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Seanad Éireann debate -
Tuesday, 14 Dec 2004

Vol. 178 No. 27

Housing (Miscellaneous Provisions) Bill 2004: Second Stage.

Question proposed: "That the Bill be now read a Second Time."

This Bill addresses the need to make statutory provision to allow housing and planning authorities to register as a charge a claw-back against individual properties provided by them under the various affordable housing schemes at a discount from market value. It is specifically required in the context of the entry into the affordable housing mortgage market of private lending institutions which will provide competition and consumer choice in this area. Additionally, it will facilitate the direct sale of affordable units by a developer or builder to eligible persons nominated by the housing or planning authority. This will speed up the sale of the unit and make the administration of the affordable schemes more efficient and cost-effective.

Recent years have witnessed an unprecedented demand for housing brought about by a number of economic and demographic changes, including rising disposable incomes, historically low interest rates and changing household formation patterns. These factors continue to place significant pressure on housing demand and house prices. The Government's strategy is to increase housing supply to meet demand and to improve affordability and access to affordable housing, particularly for first time buyers. This will help to bring moderation to house price increases.

The Government's approach to meeting housing needs is clearly working. Our success is evidenced by our outstanding house completions record. The year 2003 was the ninth record year for house completions, with 68,629 units completed, an increase in output of over 19% on 2002 and an increase of 10.5% in output in the greater Dublin area during the same period. This year is likely to be another record year. The latest figures indicate that more than 60,000 units were built in the first ten months of the year. We are building at a rate approaching 19 units per 1,000 population, an outstanding achievement. Increasing the supply of serviced land through targeted initiatives and the commitment of Exchequer funding has also been effective. There is a five year supply of serviced residential land nationally and sufficient land to meet the needs of Dublin for some eight years.

While the rate of house price increase remains problematic, it has moderated considerably since the late 1990s when price increases peaked at 40% in 1998. A number of market commentators, including the Central Bank, have predicted a greater balance in the housing market over the next few years, as increasing supply will have a dampening effect on house prices. Affordability has also been assisted by a range of factors, including high levels of economic growth which have facilitated lower tax levels and increased disposable income, increased employment, lower mortgage interest rates and low inflation.

Indicative data available to my Department show that first-time buyers continue to have a significant presence in the housing market. This is supported by the CSO quarterly national household survey for the third quarter of 2003 which indicates that almost 50% of house purchasers since 1996 were first-time buyers. The survey also pointed out that some 62% of homeowners surveyed had no mortgage or loan on their dwellings compared to 58.8% in the same quarter of 1998. While the survey indicates that the majority of these homeowners purchased before 1980, it states that approximately one quarter of purchasers since 1996 had no mortgage.

Budget 2005 also contained good news for first-time buyers with the highly significant change in the system of stamp duty, whereby the threshold at which stamp duty becomes payable by first-time buyers on second-hand properties has increased from €190,500 to €317,500. In addition, the percentage rates payable have also been reduced. Amending stamp duties for first-time buyers will improve accessibility to the second-hand housing market, reduce the dependence of the first-time buyer on the new house market and will ultimately impact on house price inflation in new homes at the starter end of the market.

The Government has responded actively to the increased level of housing need by expanding social and affordable housing output significantly. Notwithstanding the many demands on public expenditure, Government commitment to maintaining a strong social and affordable housing programme is resolute. In 2005, total Exchequer capital and current funding for housing will be approximately €1.3 billion. This is a record amount and an increase of 19.8% on the expected outturn for 2004. This increase consolidates the significant progress made in recent years, with over 13,000 households benefiting from investment under the broad range of programmes in 2005, compared to 8,500 in 1998. The total capital envelope over the period 2005 to 2009 is a massive €6 billion. To ensure that value for money is achieved for this investment, I have asked local authorities to put in place five-year action plans covering the full range of their housing programmes. These plans provide a means to ensure that these resources are used to best effect. The plans, which have been examined by my Department and discussed with authorities with a view to signing off on them by the end of the month, will allow for maximum output to be achieved through the effective planning of programmes and prioritisation in line with needs. Overall, our priority is to ensure that housing is delivered in a manner that breaks cycles of dependency and disadvantage.

Government interventions have boosted the supply of affordable housing under targeted schemes for low and middle-income purchasers. More than 10,000 households have benefited under the shared ownership and affordable housing schemes since 1999. Substantial growth is anticipated in affordable housing over the coming years, as the Part V mechanism and the Sustaining Progress affordable housing initiative take effect.

In this regard, I welcome yesterday's announcement by the Taoiseach on the release of health board lands for the initiative. This brings to more than 70, the number of projects now planned on State lands which, together with projected affordable activity under Part V, means we will exceed the target of 10,000 units proposed by the parties to the Sustaining Progress pay agreement. The key focus for the next phase of the initiative will be to significantly increase the affordable housing output through a combination of proactive local authority management of those sites for which they have direct responsibility and alternative fast-tracking strategies, such as land swaps in exchange for early delivery of units. The Harcourt Terrace site is being piloted in this respect. It is expected that more than 11,000 units will be delivered from the various affordable housing schemes between 2005 and 2007.

The Bill has three sections. Section 1 deals with the sale of properties under the 1999 affordable housing scheme whereas section 2 deals with the sale of units or land under the Part V mechanism. Section 3 contains the usual provisions of a general nature dealing with the short title and citations.

Section 1 enables a housing authority to place a charge on an affordable housing property it is proposing to sell under the 1999 scheme. Up to now the charge was registered against the mortgage deed, which allowed the local authority, as lender, to enforce it. However, where the local authority is not the lender it would have to pursue the purchaser directly for payment of the claw-back. This would be both difficult and expensive. This amendment will allow the local authority to enforce the claw-back as necessary. Section 2 is a similar provision and will enable a planning authority to place a charge on a house or land provided under Part V of the Planning Acts.

