Dáil Éireann díospóireacht -
Thursday, 7 Nov 1985

Vol. 361 No. 7

Housing Finance Agency (Amendment) Bill, 1985: Second Stage.

Minister for the Environment (Mr. Kavanagh)

I move: "That the Bill be now read a Second Time."

The primary purpose of the Bill now before the House is to increase the limit on the amount the Housing Finance Agency may borrow from the level of £200 million set in section 10 of the Housing Finance Agency Act, 1981, the Act which provided for the establishment of the agency. A number of other technical amendments regarding the agency's borrowings are also proposed.

The Housing Finance Agency, since its establishment in 1981, has become a major force on the Irish housing scene. It has enabled thousands of people who might otherwise have been unable to do so to purchase a home of their own, and in doing so, has made a substantial contribution to the housing programme and greatly assisted the house building sector of the construction industry.

As Deputies will be aware, the setting up of the agency was a major innovation in the financing of house purchase. The agency borrows on an index-linked basis from institutions such as life offices and pension funds and channels these resources into housing in the form of loans which are repayable on an income-related basis. The demand for this kind of mortgage scheme may be judged from the rapid growth in the level of lending — from £55 million in 1983, its first full year of operation, to £72 million last year.

This year demand has been boosted by the remarkable success of the new scheme whereby a £5,000 grant is available to persons surrendering local authority houses to the authority which provided them. As a result increases totalling £15 million have already been made in the agency's capital allocation. I am happy that I have recently been able to increase the allocation by a further £6 million bringing it to £86 million for the year. This amount will ensure that funds will be available to meet the demand for loan payments as they arise.

The provision of this level of funding to the Housing Finance Agency, especially when seen in conjunction with the continuing provision of substantial funds through the SDA house purchase loan scheme, is evidence of the Government's continued commitment to ensuring an adequate supply of mortgage finance from public sources to lower-income borrowers. The Government recognise the long-standing preference of our people for owning their homes if at all possible. In making available this supply of mortgage finance, together with the other incentives such as the £5,000 grant to which I have referred, the £2,000 new house grant and the £3,000 mortgage subsidy, the Government are giving substantial encouragement to would-be house purchasers to help them attain their goal of home-ownership. A high proportion of people now availing of the Housing Finance Agency loans are either vacating local authority housing or would, in the absence of the scheme, be forced to rely on such housing to meet their needs. The agency's loans, together with the other incentives, thus have the effect of reducing the pressure on local authority waiting lists and helping to make local authority accommodation more readily available to those who are not in a position to purchase their own houses.

Despite the fact that over much of the period since the agency was established conditions in the financial market have not been very favourable to the sale of index-linked stock, the agency has succeeded in raising substantial funding in each year of its operation. Until April this year, each issue of stock had required the agency to pay a higher yield to the investor than the previous one. However, a recent placement of stock at a yield of 4 per cent marked the first decline in the cost of long-term funds since the establishment of the agency. It is to be hoped that the downward trend in interest rates will enable future stock issues to be made at lower cost. Fortunately, the success of the Government's strategy in reducing inflation to low single figures has meant that, while the margin above inflation payable on the agency's stock issues has grown significantly over the last few years, the overall rate of interest charged to the agency's borrowers has been kept to a very reasonable level — 10.2 per cent being the rate most recently applied.

The agency has had to supplement its funding from index-linked stock with short-term facilities negotiated through the banking system. Short term borrowings are normally more expensive than borrowings raised by the agency's stock issues and, therefore, have an adverse effect on the agency's capacity to avoid losses on its operations. It is, therefore, disappointing that the agency has had to resort to short-term funding to quite a significant degree. I should emphasise in this regard that recourse to short-term funding does not reflect an inadequacy in the agency's capital allocation under the Public Capital Programme but is related to the market situation in respect of long-term index-linked stock.

The level of demand for the agency's loans, to which I have already referred, and the consequent need to increase the capital allocation to the agency for 1985, have been such as to render inadequate the borrowing limit of £200 million. Section 2 of the Bill proposes that the new limit should be set at £500 million. The actual amount of borrowings will, of course, be controlled on an annual basis in accordance with the normal procedures in determining the appropriate Public Capital Programme allocation for the agency. The increase proposed in the limit to £500 million has been pitched at a level that will allow reasonable scope to the agency in the continuing funding of its activities, while ensuring that the Oireachtas will have the opportunity of further reviewing the position in roughly three years time. Given the ongoing nature of the agency's scheme, I trust that this proposal will recommend itself to the House as being a reasonable one.

