asked the Minister for the Environment the plans he has for dealing with the escalating cost of houses and building land.
73.
Ceisteanna—Questions. Oral Answers. - House and Lands Costs.
8.
asked the Minister for the Environment if his Department have under consideration any plans to counter the huge increase in house prices.
With the permission of the Ceann Comhairle, I propose to take Questions Nos. 8 and 73 together.
I would refer the Deputies to paragraphs 5.15 to 5.19 of the Green Paper on Development for Full Employment. Arising from the proposals in the Green Paper, I informed building societies in August last of the Government's decision that at least 60 per cent of the total funds available to them for mortgages should be allocated in providing loans not exceeding £13,000 each and that at least a further 20 per cent of available funds should be allocated in providing loans of between £13,000 and £16,000. I also informed the societies that certificates of reasonable value should be furnished by all applicants for loans not exceeding £16,000 for the purchase of new houses. The prices of all grant-type new houses and flats provided for sale are also subject to scrutiny by my Department under the certificate of reasonable value system. Accordingly, most new houses and flats are now subject to these controls. The societies are also required to maintain the apportionment of loans as between new and previously occupied houses at current levels.
Over the most recent 12 month period for which figures are available, the average price of houses for which certificates issued increased by only two-thirds of the average increase for all new houses. In addition, the Quarterly Bul-letin of Housing Statistics which will be published shortly by my Department will indicate that the overall average gross price of new houses for which loans were approved by the principal lending agencies in the quarter ended 30 September 1978 increased by 3.4 per cent during the quarter compared to a corresponding increase of 8.4 per cent in the preceding quarter. I am hopeful that the measures announced last August will continue to have a moderating effect on the rising prices of new houses.
I am keeping the general question of house price increases under continuous review in my Department. I think that there is scope for tightening up the CRV system and I am considering what action I can take in the context of the Housing (Miscellaneous Provisions) Bill, 1977, which is now being prepared in my Department. It would be impractical to control the sale prices of previously-occupied houses.
In so far as the cost of building land is concerned, I would refer the Deputies to my reply to Questions Nos. 338, 346 and 363 of 11 October 1978. Since July 1977 I have increased very substantially the capital available for sanitary services with a view to increasing the supply of serviced land. I also increased recently the subsidisable cost limit on each developed site provided by local authorities from £900 to £1,500 so as to encourage the provision of modestly-priced private houses.
Is it not a fact that in the year from June 1977 to June 1978 prices have risen by as much as 32½ or 33 per cent? Is it not also a fact that the prac-tice of gazumping in one way or another is widespread and that there must be some way in which statutory control of this practice can be established? The measures taken by the Minister so far have not been effective? Would the Minister not agree——
The Deputy has asked a question and should allow the Minister to answer.
As a result of Government action in August 1978 the rate of increase in the price of houses, relatively speaking, has reduced considerably.
In connection with the certificate of reasonable value, is it possible for the Minister to fix prices, to establish the price of the house? Is it possible to do that?
It is not, because many factors have to be taken into consideration in the issuing of a certificate of reasonable value.
In view of the fact that the price of housing, as has been admitted, has increased by 33 per cent and that the price of both material and labour has increased by only 7 per cent, what accounts for the 26 per cent increase?
Factors which have directly affected house price increases over the past year or so include growth in demand for private houses fuelled up to recently by increased availability of mortgage finance, escalation in the cost of serviced land, scarcity of skilled labour accentuated by an unprecedented increase in house improvement works, the tendency for builders to incorporate kitchen equipment and built-in furniture and to build a better type, better quality house, a certain degree of trading up in the market, the fact that between early 1974 and mid-1977 the rate of increase in house prices lagged well behind the rate of increase in wholesale prices generally—that leeway has now been made up—and increases in disposable incomes. All these factors contributed.
Houses were cheaper under the Coalition.
No. In the year ended 31 March 1974 the cost of house building increased by 36 per cent. The only effective controls over house prices were introduced by Fianna Fáil.
(Interruptions.)
Order.
Despite the deluge of statistics and goodwill in the Minister's reply, is it not a fact that the prices of new houses increased in the order of 25 per cent more than building costs during the period to which the Minister referred?
That question has been answered.
The question also refers to the price of building land and we did not hear anything in the Minister's reply about that. Is the Minister aware that prices for new houses for which loans were approved by building societies in the 12-month period to which he refers increased by 44.1 per cent, that prices for new houses for which loans were approved by insurance companies rose by 37 per cent and that prices for houses for which loans were approved by the associated banks rose 37 per cent? How can the Minister justify pretending to tell us that there is a satisfactory position regarding house prices at present in the light of those facts? Secondly, would he comment on the situation now prevalent regarding the price of building land when in the Dublin area building land sold in recent weeks for £120,000 an acre?
