(Cavan-Monaghan): This is a short and comparatively simple Bill. There are really only three effective sections in it. Section 2 enables the Government or the Minister to pay a subsidy to building societies to enable them to keep down their interest rates. Section 2 says that in determining the amount of the subsidy regard shall be had to the amount of interest payable by the borrowers on loans made to them by the societies and the amount of interest payable by the societies to shareholders in or depositors with the society. The effect of section 2 is to enable the Minister to pay a subsidy to building societies. It would appear from what the Minister has said that the real object of the Bill is to regularise payment of a subsidy already made to building societies this year when a total of £6.934 million was paid to enable the building societies to retain their lending rate at the all-time high of 14.15 per cent.
Section 3 extends to building societies, as I see it, a practice that has already been enjoyed by the Post Office for many years. If a depositor in the Post Office dies leaving a small estate the Post Office can pay out to that person's next of kin the amount standing to the deceased's credit without production of a grant of probate or letters of administration. The Minister here proposes to make that provision apply in respect of deposits held by building societies for deceased persons. I agree with that; it is a sensible thing to do and will save trouble and expense.
Section 4 of the Bill repeals section 12 of the 1979 Act. I think that is being repealed because what is being provided for in that section is now covered by section 2 of the Bill. So much for the Bill itself as it stands and the machinery it provides. It enables the Minister to give subsidies in order to make mortgages more attractive. We have not heard from the Minister that he proposes to do that.
In my experience it has never been more necessary to provide housing finance: never have young married couples and others in search of houses been confronted with more difficulties in paying mortgage interest, in buying and paying for their houses. Since 1977 the average price of a house in the private sector has doubled from £12,000 or £13,000 to £25,000. This means that people seeking mortgages now have to pay huge sums, between £50 and £60 a week, completely beyond their capacity.
The result is that there has been a considerable falling off in house building. That is demonstrated in the plainest possible terms by a drastic fall in cement sales, a fall of 34 per cent. All of that fall in cement sales may not be due to the fall in house building. Some of it is due to stagnation in agriculture and a consequent falling off in farmers' investment in farm building. But there is still a serious falling off in house building.
Another yardstick by which builders' providers can measure activity in house building is the sale of damp proof course materials, and I have been told by people in the trade that the sale of these materials virtually has come to a stand-still since June of this year. That means that though there may be house completions this year, new starts are falling off drastically. The reason is that finance for bridging loans cannot be got. I will have something to say on that later.
People cannot afford repayments of mortgages at between £50 and £60 a week. At a time when unemployment is increasing by leaps and bounds, young married women are being compelled to go out to work in order to pay for the servicing of the huge mortgage repayments I have mentioned. I am satisfied that many of them would prefer to stay at home looking after their homes and young children. Instead, they have to get somebody in to look after the children or deposit their children with relatives or in one of the new facilities now provided in which people will look after the children during the day. That is undesirable in any case but it is doubly so in times of huge unemployment.
All this situation is added to enormously by the falling off in local authority house building. I have not got estimated figures for this year, but it is clear that the numbers of local authority houses will be down substantially, far below the record figures reached by Deputy Tully when he was Minister for Local Government. Furthermore, the numbers of local authority houses at the planning stage at the end of last year were 2,000 fewer than the previous year.
I should have congratulated the Minister and wished him well on his appointment, but I do not envy him his job of trying to clean up the mess he has taken over. I have given the huge increase in the price of private sector houses since 1977. They are not my figures. They were supplied to me by the Department in their quarterly bulletin. In the same period the numbers of local authority houses have been going down and they will be well down when this year's figures are published.
In that situation it is essential that the Minister for the Environment would tackle this problem and provide mortgages at a reasonable rate or, failing that, provide more local authority houses. At a time when there has been such a drastic increase in private house prices local authorities should be building more, not fewer, houses.
An ugly sign has been making its appearance all over the country. New houses which have been standing unoccupied during the past 18 months are bearing "for sale" notices. These signs are visible throughout the country. There is not a town in Ireland in which houses are not to be seen bearing these signs, but they cannot be sold.
It is not good enough for the Minister to come in here and say that interest rates must be reduced. All of us would like to see that. It is not good enough for the Minister to launch an attack on building societies and others and refer to them as reactionary institutions. Every Deputy would like to see building societies reducing their lending rates but we do not want to see them or other lending institutions starved of money nor do we want to see a repetition of the chaos that was created in the Department of the Environment during the year when housing grants dried up and there was a shortage of money on an unprecedented scale with the result that services broke down all over the country. I should like to warn the Minister against doing or saying anything that might result in that situation.
When the 1975 Bill dealing with building societies was going through the House the then Fianna Fáil spokesman on the environment had some good things to say about it. However, he feared that Ministers might interfere in the day-to-day working and running of building societies. He said that would be very bad because Ministers and Departments do not have the necessary expertise to take over the day-to-day running of building societies. Perhaps the present Minister for the Environment did not read the debate of 9 November 1976 or he would have found that lecture given by the spokesman at that time, the present Ceann Comhairle: The Minister should read that speech as he would find it interesting.
