Cian O'Callaghan
Question:370. Deputy Cian O'Callaghan asked the Minister for Housing, Local Government and Heritage his definition of an affordable home in financial terms; and if he will make a statement on the matter. [9720/22]
View answerTuesday, 22 February 2022
Questions (370)
Written answers
The Affordable Housing Act 2021, the first ever standalone affordable housing legislation, established a basis for four new affordable housing measures. These measures will deliver on the Programme for Government commitment to put affordability at the heart of the housing system and prioritise the increased supply of affordable homes through (1) delivering affordable homes on local authority lands, (2) the introduction of a new form of tenure in Cost Rental, (3) a First Home shared equity scheme and (4) expanding Part V planning requirements to increase the 10% contribution requirement to 20% and to apply it to cost rental as well as social and affordable housing.
This Act, supported by the unprecedented levels of funding committed to in the Housing for All strategy, averaging over €4 billion annually, will underpin the delivery of affordable housing targets. Specifically, 54,000 affordable homes will be delivered between now and 2030 by local authorities, Approved Housing Bodies, the Land Development Agency and through a strategic partnership between the State and retail banks.
There is no single or universally applicable definition denoting housing affordability. Typically, benchmark figures of between 30% and 40% spending of net household income on housing can be used by policy makers and commentators as ‘rule of thumb’ measures of affordability. However, the limitations of such indicators is also frequently referenced given they do not consider household circumstance and expenditure that may, or may not, arise such as childcare and education costs or tenure type.
Therefore defining affordability is not simply a question of ‘how much is too much?’, and may be better answered by asking ‘how much is too much for whom and in what circumstance?’ This is why our affordable purchase schemes will provide for a household specific assessment of affordability. This strives to contribute to a more developed, responsive and appropriate housing system that offers people real choice for affordable housing when they need it.
Under the provisions of the Affordable Housing Act, each household's capacity to purchase or rent a home in the required location will be considered. Where households are deemed not to be able purchase a home in the private market, or secure a tenancy at the prevailing market rates, affordable housing supports will be made available. These assessments will be informed by the Central Bank of Ireland’s macro prudential rules which have been designed specifically to prevent house buyers from borrowing more than they can afford and to increase the financial resilience of borrowers.
The Local Authority Affordable Purchase Scheme will support purchasers of Local Authority-delivered new homes by bridging the gap between the value of the home and the combined value of the buyer's available mortgage and deposit. Regulations to set out the detailed criteria are at an advanced stage and will be issued in the coming weeks. The first homes delivered through the scheme will be located in Cork City. Cork City Council indicated the purchase prices to be €218,000 for a 2-bedroom and €243,000 for a 3-bedroom dwelling. This will be followed by a Fingal County Council supported affordable purchase development (Dun Emer). Fingal County Council have indicated these will cost €166,000 for a 2-bed apartment and between €206,000 and €258,000 for 3-bed dwellings. A scale up of Local Authority-delivered affordable homes will be implemented under the Housing for All targets.
The First Home shared equity scheme, under Part 4 of the Affordable Housing Act, will primarily support first-time buyers purchasing newly constructed homes on the private market. This scheme will be available at a national level and will incorporate regional price caps reflecting median house price sales. Confirmation of the final details of this scheme is ongoing in conjunction with the relevant stakeholders and it is anticipated that the First Home scheme will be available for applications in Q2 of this year. This initiative is being designed to ensure support is provided to those that, because of the current income levels, cannot secure a sufficient mortgage to meet the cost of a modest newly constructed home in their preferred location.
Part 3 of the Affordable Housing Act provided for the establishment of a Cost Rental sector in Ireland. The introduction of Cost Rental tenancies helps improve affordability and security in the rental market. Cost Rental tenancies rent levels are based on the cost of the provision of homes, rather than being subject to the pressures of the open market. Once tenanted, rents will increase only in line with consumer inflation, remaining stable in real terms, while continuing to cover management and maintenance costs on the properties.
Over 1,500 Cost Rental homes are expected to be developed and tenanted through three delivery strands in 2022: Approved Housing Bodies (AHBs), supported by Cost Rental Equity Loan (CREL) funding; Local Authorities through the Affordable Housing Fund (AHF), and the Land Development Agency (LDA), either on their portfolio of sites, or through Project Tosaigh. All Cost Rental homes will deliver rent prices at least 25% below market rates.
The first 65 Cost Rental homes, delivered through CREL funding, were tenanted in 2021, with 25 at Taylor Hill in Balbriggan and a further 40 at Barnhall Meadows in Leixlip. Both developments delivered cost-covering rents at least 40% below comparable open-market prices within their respective local areas.
Additionally the Help-to-Buy incentive supports first-time buyers in meeting the deposit requirements for newly-built houses or apartments, as well as self-build homes. Subject to the level of income tax and DIRT paid over the previous 4 years, the Help-to-Buy scheme provides a maximum benefit to first-time buyers of €30,000 or 10% of the cost of the newly constructed home. The Help-to-Buy scheme has already helped over 30,000 first-time buyers achieve the deposit required for a new home.
The Local Authority Home Loan scheme commenced on 4 January 2022 and incorporates a lower interest rate, higher income eligibility thresholds for single applicants in Cork, Dublin, Galway, Kildare, Louth, Meath and Wicklow (increasing from €50,000 to €65,000), and more flexibility on house size. The loan can be used for new and second-hand properties, or for self-builds with a maximum value of 90% of market value of a residential property. The maximum market values are €320,000 in the counties Cork, Dublin, Galway, Kildare, Louth, Meath and Wicklow, and €250,000 in the rest of the country.
The Help-to-Buy scheme, the Local Authority Affordable Purchase Scheme and the First Home scheme are designed to assist first-time buyers in meeting the higher costs of newly constructed homes and, in doing so, will increase the volume of new homes being developed. Importantly the CSO reported that housing completions amounted to 20,433 in 2021, a welcome increase over the 2015 reported levels of 7,219. The CSO also report that Commencement Notices for 30,724 new homes were issued in 2021, representing a 42% increase compared with 2020, or roughly the same as the combined reported totals from 2016 & 2017. While these reported figures represent a significant step forward in the Government’s ambition to support the supply of new housing, it remains short of the 33,000 new dwellings annual target under Housing for All. This is why the Government has committed unprecedented levels of funding, averaging €4 billion per year to improve affordability for all families or individuals across society wishing to secure a home.