I would like to explain briefly to the House how the claw-back operates in practice. Where affordable houses are sold at a discount from market value, a claw-back applies. The claw-back is an anti-profiteering mechanism and provides that where a dwelling purchased at a discount under the affordable housing schemes is resold before the expiration of 20 years from the date of purchase, a percentage of the proceeds of sale, based on the percentage discount received, shall be paid to the housing authority. The amount payable reduces by 10% for each complete year after ten years of occupation. Up to now, mortgage finance for affordable housing has been provided exclusively by local authorities through the Housing Finance Agency and this source of funding will continue. This is because the claw-back provision has not been acceptable to the private financial institutions as a first charge on the property and, consequently, has acted as a constraint up to now on lending by them.

However, my Department has been in discussions with representatives of a number of financial institutions and it has been agreed in principle that the mortgage should be registered as first charge on the property, with the claw-bank as second charge. This has allowed substantial progress to be made in agreeing arrangements for the provision of such finance by the commercial lending sector. However, a number of matters still remain to be resolved, including the need to give local authorities the power to apply the claw-back as a charge on an affordable property, which is being dealt with in this Bill. I am satisfied that when the final arrangements are agreed the State's investment in the affordable property will be fully protected.

The House may be aware that Bank of Ireland has already pre-announced a mortgage product it proposes to provide for affordable housing applicants when the discussions with my Department have been finalised. I also understand that the Educational Building Society is at an advanced stage of negotiations and that other financial institutions have also expressed an interest in entering this segment of the market. I welcome the competition, as it is important that consumers have choice when they are seeking mortgage finance.

It has long been a Government aim to ensure that private mortgage finance is available to all potential purchasers, particularly to those wishing to purchase under the various Government affordable schemes. Notwithstanding the constraints that have operated up to now, the Government considers it appropriate that private lending agencies would also be active in this market. In addition to the need for consumer choice, it is a particular requirement of the Sustaining Progress affordable housing initiative that its operation and delivery have no impact on general Government finances. Hence the need for private mortgage finance as opposed to the provision of public finance through the Housing Finance Agency. The provisions of this Bill are a necessary step in achieving our aims in this area.

I have pleasure in presenting the Bill to the House and I thank Members for their co-operation in processing it in a speedy manner. I look forward to hearing Senators' comments on the matter.

I apologise for the absence of Senator Bannon today.

I probably will not be as excitable or aggressive as he would be and I apologise to any disappointed Members on the opposite side. I will do my best to represent him.

The Senator will need to start roaring.

While the Bill represents good news, it is also a reflection of the Government's failed housing policy. The Part V process as originally introduced was a disaster. It was badly thought out and did not work. In the Carlow County Council area only one application for housing was made during the period involved and that was for either seven or 11 houses, which only gave two affordable houses in effect. I accept that the amended system now in operation works better.

I am amused at the use of the word "affordable". We often abuse the English language. While one would expect an affordable house advertised in the newspapers to be on sale for approximately €100,000, they are generally approximately €220,000. I paid £68,000 for my house in Carlow six years ago. It is now worth approximately €230,000. Even six years ago I regarded my house as being unaffordable as did many of my friends. It is laughable that affordable houses are now three times more expensive than they were originally.

I do not know how a young person starting on the property ladder could afford to buy a house in Dublin. Like many Members, I considered purchasing a property in Dublin as I work here during the week. However, I could not afford to do so now. I went to college beside where the Minister of State's brother and Senator Brady live in Drumcondra. I have seen property prices there go through the roof in recent years and I regret not having bought a house here. The Fianna Fáil organisation was very wise buying St. Luke's some years ago. Perhaps it had vision or inside information.

We certainly have vision.

I used to live in the house beside Fagans pub with which I am sure everybody is familiar. The rent on that property now would probably equal the mortgage repayments if it had been bought some years ago. This is a very serious issue and I do not understand how couples buy properties. Many of the so-called cheaper properties are only 700 sq. ft. God help the couple if they have a row as even at opposite ends of the house they would still be near each other and this might contribute to marriage break-up. I do not know what these people will do when they start having children. However, that is a matter for another day.

I welcome the Bill which, in the interest of facilitating access to affordable housing, Fine Gael supports. It is a two section Bill that will enable the smooth operation of the affordable housing initiative of Sustaining Progress and, in particular, the provision of affordable housing mortgages by banks. Up to now, affordable housing could only be purchased through a loan from a local authority because of the need of a clawback in the event of an early sale by those seeking to make a quick profit. Under the legislation, if an affordable housing unit is purchased and quickly resold, the sale will not be finalised unless the vast majority of the profit is paid back to the local authority. The Bill allows local authorities to enforce this clawback. Without it, they would be forced to pursue vendors for money. This would prove time-consuming, expensive and difficult.

In publishing the Bill, the Department made specific mention of the Bank of Ireland's "Breakthrough" mortgage product for affordable housing which would be inaccessible if the Bill were not passed. Under the proposed arrangements, the average price of a new house would be €222,000 in Dublin and €180,000 elsewhere. Meanwhile, the Irish Home Builders Association has put forward a separate proposal for local authorities to work in partnership with builders to deliver affordable houses on council owned land banks and green spaces in existing council estates. The popular conception is that affordable housing is for the socially disadvantaged. However, support for the Bill will lead to a situation where people on any income, who feel priced out of the housing market, despite earning a good salary, can apply for a loan through private lenders.

While Fine Gael welcomes the Bill, I cannot but mention that the backdrop against which it is set is depressing. A foot on the housing ladder has in recent years become a tantalising foot too far. Permanent TSB has stated that the average price paid for a house in Ireland in September was €252,431, up over €18,000 on that recorded in December 2003. This is good news for people who own property but it is bad news for those trying to get on the property ladder. The average price paid for a house in Dublin in 2004 was €330,000, while outside the capital it was €222,000. The equivalent prices in September 2003 were €296,000 and €195,000. This represents an increase of 11.5% and 13.6% in the 12 months to September 2004 in Dublin and outside Dublin, respectively.