I hope the Minister will not take offence at this but he should not run his Department on a political basis and simply request things to be done for political purposes. When he spoke to the building societies the other day he was thinking more about the Donegal by-election than about people who have mortgages or who are looking for housing finance from the societies. At present the building societies are operating on a very tight schedule. They have more applications for mortgages than they can handle. By and large in the past they acted in a reasonable and balanced way. For example, contrary to what many people thought they were able to hold the interest rates without any increase between July 1979 and April 1980. It was generally thought at the time that interest rates would have been increased by about 2 per cent but they did not take that decision. They waited and were able to hold on at the existing rates until April 1980 when they came to the Minister and informed him that it would be necessary for them to increase their deposit rates if they were to remain competitive. The Minister gave them a subsidy which we are now regularising.
As I said building societies have applications for more mortgages than they can handle. The subsidy which the Minister gave them last April has been discontinued and even with that loss of subsidy they are not proposing to increase their mortgage rates. They fear that if they were to reduce their mortgage rate by whatever the Minister wants them to they would have to reduce their deposit interest. In their expert opinion the result of that would be a falling off in investment and deposit income. As a result of the reduction in lending rates there would be a further escalation of applications for loans which they could not possibly handle.
If the Minister looks around his Department he will find that over the last ten years chaos was created there on a number of occasions by impromptu decisions which did not work. The Minister should be thinking of new systems which would enable house builders and buyers to finance the purchase and building of houses. Fine Gael introduced a document last week which was welcomed by a Deputy of the Minister's party, Deputy O'Donoghue, who said he understood it and that it was nothing new, that Fianna Fáil were thinking of introducing the system themselves and when they did he hoped they would not be accused of stealing Fine Gael clothes. The system is a mortgage linked to the current income of the buyer. It is a type of mortgage which enables the proposed State agency to lend up to four times the income of the borrower. At any stage the borrower will not have to repay more than 20 per cent of his income whereas at present the building societies and other agencies are prepared to advance only two and a quarter or two and a half times the amount of the borrower's income and the unfortunate borrower is expected to pay up to 52 per cent of his current income in the early stages of the mortgage. That does not make sense. The question is then how is it to be financed? and that has been spelled out in this House on two occasions already. It is to be financed by 25-year bonds, of course guaranteed by the State, and they would be taken up by pension funds and life insurance money. There is floating around this country about £300 million per year of that sort of money. I would direct the Minister's attention to that type of finance for financing the building of houses and I would recommend him strongly to follow what was stated here by Deputy O'Donoghue on the Adjournment Debate when, as I understood his contribution, he approved of the Fine Gael income-linked type of mortgage financed out of pension funds and life insurance funds on the basis of a return of inflation plus 2 per cent. There is a big market for that type of money at present.
I would like to make one other point on this Bill. One of the great problems confronting house buyers and house builders is bridging loans, a matter which should be tackled seriously. A person can go to a building society and get approval for a loan, but of course he does not get payment of the loan until the house is built or very nearly. That man very often finds himself in the position that he cannot build the house until he gets some money and then he has to get a bridging loan and, for some reason, the lending institution who are prepared to give him the loan are not prepared to give him a bridging loan. If the law needs to be changed then the law should be changed to enable building societies to do just that. If the Minister for the Environment, Deputy Burke, in the short time that will be at his disposal, would tackle that and get that law amended, then he would leave a monument to himself that would be more attractive than a plaque. I cannot understand why a building society cannot make the bridging loan on the same terms as a bank will make it. Surely the bank will not give a loan unless they have adequate security, and if the borrower can provide adequate and acceptable security to a bank for a bridging loan until such time as his title is put in order and the house is built, then that security should be acceptable to the building society or other lending agent. I understand from making inquiries—I did not do any personal research—that the difficulty is that it is not acceptable for the building societies to do that. I repeat that if it is not legal the law should be changed in order to make it legal. I do not suggest for one moment that a building society should lend money on a security that is not a safe one, but the banks are not noted for lending out money to people without acceptable security, and if the security is acceptable to the bank it should be acceptable to the building society, and the rate of interest on repayment should be the same as on the final loan.
That is all I want to say on this Bill. I accept the Bill as it is introduced. It is an enabling Bill in two regards and it has one amending section in it, but let me conclude by telling the Minister that he has a big problem to face. He has the problem of the badly housed people of this country who are looking for houses mainly because we have a young population and because people want a house when they get married. There was a time when people were prepared to live in attics and in unacceptable accommodation and many young women moved into that type of accommodation on the understanding that it was only temporary and that in a year or two years' time they would be provided with an adequate house, but they learned that they were let remain in this substandard accommodation for a very long time. Their daughters are not going to fall into the same trap.
Secondly, I would advise the Minister for the Environment to get on with the building of local authority houses because until such time as the cost of private houses comes down he will want more local authority houses instead of fewer. I tell him also that unless something is done in his Department the unemployment problem will increase and next year he will have a much worse unemployment situation in the building industry than he has this year.