The present limit of £200 million is laid down in section 10 of the 1981 Act and the power of the Minister for Finance to guarantee such borrowings is dealt with in section 11. These sections were amended by section 2 of the Housing Finance Agency (Amendment) Act, 1982, which relates the limit, and I quote, to the "money actually borrowed by the agency". Therefore, it had been considered that the statutory ceiling applied to the amount of funds actually accruing to the agency on the foot of stock issues. However, recent legal advice has been that the ceiling relates to the nominal amounts of stock without regard to any discounts at which it might have been issued. It had been intended to include the provision increasing the borrowing limit and the ancillary provisions contained in this Bill in the Housing (Miscellaneous Provisions) Bill, 1985, which was circulated recently. But in view of the legal advice and the fact that the latter Bill, as a comprehensive Housing Bill, will require detailed discussion in both Houses, it has been necessary to bring the present Bill forward for early consideration.

The other proposals in section 2 are to permit the agency to raise funds by means of promissory notes or bills of exchange and to change the basis for calculating the amount of foreign borrowings for the purpose of ensuring compliance with the overall borrowing limit. The first of these amendments is simply to ensure that the option of utilising promissory notes or bills of exchange in the course of its funding activities is open to the agency should it deem it appropriate.

The second simply changes the rule about the exchange rate which is to be applied in calculating the amount of any foreign borrowings. Instead of using the exchange rate prevailing at any given time the calculation is made, as at present, the appropriate exchange rate will in future be that which prevails at the time of borrowing. This will ensure that the borrowing limit is not exceeded simply because of an appreciation in the value of a foreign currency in which money might be borrowed. Incidentally I should say that the agency has not so far raised any funds through the medium of foreign borrowing.

Section 3 makes changes in relation to the powers of the Minister for Finance to guarantee borrowings which are consequential on the amendments to section 10 to which I have referred — basically, by the inclusion of reference to promissory notes and bills of exchange in view of the introduction of these in the preceding section.

As Deputies will see, the measures proposed are of a technical nature and are required to permit the Housing Finance Agency to continue its valuable contribution to the housing programme. I commend the Bill to the House.

Mr. Molloy

I welcome the Bill. As the Minister has stated, its purpose is to increase the upper borrowing limit of the agency from £200 million to £500 million. This does not mean that an additional £300 million is now available for housing construction. The position is far different. As the number of loans paid out each year multiplies, there will be a need for further revision of this limit in future years and I believe the present limit of £200 million may already have been exceeded. I understand that up to October 1985, 11,000 loans have been paid involving payments of £217 million since the Housing Finance Agency paid out their first loan in August 1982. Perhaps the Minister would clarify whether there is a retrospective aspect to this Bill and whether the Minister and the agency have already exceeded the authority given to the House in allowing them to borrow to a limit of £200 million.

The growth in the number of loans paid out by the Housing Finance Agency does not mean that there has been a growth in the number of houses built to meet the needs of our young population. The opposite is the case and the past few years have seen a dramatic fall in the number of new private homes being constructed. A number of significant changes have taken place. Principal among them is the dramatic drop in the number of SDA loans which have been approved. I will give some figures to indicate the extent of the drop. In 1980, 10,381 SDA loans were approved and in 1984 only 4,959 SDA loans were approved, a drop of over 50 per cent or 5,422. By any reckoning this is a massive drop. The addition of the 1984 Housing Finance Agency loan approvals of 3,616 to the SDA approvals gives a total of 8,575, which shows an overall drop of 1,806 on the 1980 level of approvals for local authority loans.

That is the real figure which the Minister skirted around. In highlighting the increase in HFA loans there is the danger that the uninitiated may come to the conclusion that despite what has been said elsewhere things are rosy in the house construction garden. This is not the situation. One has to look at all the factors, not just one in isolation. The HFA is a new body, only in its third year, and the growth is welcome but it is important to recognise that it is at the expense of the old SDA loan system which had proved reliable and helpful to tens of thousands of people building homes in the past.

Probably of more significance is the switch in loan approvals from mostly new houses under the SDA system in 1980 to mostly secondhand houses under the HFA system in 1984. In each year since the commencement of operation the HFA have approved more loans for secondhand than for new houses. Since their establishment, 5,000 secondhand house loans were approved by the HFA, as against 4,233 loans for new houses. This contradicts the Minister's argument that something is being done here to help the construction industry. That is not the position. Most of that money has gone into houses which were mainly changing hands and not into new houses. Information supplied by all lending sources, the building societies, the banks, the HFA and the local authorities, shows that the proportion of mortgages approved for the purchase of secondhand houses went from under 50 per cent in 1976-80 to 58 per cent in 1983. A total of 15,833 new house loans were approved in 1979 from all sources. The number approved in 1984 was 12,385. During that period there was a drop of 3,448 in the number of new house loans approved. On the other hand, the number of secondhand house purchase loans approved in 1979 was 14,218 and the number approved in 1984 was 16,467. While there was a drop of over 3,500 in the number of new house loans approved there was an increase in the same period of 2,249 in the number of secondhand house loans approved. The number of new house loans paid by the HFA last year was 1,760 and the number of secondhand house loans was 1,867. The figures show that much of the money in recent years has been going to the purchase of secondhand houses.