Only 315 affordable housing units were acquired under Part V of the Planning and Development Act 2000. Figures show that just 12 county councils and two city councils acquired any social and affordable houses under the Act. Dublin City Council acquired 11 houses, while Cork City Council did not acquire any. Department of Environment, Heritage and Local Government sources say the modest number came about as a result of builders using stockpiles of planning permissions granted for land purchased prior to the introduction of the 20% clause in August 1999.

Internal projections compiled by the Department of the Environment, Heritage and Local Government estimate that around 500 social and affordable houses will be built in 2004, 1,000 in 2005 and 2,000 in 2006. By October 2002, 52,726 families were waiting for local authority housing. This was up from 39,176 in 1999, an increase of almost one third. In the 2002 programme for Government, we were promised, "We will assist the voluntary housing sector so that the target of 4000 accommodation units per annum envisaged under the national development plan can be reached". However, only 187 affordable housing units were completed last year, only 315 affordable housing units were acquired under Part V of Planning and Development Act 2000 and figures show that just 12 county councils and two city councils acquired any social and affordable houses under the Act. This is a case of reality versus idealism.

Government plans announced on 29 December 2003 for 3,600 affordable housing units in Dublin, Cork and Waterford will deliver 2,550 units for the capital, less than 1,000 for Cork and a meagre 100 for Waterford. In October 2002, 52,726 families were waiting for local authority housing. This was up from 39,176 in 1999 — an increase of almost one third. There are 5,581 homeless people in Ireland, living in 3,773 households. In Dublin, 4,060 people, including 1,140 children, are homeless. These figures are taken from the housing statistical bulletin for the period September 2003 to 21 January 2004. The Simon Community claims that the figures are a gross underestimation.

Contrary to the opinion of the Minister of State's brother, the changes to stamp duty announced in the recent budget mean the average first-time buyer in Dublin will not be exempt from stamp duty. This is thanks to the Government's failure to set a reasonable threshold for exemption. Stamp duty should have been abolished completely for all first-time buyers. Putting in place levels and thresholds leads to difficulties, particularly in the Dublin market where it is impossible to buy a house for less than €300,000.

Of course one can buy a house for less than that amount.

I challenge the Minister of State to indicate where fairly good properties can be purchased for less than €300,000 without people being obliged to move to outlying areas of Dublin. Stamp duty on second-hand houses should have been abolished for all first-time buyers. That would be a sensible approach. However, we welcome the fact that the Minister of State has, in principle, adopted a Fine Gael idea, namely, our suggestion in April that stamp duty on second-hand houses worth less than €400,000 be abolished for all first-time buyers, although the steps taken in the budget do not go far enough. According to the Minister of State's figures, the average price paid for new houses by first-time buyers in the capital was €308,000 in the second quarter of this year. With prices rising at approximately 1% per month, that average has already breached the level of €317,500 set in the budget. This means that young Dubliners struggling to get on to the property ladder may still be forced to move further away from the city — including to places such as Mullingar and Carlow — to find a home.

The measures taken in respect of stamp duty were minimalist at best and totally failed to address issues such as the need to free up the supply of larger houses by reducing stamp duty for those seeking to trade down. This is a major issue because people are living in houses which are far too big for them and which they cannot maintain. These people wish to trade down but they will be penalised by the draconian stamp duty regime if they do so.

Fine Gael urges the Government to go that little bit further and adopt its three-point plan for first-time buyers. The first step in this plan is the introduction of a house deposit savings scheme, similar to the SSIA scheme, to help young people who are saving for deposits for new homes. Under the scheme, first-time buyers would receive €1 for every €3 they save, provided those savings are used for a deposit on a house. No tax on interest will apply and the recipient must show regular monthly savings for a minimum of two years. The scheme will operate for both new and second-hand houses

The second step is the abolition of stamp duty on second-hand homes up to a value of €400,000 bought by first-time buyers. This would mean that a first-time buyer purchasing a second-hand home costing €325,000 would save €14,625. The third step is the front-loading of mortgage interest relief for first-time buyers during the first seven years of the lifetime of a mortgage. This would provide these people with assistance when they most need it.

We welcome the Bill. However, much more work remains to be done in the area of housing. The Government's record in this area is particularly bleak. I was canvassing in Kildare during the recent by-election campaign and, if I recall correctly, there is a waiting list of over 4,000 in Naas. That is a startling statistic. We are co-operating fully with the passage of the Bill in recognition of the major problems that exist. However, to borrow a phrase, much more needs to be done.

I welcome the Minister of State and I thank him for introducing this welcome Bill. I support what he said in respect of housing supply. It is marvellous that almost 69,000 units were completed in 2003, the ninth record year in a row for house completions. The figures for 2004 also look good.

I was interested in his comment that thanks to the serviced land initiative, there is a good land bank available throughout the country. The figure for Dublin, at eight years, is higher than that for the remainder of the country, at five years. That is an important point. The Minister of State also spoke about the stamp duty exemption, which is very important for first time buyers of second-hand property and has been welcomed by young people.

The Bill is urgent because private financial institutions wish to have access to the affordable housing mortgage market. Bank of Ireland intends to launch an affordable housing mortgage product early next year and the Educational Building Society also has an interest in this sector. On the news this morning we heard about a European mortgage, an area of the market which our financial institutions are anxious to enter and where I hope they will be successful in providing funding for affordable housing.

I remember hearing the word "claw-back" as far back as the 1970s. The late Jimmy Tully was Minister for Local Government in the coalition Government that built many extra houses. It was the first time I heard of people profiteering by buying their houses from the county council, selling them and making a profit. To make matters worse, there were incentives for people to leave local authority houses and inevitably good tenants and home owners left estates. It was made clear by the Minister then, and everyone supported him, that there could not be a situation where people were making profits by buying houses and the claw-back was introduced as an anti-profiteering measure.

There have been some good initiatives in recent times, particularly involving local authority, health board and other publicly owned land. The Taoiseach spoke recently about the release of health board lands for housing initiatives. This move has been popular in County Galway, where the Western Health Board has large areas of land, particularly in Ballinasloe, that could be used for affordable housing. Vocational education committees, county councils and tourism bodies could also become involved in land swapping. Land owned by the agricultural college in Athenry is being taken for road widening and for the new roads from Galway to Ballinasloe and Dublin and some of that land will become available for affordable housing. I hope those people in the Department who have received submissions from Galway County Council on those proposals will ensure there is development in the affordable housing area.