There are many questions on the Order Paper relating to the same subject and I do not want the Deputy to anticipate them.
The question is quite specific.
A last supplementary, please.
What about a reply?
The Minister may reply.
I said in my original reply that as regards the cost of building land I would refer the Deputies to my reply to Questions Nos. 338, 346 and 363 of 11 October 1978. Since July 1977 I have increased substantially the capital available for sanitary services with a view to increasing the supply of serviced land. Recently I increased also the subsidy cost limit on each developed site provided by local authorities from £900 to £1,500 in order to encourage the provision of modestly priced private houses. In addition, the Kenny Report is under active consideration by the Government. This report was commissioned by the previous Fianna Fáil administration but the Coalition Government did nothing about it.
I did not mention the Coalition Government or the Fianna Fáil Government. I am not interested in playing politics with the housing situation.
I am calling Deputy Quinn.
I wish to ask the Minister a final supplementary. Is he willing to set up an inquiry regarding house costs and building costs?
I have called Deputy Quinn.
The Minister of State gave a very lengthy reply to a couple of two-line questions. In his reply he stated that part of the reason for the excessive in-crease in the price of houses over the building increase was due to extra demand. In view of his own statement, will the Minister state if it is still the Government's policy with regard to people who have applied for local authority housing and who are on the housing list to try to push them out of the local authority housing sector and into the private sector, thereby increasing the demand?
There is a later question on those lines.
More money has been made available to local authorities this year in order to rehouse people in need.
If that is the case, why have so few houses been built and why is the Minister so disappointed with the performance?
That is a separate question.
Is the Minister aware of a report published by the Economic and Social Research Institute showing that under Fianna Fáil there has been no increase in the volume of house building and that any money provided has gone into higher prices for houses and, as the Minister's reply divulges when read carefully, into higher profits for builders?
I have not studied that report.
9.
asked the Minister for the Environment if, in view of the failure of private enterprise to meet the housing needs of the middle income group, he will extend the financial resources available for local authority housing, and bring the eligibility rates up to a more realistic level in accordance with the recent rapid changes in the value of money.
As regards the financial resources available for local authority housing, I am satisfied that the public capital programme provision of £80.77 million in 1978 is more than adequate to maintain a satisfactory level of activity on the local authority housing construction programme, commensurate with current housing needs. Loan charges on this programme are met in full by the Exchequer.
The level of activity on the programme in 1979 will be determined in due course by the Government's decisions on the 1979 public capital programme allocations.
In so far as the local authority house purchase loans scheme is concerned, the Government, since they assumed office, have twice increased the amount of the maximum loan. The loan limit was increased from £4,500 to £7,000 and the yearly income limit from £2,350 to £3,500 with effect from 26 May 1977. The loan limit was again increased to £9,000 with effect from 1 September 1978. Provision of £40.7 million was made in the capital budget for 1978 to meet the increased expenditure on house purchase loans. This compares with an expenditure of approximately £17 million in 1977. The commitment to keep the income and loan limits under review has been and will continue to be met.
In so far as the overall house purchase position is concerned, I would draw the attention of the Deputy to the fact that the number of house purchase loans approved by the principal lending agencies in the first six months of 1978 increased by 25 per cent over the number approved in the same periods of 1977 and 1976. I do not consider that this can be regarded as a sign of failure.
Is it not a fact that according to the Green Paper there will be a cut in capital expenditure for housing, not an increase? Further, is it not true that inflation has driven a coach and four through all the grants which the Minister has pointed out have been increased? The £1,000 grant is not worth as much as when it was first granted by Fianna Fáil. In the circumstances, will the Minister not increase the eligibility limit in order to bring it into line with the inflation rate and also change the attitude towards the £1,000 grant which is a negligible figure in the cost of a house?
The position is that inflation has had a certain impact on the cost of houses and on the allocation of money for housing. We must bear in mind that the increase in the public capital programme for housing was substantial as compared with the 1977 level. We must not forget that were it not for the £1,000 grant the position would be far more serious.
The Minister mentioned a figure of £80 million. Is it not the position that the local authorities asked for £100 million and that in a circular dated 31 August 1978 the Minister declined to give that amount? In view of that publicised information, is the Minister happy with the capacity of the local authorities to meet their housing needs in the coming year?
As far as I am aware, the local authorities are reasonably satisfied with their capital allocation for 1978. It is a substantial increase over the figure for 1977.
I have two questions to ask the Minister. First, is not the most vital question here the total public capital expenditure on housing as a percentage of total public expenditure? In that context, is the Minister aware that the percentage of total capital expenditure on housing since 1976 has been in continuous decline from 11.89 per cent in 1976 to 10.89 in 1977 and to 10.55 per cent this year? Despite the inflated cash figures mentioned by the Minister, local authorities have less money now to spend as a percentage of total capital expenditure than previous years. Is that not the position?
