The Government’s 2011 Housing Policy announced the standing down of all affordable housing schemes in the context of a full review of Part V of the Planning and Development Acts 2000-2013. Details regarding the review are available on my Department’s website at the following web link:
I expect to be in a position to finalise future policy approaches and actions in relation to affordable housing in the near future. Under the shared ownership scheme, a house is acquired by a local authority and leased to a shared owner, who purchases at least 40% of the value of the house and rents the remaining equity from the local authority. The local authority finances the transaction by borrowing from the Housing Finance Agency. The shared owner must purchase full ownership within 25 years. The Pre 2003 Index Linked Loan was introduced in 1991. The loan is split between annuity and rental portions. The annuity loan is repaid on the prevailing variable interest and capital basis. Rent is charged at 4.3% on the rental equity balance. The rental equity balance is adjusted in line with the Consumer Price Index (CPI) each year.
In January 2003, the Shared Ownership scheme was changed for all loans taken out from that date. The loan continues to be split between annuity and rental portions. Again, the annuity loan is repaid on the prevailing variable interest and capital basis. Post 2003, rent was charged as follows:
- Rental Equity is treated as a capital loan
- The Rental Equity reduces or increases according to the amount of rent paid over the amount payable on the going interest rate.
- Initially rent is charged at 4.3% on the rental equity balance and is increased by 4.5% on 1 July each year thereafter.
The rent is used to repay the cost of the local authority equity to the Housing Finance Agency and, depending on the level of mortgage interest rates obtaining, may also increase or decrease the capital outstanding on the local authority share at the end of each year. These arrangements represent a significant improvement on the previous terms of the scheme for the shared owner. The main differences in the schemes are in the treatment of the rental equity. In the Pre 2003 scheme, the rental equity balance is index linked to the CPI. In the Post 2003 scheme, the rental equity balance is treated as a capital loan and can be paid down over time if the rent repayments exceed the interest amount due.