It is unfair to blame local authorities for the delays with the provision of affordable housing. Yesterday's Irish Independent contained articles on many of the initiatives. The tenor of the articles was that these initiatives are being taken because the local authorities have fallen down. Some local authorities are not as enthusiastic about these schemes as others but there are many proposals from local authorities for affordable housing and they should be proceeded with. These are popular schemes and if we could build housing for the prices mentioned in the newspaper yesterday, there would be property that young people could buy and use to get on to the property ladder.

I am referring to an article in yesterday's Irish Independent which is headed “Plan for 30,000 low cost homes offers new hope for house buyers”. This article describes two schemes, one which will give us 25,000 affordable houses over four years and another, involving the Irish Home Builders Association, which will result in an additional 5,000 such houses in the next two and a half years.

The first scheme, which involves the Departments of the Taoiseach, Finance and the Environment, Heritage and Local Government, envisages new homes with an average price of €220,000 in Dublin and €180,000 elsewhere. This radical plan is welcome. The land, owned by health boards or the Department of Agriculture and Food, is available.

The Irish Home Builders Association scheme involves council developments that have large open spaces that are under-used — sometimes leading to anti-social behaviour — which could be used for affordable housing. Local authorities should consider amending county development plans to ensure this land is available.

Delivery for these schemes is targeted for the next few years, with 1,500 houses in 2005, 6,000 in 2006, 8,500 in 2007 and 9,000 in 2008. I hope the initiative will be a success. Many builders say it will ensure a dramatic turnaround for people on social housing lists and for those who cannot get a foothold in the private housing market.

There are many plans and it is up to us to show the will to work on them. The measures in this Bill are important because they will allow money to go back to the Exchequer. It was very simple in the past when the local authorities did everything to build houses and provide loans. We saw, however, that when people were stuck on fixed interest rates with their local authority, they could go to the private lending institutions and get their mortgages at a lower rate. Many of the county councils were glad to off-load these mortgages and have the loans provided by the financial institutions. We in County Galway have the best of both worlds. Galway County Council states that it can be a lender of last resort, and people can go back to it if they cannot get finance at a decent rate in the private sector. As far as the council is concerned, however, it has done its part in providing loans and there are other options now of which people can avail.

It is great that newer schemes have been introduced by successive Governments, none more so than the present Government and the Minister of State, Deputy Noel Ahern. The voluntary, social and affordable housing schemes will help many people. I hope the Government's good record of building more units can be continued. We should make clear that we are not always talking about houses. As Senator Browne said, various types of accommodation are available.

The Bill before the House is short, but it is important because it will tidy up a loophole. Many Governments have examined this issue since 1974 or 1975, when I heard the phrase "claw-backs" used for the first time in respect of people who were allocated housing but sold them off after a number of years. I welcome the Bill, which I hope will be passed by the House quickly.

I welcome the thrust of the Bill. I support its attempts to facilitate access by private financial institutions to the affordable housing mortgage market. It will allow local authorities and housing authorities to place a charge on such properties, which is important. People renting local authority houses who were given tenancy in the 1980s have been able to purchase them, before selling them on at a huge profit, as a result of the various purchasing schemes which have been offered to them in recent years. There is nothing wrong with that — it is not illegal — but we need to consider the issues which arise. There is a need for caution in respect of the sale of assets which used to belong to local authorities. Not only should we be concerned about the exorbitant profits which have accrued in certain instances, but we should take some action.

The thrust of the legislation before the House is linked to a clear commitment contained in Sustaining Progress, which was agreed by the social partners almost two years ago. The Taoiseach said in the document that the Government's target of building 10,000 affordable houses would be met in the lifetime of the agreement. In March 2004, the then Minister for the Environment, Heritage and Local Government, Deputy Cullen, admitted in response to the Labour Party's Dáil spokesman in this area, Deputy Gilmore, that none of the planned houses had been built or even started, planning applications had not been lodged and architects had not been appointed. One does not need to be a genius to work out that we have seen almost two years of inaction in respect of this commitment, which is central to the lives of ordinary working families. I refer to people on lower incomes who may have been unable to participate in the housing market for various reasons, not least of which is the rate of house price increase in recent years. I accept that nobody foresaw such an increase, but the Government has a responsibility to legislate for such people nevertheless. When the Government makes a commitment, it should stick to it.

I am reminded of a discussion on a prominent radio programme last week about the McCabe issue in Limerick, which needs to be treated with great sensitivity. As I was driving to the House last Wednesday, a person from the Dublin area said on the programme that he was curious about the use by Ministers, particularly the Taoiseach, of the phrase "a Government commitment". It appeared at that stage that there was a clear intent to change a commitment made in the McCabe case, for obvious reasons. When the person in question wrote to the Government publications office to ask for a definition of the phrase "a Government commitment", he received a prompt reply in which he was informed by an official that the term has no legal standing. I will be cautious about that phrase from now on because I know it does not have any legal standing. It is clear that it does not have any standing in terms of a commitment to the electorate because the results of last June's elections bear that out. We need to examine the Government's commitment to build 10,000 affordable houses under Sustaining Progress, given that no such applications had been made to local authorities by March 2004 and not much progress has been made since.

Senator Browne referred to the house price index, which was published earlier this year by Permanent TSB. The index clearly indicated that the average house price in Dublin is €320,000. Those of us who read the newspapers' property supplements, which inform us that substantial moneys are required to purchase flats, apartments and houses in Dublin, have no reason to believe otherwise. A young couple would need combined earnings of approximately €100,000 per annum if they were to qualify for a mortgage for an average priced house. That is a huge amount of money by any stretch of the imagination. Some startling issues arise when one considers that such money needs to be raised to build a house.