I do not agree with what the Deputy has said. The question spoke of "the failure of private enterprise to meet the housing needs of the middle income group". The Government are meeting the needs of this group.
Does the Minister not accept the figures I gave? I can assure him they are accurate. The question spoke of bringing the eligibility rates to a more realistic level. Is the Minister aware of the growing concern of people who are endeavouring to get loans from local authorities? They are in an impossible situation because the income limits are so low that the amount of loan they get is almost irrelevant to the price of a house. The number of people who will benefit from such loans in decreasing. Will the Minister indicate what response he will make in that area?
I indicated in my reply that the loan limit was increased from £4,500 to £7,000 and the yearly income limit from £2,350 to £3,500 as from 26 May 1977. The loan limit was again increased to £9,000 with effect from 1 September 1978. The eligibility limit and the amount of loan are being kept under review.
The amount is irrelevant when compared with the cost of the house.
The Minister mentioned that a sum of £80 million was given to local authorities when they had asked for £100 million. He said that they were satisfied with the amount of money they got. Is he quoting from official replies from the local authorities? Have they written to thank him for the £20 million shortfall in the amount they asked?
I said they were reasonably satisfied.
Will the Minister state how this reasonable satisfaction was expressed?
It was expressed in terms of the number of houses built this year. I hope that by the end of this year, despite various difficulties in the building trade during the year, more than 26,000 houses will have been built.
Am I right in assuming that the Minister assumed that the local authorities were reasonably satisfied but that the local authorities themselves did not express reasonable satisfaction at the amount of money offered? Is that the correct assumption?
The Deputy will appreciate that no matter what allocation is made one will never satisfy everybody.
That is not the point.
Deputy Quinn is remaining on his feet all the time.
I am sorry; that is discourteous to the House. I felt I was misled by the Minister when he stated that local authorities were satisfied with the amount of money they had received when in fact his qualification now is that he considers that they are reasonbly satisfied.
Deputy Mitchell.
Might I ask one final supplementary arising on this specific point? If the Minister makes the assumption that they are reasonably satisfied because they are building a number of local authority houses could he explain why it is that the senior Minister in the Department of the Environment expressed grave disappointment at the number of local authority house completions this year? Further, can he say if there is any discrepancy between the point of view expressed by him and that expressed by the senior Minister, as recently publicised?
The Deputy is aware that there were and are numerous problems in relation to the construction industry such as the availability of materials and labour problems. As I indicated, the number of houses that will be completed this year will show a substantial increase over and above last year. Also I did not say the local authorities were satisfied; I said they were reasonably satisfied.
Is the Minister aware that the £9,000 SDA limit will now cost house purchasers something in the region of £130 per month to repay? Does the Minister consider it realistic that persons earning £67 per week should be asked to pay such high amounts? Is the Minister not aware that it is self-evident—in view of the way housing prices have got out of control—that the Government must, as a matter of urgency, increase the £3,500 income limit?
As I said, this matter is under review.
Question No. 10.
The Minister says the matter is under review. When are the hard-pressed house purchasers to know the position?
Deputy, please, we must make some progress.
(Interruptions.)
When will there be a decision taken if it is under review? For instance, when are mortgages going to be subsidised?
Question No. 10.
Would the Minister ac-cept responsibility for the historically high level of mortgage interest rates?
Deputy, please. Question No. 10.
10.
asked the Minister for the Environment the most up-to-date information regarding increases in house prices, in both percentage and money terms, over the last 12 months and broken down for each three month period since June 1977.
As the reply is in the form of a tabular statement, I propose with the permission of the Ceann Comhairle, to have it circulated with the Official Report.
Following is the statement:
Increases in House Prices
|
Quarter ended |
New Houses |
Other Houses |
||
|
£ |
% |
£ |
% |
|
|
30/9/77 |
1,001 |
7.0 |
704 |
5.1 |
|
31/12/77 |
477 |
3.1 |
461 |
3.2 |
|
31/3/78 |
1,848 |
11.7 |
271 |
1.8 |
|
30/6/78 |
1,480 |
8.4 |
2,313 |
15.2 |
|
30/9/78 |
650 |
3.4 |
1,165 |
6.6 |
|
Year ended30/9/78 |
4,455 |
29.1 |
4,210 |
29.1 |
Notes:
(1) These figures relate to increases in the average gross price of houses for which loans were approved by the main lending agencies.
(2) The houses concerned are not necessarily comparable from quarter to quarter or from area to area; this applies particularly in areas where the number of loans approved in a quarter may be relatively small and the average prices influenced significantly by individual housing schemes. Further, the average price may be influenced from quarter to quarter by changes in the distribution of loan approvals among the agencies.
Thanks be to God for tabular statements.