Mick Wallace
Question:8. Deputy Mick Wallace asked the Minister for Finance his plans for a mortgage insurance scheme for first-time buyers; and if he will make a statement on the matter. [23047/14]
View answerTuesday, 27 May 2014
Questions (8)
Oral answers (7 contributions)
The Government's document, Construction 2020: A strategy for a renewed construction sector, states consideration will be given to the concept of a mortgage insurance scheme. Specific reference is made to the Help to Buy scheme in the United Kingdom. Will the Minister elaborate on plans in this regard?
The Government recently launched Construction 2020: A strategy for a renewed construction sector. The purpose of the strategy is to underpin the future competitiveness of the country, ensuring we will continue to be well positioned to attract the inward investment that has been so important to our economic development. The strategy includes the Government's desire for a return to sustainable levels of mortgage lending as part of a healthy market. This involves the consideration of measures to stimulate the development of housing. In order for developers to be supported, they need confidence that customers will be capable of accessing finance to purchase new builds. This means mortgage products being available to potential purchasers with an ability to support repayments.
In Ireland's recent abnormal housing market we have seen lending volumes decline dramatically. The banks are highlighting the lack of supply of houses in particular urban areas as a contributing factor in the lack of drawdown of approved mortgage facilities. I look on the development of this initiative as being an aid to encouraging and facilitating the supply of new homes, particularly for young families. In other jurisdictions such as the United Kngdom and Canada mortgage insurance markets have been developed to support bank mortgage lending, particularly to first-time buyers. Mortgage insurance allows banks to share the risk of mortgage lending, either with the public sector or private sector insurance companies, with the aim of increasing bank lending in general or to target groups.
My Department is committed under this strategy to examining the concept of a mortgage insurance scheme and how it might benefit new housing completions in the Irish market. The objective of any scheme would be to ensure adequate availability of mortgage finance on affordable terms for new completions, particularly for first-time buyers, as the economy recovers. In doing so we would aim to provide the certainty needed to support greater levels of investment in new housing, with the associated benefits for the construction sector and ultimately for the consumer.
As the construction strategy mentions, my Department is undertaking an economic impact analysis which will assess the impact such a scheme would have on the Irish housing market, taking into consideration time limits, targeting first-time buyers or owner-occupiers and focusing on new housing. The analysis will draw lessons from mortgage insurance initiatives undertaken in other countries and will include questions as to the appropriateness of a price cap as well as regional or geographical restrictions. Once this analysis has been completed and presented to me, I will consider the next steps.
The Minister would surely agree with me that supply is a bigger problem than demand. He might argue that the sort of incentive he mentioned might indirectly increase supply. However, there is a fear now that any Government moneys spent on increasing demand will only facilitate another property boom and the banks. This is difficult to understand, given that the banks would be out of business but for the help they got from the Government and taxpayers. It beggars belief that we cannot tell the banks what to do at any level. We do not seem to be able to encourage them to lend as much as they should without the provision of some sort of subsidy by the Government. The elephant in the room, and the reason supply is so poor, is that the Government no longer builds social housing. Would the Minister agree that the most positive move the Government could make now would be to start a huge social housing programme?
There are more than 70 recommendations in the construction initiative published by the Government, and through the Cabinet sub-committee the Taoiseach will, on a month-by-month basis, ensure these initiatives are introduced and developed. The Deputy is aware that the housing market and the building industry have been in crisis for many years and that they constitute an impaired sector of the economy. Many good builders have had to go out of business. Deputy Wallace understands that there are fundamental rules but, based on comments they have made, many other Deputies do not understand these rules. First, no builder builds a house unless he knows he can sell it for more than it cost to construct it. We have only barely passed that point in some areas in the past 12 months, but have not reached it yet in some parts of the country. Second, a builder must finance the build.
This initiative is not a demand-side initiative, because we are not applying it to second-hand houses. If we introduce this, it will be for new houses only. The initiative in the United Kingdom has increased the supply of new houses outside London by one-third in the two-year period since it was introduced. It is a supply-side initiative, not a demand-side one.
George Osborne's Help to Buy scheme has cost the British taxpayer £12 billion and has led to a serious increase in the price of housing. The Minister is right that a builder cannot build unless he can make ends meet and the project makes a profit. Does the Minister not agree that the biggest problem in Ireland is the land bank accumulation that goes on? It is not the builders that are accumulating land, but a different type of individual. A very small group of people here control most of the development land. Surely the time has come for the State to take an active part in controlling the price of development land.
In his response to Deputy McGrath's question on NAMA and bank sell-offs, the Minister said there was good money coming into the country. I suggest to him that the selling off of big blocks at a price of €100,000 or less per unit will prove problematic.
There are units for which the ordinary individual would have to pay in the region of €230,000 or €240,000. Large investors buying huge numbers of them at a time are getting them for €100,000 or less each. Not only are we selling off valuable assets at a knockdown price, but these people are gaining serious control over the rental market. Never in the history of the State have so few people controlled such a number of units that are available for rent, which is adding to the problem of housing availability and homelessness.
The Deputy is on a different question.
These are considerations that the Government always takes into account. However, we are dealing with a situation in which the whole building industry collapsed for reasons we are aware of. Many good builders can no longer build. We are trying to take initiatives to get it going again. We have succeeded to a great extent by removing the overhang in Dublin through sales of property by NAMA and IBRC, and there are cranes on the skyline again. We are so far away from one of these unsustainable building booms that I do not know why people talk about it. People can only analyse things through the lens of the past. They would want to start looking at the future and ask what we can do to put 25,000 houses a year into this country again when last year we built 8,000. Much of that needs to be done through supply-side measures. I will do an economic analysis on the subject matter of the question, and if I think it can improve supply, I will take action in the Finance Bill; if I think it will not, I will not.