The escalation in the price of houses has paid a significant part in the development of the circumstances we face. It is clear that almost eight years of conservative right-wing rule have not benefited families on lower incomes who cannot afford their own houses. Local authorities have not been given the resources necessary for their house building programmes, which are aimed at reducing this country's increasing housing lists. If one examines the level of housing need in every town and village, one will see that the affordability gap is increasing at an alarming rate. There is great pressure on local authority housing lists as a result. The various commitments given do not have any legal standing. Those who make such promises do not have the moral fibre to fulfil them.

Approximately two years ago, the former Minister for the Environment, Heritage and Local Government, Deputy Cullen, removed the 20% clause to give builders more scope in securing planning permissions. Just 163 affordable houses were built under that clause before the permissions were gifted back to builders. The Government's sell-out to the building industry has disadvantaged many young people and resulted in a huge shortfall in affordable housing. The gift that was given by the Government two years ago, in the run-up to Christmas, was unthinkable because those who should have benefited from the 20% clause were kept out of the loop. Two years on, no applications have been made by local authorities, according to a parliamentary reply given earlier this year by the Minister, Deputy Cullen, which would make the hair stand on the back of one's head. There has not been any movement in that regard on the part of the Government, the former Minister or his successor, Deputy Roche.

The Minister of State referred earlier to two press releases issued yesterday, one in his name and the other in the name of the Taoiseach. At 5.30 p.m. yesterday, the Taoiseach announced that the Government had agreed to release additional State lands for the affordable housing initiative under Sustaining Progress. In the second paragraph of a statement issued at 6 p.m. yesterday by the Minister of State, Deputy Noel Ahern, he welcomed "the 10,000-unit target figure being reached". In the fourth paragraph of the statement, however, he welcomed "the 10,000-unit target figure being exceeded". If one can move from fulfilling a commitment to exceeding it in the time it takes to read from the second paragraph to the fourth paragraph of a statement, one can exceed the speed of light or the speed of sound. It is particularly unlikely when one considers that no architects have been appointed, no applications have been lodged and no real action has been taken in this area.

The Government has committed itself to making State lands available on four separate occasions in recent times. Given that it is problematic to make State lands available in several areas, not least in west Cork, the problem will not be entirely solved in that way. We need prompt action. It is clear that the Government's target will not be met until the houses have been built. As of this evening, the 10,000 units to which the Taoiseach committed himself two years ago have yet to be delivered. Who will build them? I know that we are in the Yuletide season, but I do not suspect that Santa Claus will deliver the 10,000 houses. When one considers the manner in which this issue has been handled, it is no wonder Government advisers are being paid €1,200 a day. One will need to pay one's communications advisers that much money if one expects them to put a spin, or a certain interpretation, on the grossly inadequate and unprofessional manner in which the affordable housing issue is being dealt with.

I welcome the Minister of State to the House and congratulate him on negotiating a fantastic package in the budget.

He mentioned some absolutely staggering figures in this regard and alluded to the multiannual funding arrangement being put in place, amounting to €6 billion over the next four years. Both the Opposition and Government have recognised that the solution to the housing deficit lies in increased supply. A number of measures have been taken in recent years to ensure that a sufficient number of houses comes on stream to deal with the deficit.

I welcome this Bill particularly because it affords a choice to those who are trying to buy a home and to local authority tenants. It also affords an opportunity to local authorities to roll over their housing stock much more quickly than they could otherwise do. They can improve the quality of the housing stock. This is just one of a range of measures to ensure that the supply is adequate.

Senator Browne mentioned Dublin. I particularly welcome the housing proposals affecting Dublin City Council. One such proposal is to allow local authority tenants in flats to purchase their properties. Certain issues that arise in this regard must be addressed, including those associated with maintenance and titles to the properties, but they can be worked out.

Some families in my constituency of Dublin Central have been living in complexes of flats for three or four generations. The present economic conditions are such that a couple who have raised their family are in a position to purchase an asset in which they have lived most of their lives. I would welcome any initiatives that could be taken in this area by Dublin City Council. I remember the Dublin millennium deal of 1988, which allowed tenants of Dublin Corporation to purchase their houses at a reasonable price. There was a very slow take-up of this scheme because many of the relevant details were unclear. Those who did take up the offer were extremely lucky and those who did not were kicking themselves some years later when property prices tripled and quadrupled over a short period.

When we examine the progress that has been made, particularly in local authority areas, we will realise that certain areas have changed completely in the past ten or 15 years. Some local authority estates had a name for antisocial behaviour but their reputations have improved. I congratulate Dublin City Council on its estate management policy, which has improved conditions so much that properties in many local authority estates are now highly sought after. These estates are settled areas with strong communities and have all the necessary facilities.

Such initiatives can lead to problems in some cases in that children of people who have a long established connection with an area and who want to buy their first property are not able to compete with other bidders because of high prices. Speculators are buying properties for rental purposes in what are ostensibly local authority estates.

In Dublin, particularly in the inner city, a considerable anomaly arises in that tenants in Dublin City Council developments are paying perhaps €30 to €50 per week for a flat while others, who are literally living within yards of these developments, are paying hundreds of euro per week to rent or buy private apartments. This must be addressed. This Bill will help to alleviate the problem because it will allow the private institutions to become more involved in the local authority areas. This can only be welcomed.

The aforementioned anomaly exists not only in Dublin but in most large villages, towns and cities, wherein settled communities that have been present in those locations for a long time, and which have all the necessary facilities, are outpriced because of the existence of new developments. I recall a survey that indicated that the average stay in an apartment in Dublin was two years. There should be a balanced approach to the regulations that pertain to these areas.

This legislation prevents unscrupulous tenants and speculators from making profits on the back of local authority investment, thus protecting taxpayers' money. When we consider the improvements in the standard of local authority housing, we will conclude that it is understandable that steps should be taken to protect investment. In this regard, I particularly congratulate Dublin City Council on its recent strides to improve its housing stock. The design of local authority housing and the materials used therein is top-class, particularly in accommodation for senior citizens.

