcome the work of the Department in embracing a community approach towards local authority housing. Voluntary housing groups do great work in providing housing for the disabled, the elderly and the disadvantaged. There is great local and community interest in working with local authorities. The amendment tabled is worthwhile. It is important to allow the Minister examine the difficulties. The Government and the Minister will examine the matter properly and fairly and take all aspects into consideration. Measures will have to be considered which will provide reasonable and fair opportunities to young people who are having difficulties because of a strengthened economy and the accompanying rise in the standard of living.

Mrs. Ridge

The Minister is not happy that Senator Joe Doyle deplores the situation. He hardly expects the Senator to praise it. The housing sector is a timebomb waiting to explode. There is a war of attrition and the matter has to be hammered home week in, week out, regardless of who is in Government. We owe that much to the citizens of this State. What do we tell the 1,700 people on the housing list of South Dublin County Council? The Department of Environment and Local Government gave them 105 housing starts while 100 applications are submitted each month. First-time buyers are on that list because they cannot afford to buy a house.

I remember when housing action groups took to the streets. I guarantee that unless the Minister moves quickly, that will happen again. We will then resort to panic building which resulted in Ballymun and areas where people remain marginalised.

Perhaps the Minister will accept suggestions from a member of a party whose actions he has deplored. As a member of a local authority, I believe our land density regulations are ridiculous. We could go in excess of ten to an acre in urban areas and the style of housing could be changed to provide larger accommodation in the same space.

I previously referred to the capital gains tax in the House, when the Minister misunderstood me. I asked that it should be returned to the local authority where the decision to rezone is taken. This would allay the difficulties in providing houses. Although the Minister said it did not work, the certificate of reasonable value should be reintroduced. It is unbelievable that a house can increase in price by £30,000 in three months. We are heading towards negative equity. This nettle must be grasped now, even though it hurts. Otherwise we will be in serious difficulty.

There should be an examination of the control of rents in the private sector because they are reaching a criminal rate in some areas. There is no need to be adversarial about this matter, as it is a problem which requires us all to put our heads together to work for the interests of the people.

Mr. J. Doyle

I have been a Member of the Houses of the Oireachtas for the past 16 years and this is the first time I have been charged with political opportunism or reacting in a knee-jerk fashion. It saddens me, especially as it concerns housing, which I hold dear to my heart. It is the responsibility of Oppositions to prompt Government into action to deal with problems in society, which is what this motion does. We hit a raw nerve, as could be heard from the Minister's reply.

This motion did not come about just because Fine Gael tabled it. Every day on the Order of Business, Members on both sides of the House ask for Ministers to attend the Seanad to do something about the cost of housing. That happens continually.

Newspapers are full of editorials and letters dealing with the cost of housing. Recently, His Grace, the Archbishop of Dublin, Dr. Connell, stated that the cost of houses in the city had escalated beyond reason and could prove the undoing of normal family life.

This is particularly so when both partners are struggling from one end of the week to the other to try to meet their mortgage repayments. In my earlier contribution, I quoted a statement by the Director of Consumer Affairs who said the Minister with responsibility for housing should ask builders to explain why houses built in different phases on the same estate could increase by £20,000 between phases one and three, even though the price of land had not increased.

In his vindictive reply, the Minister of State did not even mention that issue. He criticised Fine Gael for having, as he put it, "jacked up stamp duty from 6 to 9 per cent on certain houses". He did not tell the House, however, that they were houses costing over £250,000.

Mr. Molloy

The Senator has got the figure wrong.

Mr. Walsh

It was £150,000.

Mr. Doyle

They might have been big houses, but we do not know. Houses in my area sell for £1 million or even £2 million and I cannot see any reason why the purchasers should not pay the lawful stamp duty on them.

Fine Gael wants some relief to be given to people who are buying second hand houses for the first time, including young people who cannot be accommodated on the housing list, but who have some savings and want to buy their own home. While I accept this approach might not provide the whole answer, such people should not be penalised by having to pay stamp duty. They should get some relief now that the cost of housing has risen so much.

If young people starting out in life and trying to put money together to buy a house, heard the Minister of State's speech they would be very disappointed. No wonder young people have no confidence in politicians. The diatribe the Minister of State gave was unbelievable and unbecoming of any Minister I have every heard in the Seanad. I am disappointed because there was not one constructive issue in the Minister of State's reply.

This motion was moved with the intention of drawing attention to an issue that is affecting many people in our society. Fine Gael has a right to table such a motion and I commend it to the House.

Amendment put.

The Seanad divided: Tá, 21; Níl, 12.

Tá

• Bohan, Eddie.
• Callanan, Peter.
• Cassidy, Donie.
• Chambers, Frank.
• Dardis, John.
• Farrell, Willie.
• Finneran, Michael.
• Fitzgerald, Liam.
• Fitzgerald, Tom.
• Fitzpatrick, Dermot.
• Gibbons, Jim.
• Kiely, Dan.
• Leonard, Ann.
• Lydon, Don.
• Moylan, Pat.
• O'Brien, Francis.
• O'Donovan, Denis.
• Ó Murchú, Labhrás.
• Ormonde, Ann.
• Quill, Mairín.
• Walsh, Jim.

Níl

• Burke, Paddy.
• Coogan, Fintan.
• Cosgrave, Liam.
• Costello, Joe.
• Doyle, Avril.
• Doyle, Joe.
• McDonagh, Jarlath.
• O'Dowd, Fergus.
• Ridge, Thére se.
• Ryan, Brendan.
• Taylor-Quinn, Madeleine.

Tellers: Tá, Senators Dardis and T. Fitzgerald; Níl, Senators Burke and Ridge.

Amendment declared carried.

Question put: "That the motion, as amended, be agreed to."

The Seanad divided: Tá, 22; Níl, 13.

Tá

• Bohan, Eddie.
• Bonner, Enda.
• Callanan, Peter.
• Cassidy, Donie.
• Chambers, Frank.
• Dardis, John.
• Farrell, Willie.
• Finneran, Michael.
• Fitzgerald, Liam.
• Fitzgerald, Tom.
• Fitzpatrick, Dermot.
• Gibbons, Jim.
• Kiely, Dan.
• Leonard, Ann.
• Lydon, Don.
• Moylan, Pat.
• O'Brien, Francis.
• O'Donovan, Denis.
• Ó Murchú, Labhrás.
• Ormonde, Ann.
• Quill, Mairín.
• Walsh, Jim.

Níl

• Burke, Paddy.
• Coogan, Fintan.
• Cosgrave, Liam T.
• Costello, Joe.
• Doyle, Avril.
• Doyle, Joe.
• Manning, Maurice.
• McDonagh, Jarlath.
• O'Dowd, Fergus.
• O'Toole, Joe.
• Ridge, Thére se.
• Ryan, Brendan.
• Taylor-Quinn, Madeleine.

Tellers: Tá, Senators Dardis and T. Fitzgerald; Níl, Senators Burke and Ridge.

Question declared carried.

An Cathaoirleach

When is it proposed to sit again?

Mr. Cassidy

At 10.30 tomorrow morning.