Perhaps the Minister of State will consider examining the voluntary housing sector. Dublin City Council has worked very closely with voluntary organisations in this regard. Generally, there is no coverage for somebody buying back accommodation under a voluntary housing scheme. If Dublin City Council or a local authority is involved, there is such provision.

I welcome this legislation because it increase people's choices in respect of housing.

To the extent that the legislation is necessary to address the problem to which Senator Brady has just referred, I welcome it.

How did the Minister of State compile the statistics that indicate there is a five-year supply of serviced land remaining nationally and an eight-year supply of such land in the Dublin region? What do the figures mean? We are now building approximately 70,000 houses annually. Therefore, if the national supply of serviced land is to last for only five more years, there is only enough serviced land for another 350,000 houses. Is the land in question zoned and serviced with roads, footpaths, lighting and sewerage systems?

It is zoned and ready for development.

There are about five years left. If we are building an average of——

Not "left", but available.

The Minister of State will have an opportunity to reply at the end of the debate.

I was trying to be helpful.

If no more services are being provided, there are only five years left before the supply runs out.

I am delighted that the Minister of State clarified that supply and demand will dictate house prices. It took two Bacon reports to tell us how to reduce house prices. The Minister of State outlined how to do so in a few lines and stated that the Central Bank has predicted that an increase in supply will have a dampening effect on house prices. The Opposition has been saying this for years.

I wonder how productive the Bill will be in terms of claw-back. Some years ago, a Government introduced a scheme whereby tenants in local authority houses were given £5,000 to move out and obtain alternative housing. I do not know which Government was responsible but it may have been led by Fine Gael.

There should be an incentive for people to move on and better themselves. Under this system it seems the claw-back would be so great that it would be counterproductive and they will not move on. It would be a retrograde step to prevent people from moving on and improving themselves. Will the Minister of State clarify this point before making a final decision on it because many people who avail of the affordable housing find after a few years that they may be in a position to better themselves? Had they been able to afford to buy their house before then it would have appreciated so it would probably do them a disservice if the claw-back is too high. The claw-back should be flexible and should not prevent people from moving forward because if they do move on, an affordable house becomes available for somebody else whose need may be greater.

I welcome the Minister of State to the House and particularly welcome this short Bill. The Minister of State spelled out clearly the improvements and developments that have taken place around the country. Many local authority members have pursued the issue of affordable housing for many years. Several former local authority members are now Members of this House. They saw the need for affordable housing. Some local authority tenants' circumstances and employment prospects have improved and they are now in a position to purchase houses in private estates built at an affordable cost. This is very welcome because if that arises it will make houses available for tenants in local authority estates.

We must also consider the housing schemes provided by agencies such as Respond for people who have been on local authority housing lists. There is a ruling that those tenants may not buy out their houses which in the long term is not good for the estates. Whether a local authority estate or respond development, houses are better maintained when people own them. The maintenance costs in many estates of which I am aware are substantial and will continue to be so if we do not allow people to buy out their houses.

The Minister of State commented on the money being made available for housing. Irrespective of how many houses we build or what type they are there will always, unfortunately, be families on a waiting list. That has always been the way. I was a member of a local authority for several years and at one stage we had almost more houses than applicants for them. This was in rural Ireland. The scene changed as family situations changed and in some cases, following marriage break-ups, two houses were needed where formerly there had only been one. We have dealt with that.

Opposition Members shout about the need for more housing and more land. Some years ago the then Minister for the Environment instructed the county manager in my county to dispose of land we required for housing; we paid a high price later in trying to build up our land bank when the Department gave us money to provide housing for the many people on our waiting list. When money was tight the councils were instructed to dispose of land and had no option.

Sections 1 and 2 refer to the 20 years of residence. If people buy a house at an affordable price, 20 years is fair. After ten years there is a 10% reduction each year which is welcome. We have all seen situations where people bought out houses from local authorities under a purchase scheme many years ago. They bought at a knock-down price and shortly afterwards sold the houses and made substantial money on them while the council had people in flats and apartments looking for houses. Those sections are very important because we should make every effort to allow people who wish to purchase a house to get their first home. Everyone wants to own their own house. I welcome the Bill for that reason.

I also welcome the references to the banks and their involvement. I hope they will give money to people to purchase houses but I hope they will not repossess and sell those houses in the future if the economy tightens. They did that in the past when at least local authority members could help those who had borrowed money from the authority. They could talk to the managers in the banks who were available to discuss genuine hardship cases but lending institutions now get their money when they want it and show little mercy to anyone.

This Bill is welcome and much needed. If young people are in a position to purchase an affordable house that will ensure they can raise their families there. I thank the Minister of State for his work in the Department and the amount of funding he has made available to local authorities for housing schemes around the country.

I thank all the Members for their comments and general support for the Bill. We all share Senator Browne's views on affordability but "affordable" often means whether one thinks one house is affordable by comparison with another. Just because I bought a house 20 years ago does not mean I think it is affordable. To measure affordability one must look at some of the estates where these units are built and compare the price of an affordable house to one sold privately by the developer. If one gets a house for €200,000 and somebody else buys a house across the road for €290,000 then one is not doing too badly.

Affordability can mean different things. There is an affordability index, which is not published, although different exercises have been done with regard to it. What is affordability? If one were to say price does not matter, one would be rubbished. It is affordability that counts, and the normal test of affordability is the percentage of disposable income which goes towards one's mortgage.

Houses are slightly less affordable than previously, but it depends on the year under review. Houses are more affordable today than in 1992. Again, if I said that outside this House, I would be rubbished. However, it is a fact. We had a general election 1992 and interest rates were at16%. People were paying enormous mortgages. An extremely high percentage of take-home pay and disposable income went towards mortgages. We experienced devaluation in 1993 and mortgage rates went way down. Suddenly houses were much more affordable. The graph has been up and down. Houses are less affordable than in 1993 but more affordable than in 1992. The best test is what percentage of one's disposable income is spent on one's mortgage. If it was not for historically low interest rates we would be in big trouble. It is not fair that developers got the huge dividend from the fall in interest rates. However, that is life.

Senator Browne mentioned that affordable housing is generally perceived as being for people who are socially disadvantaged. That perception is wrong. Social housing is for people who are socially disadvantaged. Affordable housing is private housing for people in a particular income bracket who want to buy their own homes and who always would have bought their own homes, but are under pressure and need State assistance. It is for individuals in a particular income bracket of average industrial pay or slightly lower, not for those who are socially disadvantaged.

I release a lot of facts regarding what is built and what is undertaken. Certain people in the media and in both Houses continue to misrepresent the Department. There has been much hype about the figure of 315 houses, now 390, that have been delivered under part 5 of the scheme. That is one of four affordable housing schemes. A total of 2,600 affordable houses were built last year, and hopefully it will be a similar figure this year. Those houses came under the shared ownership and 1999 schemes and are well established at this time. The figures of 315 and 390 are from the part V scheme, which, like all schemes, has been slow to get up and running. There is no magic wand in housing. It can take up to three, four or five years from the time a policy is determined to the time it is fully established. This applies in the case of any developer, whether he is building private, social or affordable housing. It can take approximately four years from the day he gets the site to the day he hands over the keys.

Senator Browne spoke of 52,000 people on waiting lists. I do not know where he got that figure. The correct figure, which I acknowledge is high, is 48,000.

The abolition of and reduction in stamp duty will help considerably. Young people, as potential buyers, are extremely pleased. Media reports now say the cost of second-hand houses is jumping up as a result. I remain to be convinced of this. Until recently, the deposit and stamp duty discouraged first-time buyers from buying second-hand houses. They have been concentrating on the new house market. Approximately 40% to 45% of new homes are bought by first-time buyers. Changes to stamp duty will encourage some first-time buyers to move into the second-hand market and there will be a certain rush of interest in that area. The corollary of this is less pressure in the new house market. We cannot have it both ways. If there is a rush of people from one market to another, there will be more pressure for second-hand houses but less pressure for new houses. It should balance out after a few weeks or months. Those measures are of great benefit.

The average price of a house in Dublin may be over the limit of €317,500, but that represents the average price of all houses whether new or second-hand, including those which are extremely expensive. It includes the new house which sells for €1 million and the second-hand house which sells for €3 million. They are in the mix of this average. Unfortunately, there is no published figure stating the average price of a starter home in Dublin. While the average price may be over €317,500, the average price of a starter home certainly is not. On the north side of the city, with which I am more familiar, plenty of starter homes are priced well below that average. In my job I have the pleasure of opening many new housing estates. I was in Balbriggan a few weeks ago opening an estate of houses priced between €140,000 and €160,000. There was no publicity about it whatsoever. These were starter homes and looked lovely. People will only talk about the price of the average home. However, that price includes mansions and new and second-hand homes bought by people with plenty of money.

Senator Kitt spoke about the overall housing market. It is about supply, supply, supply. Some 69,000 homes were built last year. That figure will be in excess of 75,000 this year, although some have predicted 82,000. We will probably have the final figure by early February. Throughout the 1960s, 1970s, 1980s and into the early 1990s, the figure wandered up and down between 20,000 and 30,000. In 1993, 22,000 homes were built in Ireland. In 2004, 68,000 homes were built, and 75,000 will be built this year. This is an enormous figure. No other country has managed to increase its house production to such an extent. There is an international index which shows the number of new homes per thousand of population. We are building just under 19 new homes per thousand of population per year. Spain and Portugal are next, the UK is at three, and Sweden is at one. The census, on which constituency revisions are based, shows the population increased by 8% in the six-year period up to 2002. I do not know of another country whose population — I am not referring to the population of a city or suburb — increased by that amount.

On further analysis of those figures, the number of people in the 20 to 35 years age group, the key age group for household formation, increased by approximately 18% in that six year period. Many of the people in that age bracket emigrated in the 1980s when they were aged 21 or 22 years and lived with their parents. They returned ten or 12 years later with a husband, wife, boyfriend or girlfriend and possibly a baby seeking to buy their own home. The rise in the population and in that particular segment of it is contributing to our Celtic tiger economy. They are all young, healthy, busy, working and that is marvellous, but the increase in population has exerted major pressure on the demand for housing. In many ways such pressure is a negative by-product of the booming economic growth here over several years. We are getting there when house figures have increased from 22,000 to 75,000 in ten or 11 years, which represents a sharp increase.

Senator Kitt referred to the claw-back charge. It is right and proper to provide for such a charge. People are being given a site or a house at a much reduced value. The claw-back charge applies in the event of the resale of an affordable house. It is necessary to guard against profiteering. The Bill will enable the claw-back charge to be secured, irrespective of whatever source of finance is used. A person is given an affordable house at a value minus the cost of the site or at a value where the cost of the site is much reduced. It is appropriate to claw back that value if the purchaser sells the house. The full value can be clawed back if the house is sold within the first ten years following which a sliding scale will apply for up to 20 years.

Senator Kitt applauded the work of local authorities in regard to social housing. In this context, the performance of some local authorities has been good while that of others has not been so good in recent years. We are agreed that local authorities require certainty of funding and a multi-annual approach to it. In the past local authorities were often advised in January, February or March of the number of houses they could build in that year, but that approach is no good. They need to have a long-term view of what they can build. In more recent years local authorities have been given a four-year multi-annual programme, whereby they know what they will be allowed to build and what they agree they can build. We are putting in place secure funding for local authorities. Those two measures have been introduced together with the introduction of action plans, which will provide local authorities with plans for the next four or five years. The capital envelope for this area is €6,000 million up to 2009 which should result in a great deal of good work.

Reference was made to an article on this area in one of yesterday's newspapers. Many talks are taking place. As well as the four affordable schemes, we are exploring other proposals with the industry. There is no announcement on that, but different possibilities have been suggested and different proposals are being examined. A task force comprising of the four managers of the local authorities in Dublin has been set up and it is working with the industry exploring if there are other ways of maximising and bringing forward more quickly the supply of affordable homes which could be sold directly by the developers or the builders to house buyers rather than through the local authority system.

In regard to the price of land, the All-Party Oireachtas Committee on the Constitution prepared a report, I do not know if it has been debated in this House. It will probably be debated in both Houses together with the Goodbody report and the NESC report, which have not yet been but are due to be shortly published. A commitment was given in the other House that when those three reports are published there would be a detailed discussion on them. I believe that will happen soon. These reports, when published, will go into all aspects of housing, the price of land, the hoarding of land and other related issues.

Senator McCarthy referred to the withering rule. We changed it two years ago to encourage an increase in the supply of houses. There was talk two years ago that builders were going to run out of planning permissions, of which they had built up a fair stockpile. They only had a two-year lifespan at that time. We could have become involved in a major argument with the building industry but we changed the rule and gave those applications the longer life that would apply to a normal planning application in order to encourage an increase in the supply of houses. On a temporary basis that measure reduced the dividend coming forward for social housing. I accept that, but it resulted in an increase in the supply of houses. No success would have been gained from having a war of words with the building industry which would have resulted in no houses being built. We made a judgment call which delayed the dividend coming forward, but that resulted in our getting a good supply of houses. With the provision of 68,000 to 75,000 houses, it is not a buyers' market yet, but it is getting close to it.

I am not sure whether Senator McCarthy deliberately mixed up the Part V rule with measures under Sustaining Progress. The shared ownership scheme, the 1999 scheme, the scheme under Part V of the legislation and the scheme under Sustaining Progress are the four schemes in this area. The Senator referred to the provision of 315 houses under the Part V scheme. Some 390 houses have now been produced under it, work on more than 1,800 is in progress and deals are being negotiated in respect of 2,700. While the figure of 300 is miserable, some 1,800 houses are under construction. By next year the number of houses produced under Part V will be substantial and by the following year provision under that scheme will be in full flow. It takes a while to have completions. For good or bad, two years ago builders laid many foundations, built up the walls and left the houses in that state and thereby avoided paying the levy. Then the withering rule was extended. The planning permission for most of the houses that have come forward this year and last year were secured three or four years ago. That is the reason the dividend from Part V has been slow up to come forward up to now. The 1,800 houses under construction may not all be finished next year, but most of them will be. The provision under Part V will also be good from next year onwards.

Under the scheme under Sustaining Progress State lands have been offered in this respect, namely, some 70 patches of such lands. None of the houses proposed to be built on those sites have been started, but that announcement as part of the pay deal under Sustaining Progress was made only 16 or 17 months ago. They cannot be a burden on the Exchequer. The advertisement in respect of the St. Bricin's Hospital site as part of a proposed development for O'Devaney Gardens has been placed. Advertisements have also been placed in respect of Jamestown Road and Infirmary Road sites. The Harcourt Terrace site involves a land swap. Advertisements issued have sought for expressions of interest. Progress is being made. It will probably be 2006 before a sizeable number of those lands become available but they will become available. The first step is to acquire the site. We have identified the sites for in excess of 10,000 houses. Once the sites are established, we can plan ahead and start things moving. Much of the land in this regard is in other use and much of it is not serviced or zoned. It will be a few years before some of it becomes available. We are working on a number of sites and there might be a small dividend from that next year. It will probably be 2006 before most of those sites become available, but they will become available.

Senator Brady referred to the sales scheme and what Dublin City Council has in mind in that respect. I believe in that scheme. Right-wing economists and such like think it is stupid to sell our housing stock. Those on the left are now objecting to Dublin City Council's plan. It is quite extraordinary that for different reasons the two extremes of the political divide have reservations regarding sale schemes and that most sensible people in between support them. When the NESC report is published, and it examines the issue in some depth, those who support sale schemes might be needed.

One cannot have a sale scheme involving voluntary housing. I hear objections all the time from people in such housing who would like to buy. However, the housing associations, perhaps dominated by the big ones, are very strongly against allowing their tenants to buy. Tenants in smaller associations down the country should lobby through their housing association for more flexible arrangements. The Irish Council for Social Housing, which represents voluntary housing, has very strong views and is against tenants buying out units. Some of them should have been co-operatives.

Senator Paddy Burke stated that there should be an incentive for people to buy their affordable houses. However, an affordable house is for somebody who cannot afford to buy a house on the open market because his or her income is too low. The State gives such people a site free or at a much reduced price. If they do better later in life they will be able to sell, pay the claw-back and buy a house on the market. I accept that in five, ten or fifteen years paying the claw-back might restrict entry into the private market. However, nobody comes to affordable housing if they are able to buy on the private market.

The Senator was not referring to 1985. That was a different issue involving a scheme introduced by the Fine Gael-Labour Party Government. That scheme seemed like a good idea at the time, given that houses cost approximately £22,000. In Dublin people were given £5,000 plus mortgage interest relief. Many people got a lump sum of £8,000 to buy a house at £22,000. The scheme was so successful that people were handing back their keys to local authorities at a rate of knots. It created a huge supply of local authority accommodation. In my constituency there were approximately 300 vacancies in a certain flat complex and there was nobody to whom to allocate them. It was so successful that it denuded estates of anybody who had a job and left behind people who did not have a job. It was a well-intentioned scheme and I probably thought it was a good one when I first heard about it. However, it did much damage and it took many estates years to recover lost ground. The affordable housing scheme is totally different.

Senator Moylan spoke about the Respond Housing Association. I have dealt with that. Senator Kitt mentioned the lending institutions. He must not have a very nice bank manager. I do not believe there are many repossessions in Ireland. I am told that house repossession in Ireland is one of the lowest in Europe. It may be that the Senator knows of one or two cases where there was not much understanding. If people get in contact at an early stage, most financial institutions are reasonable provided MABS or some other organisation is helping.

I am sorry to be so long-winded. There were many points to be responded to. I thank Senators for their support and co-operation in dealing with this Bill so quickly.

Question put and agreed to.

When is it proposed to take Committee Stage?

Now.

Agreed to take remaining Stages today.

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