The drop in the number of new house loans is reflected in the fall off in the number of new private house completions, which have come down from 23,236 in 1981 to 17,942 in 1984, a drop of 5,294. We are informed from a reliable source that a further drop is likely in 1985. The Department's estimate is a drop of 1,000 in the number of new house completions in 1985 and the construction industry have put a figure of 1,500 on the extent of the drop this year. The sad saga of the falling-off in the number of new homes constructed has continued in 1985, despite all the statements which have emanated from the Government and despite the attempts to paint a rosy image. Mass unemployment has occurred in the construction industry because of the rapid fall in housing output. The Government's decision to cut back on capital investment and introduce punitive tax measures, such as VAT at 10 per cent and the abolition of the section 23 tax incentives, together with many other measures, remain as monuments to the Government's incompetence in the area of housing policy.

This was highlighted further by their sudden reversal of policy last week for inner city development and home improvement grants. Welcome as this death bed conversion may be, it smacks of a panic measure taken suddenly without adequate arrangements having been made in advance to ensure effective operation. No firm costings are available as to the overall cost of some of the measures. I believe the Government's figures grossly underestimate the eventual cost. No details have been given of where the funds will come from to finance these changes. No proper administrative arrangements had been made before the grants were announced. It was extraordinary to see the documents circulated by the Minister stating that arrangements would now be made to have discussions with the Revenue Commissioners to ensure that those benefiting from the new grants will use only registered contractors.

Matters of that kind should have been worked out before an announcement was made. Announcing the implementation of the grants scheme four weeks ahead created panic in certain sections of the construction industry where they were faced with imminent shut-down. People withdrew their current applications and were proposing to wait for the improved applications that would not come onstream until after an inspection had been carried out by an officer of the Department. We know from experience that this can take as long as three months. If the grants were not to operate until 1 December and the inspectors had to carry out inspections in all cases——

An Leas-Cheann Comhairle

The Deputy may make only a passing reference to that.

Mr. Molloy

This is only a passing reference. We will have another opportunity to deal with this matter. There is plenty of evidence that little consideration or thought was given to the scheme before it was announced. Obviously it was a sudden panic decision when the Government saw the continuing deterioration in employment.

Mr. Kavanagh

The Deputy is worried that the scheme will be too successful.

Mr. Molloy

The Government rejected all the pleas from this side but finally they conceded they could not ignore them any longer.

An Leas-Cheann Comhairle

I have already told the Deputy he may make only a passing reference to this.

Mr. Molloy

We welcome the change of heart, but it is evidence of a hodgepodge policy on the part of the Government. A study of the housing situation leads one to the conclusion that some strange things are happening. The only reasonable conclusion is that emigration must have reached epidemic proportions resulting in the cream of the population, young educated parents, having to leave the country to find work and to rear their families abroad. Inevitably they will buy their homes abroad. There has been evidence of a fairly strong demand for home loans from the various lending agencies, including the Housing Finance Agency, and yet there is clear evidence in the Department's statistics of a dramatic drop in the number of houses being built. Money in the housing market must be leaking in some direction and the only conclusion one can come to is that there is massive emigration. People are selling their homes and they are not using the money to reinvest in housing in this country. Rather, they are emigrating and taking the funds out of the country. They may clear off their debts before they leave but certainly they are not re-investing in housing.

This is a new phenomenon but it is not something the Minister has spoken about in seminars or conferences or in his contributions here. It is important that we should have some independent State agency to look at the situation and give an objective opinion on what is happening. An Foras Forbartha play an important role in presenting objective data in regard to housing developments. To support my contention that there is major emigration, that it is affecting housing and that it will have an effect on the demand for housing finance loans, I shall quote from a document from An Foras Forbartha. It comes from the housing construction division of that body. It states:

Looking back now, the seventies present a remarkable picture and when we compare that period with developments so far in the eighties it is relatively easy to understand why there are problems in the housing market.

The document gives a graph showing disposable income in the period 1970-1979 and also in the period 1980-1984. It shows it was up 50 per cent in the first period and down 5 per cent in the second period. Employment was up by 100,000 in the first period and it has decreased by 45,000 in the period 1980-1984. In the period 1970-1979 the number of people who returned to this country was 120,000, whereas in the period 1980-1984 we have had emigration and the figure given is 25,000. Interest rates in the first period went from nil to -8 per cent and in the second period from -4 per cent to +4 per cent in real terms. The population increased by 1.5 per cent per annum in the period 1970-1979 while the increase was less than 1 per cent in the 1980-1984 period. The document stated:

The factors listed in the table in one way or another affect the housing market. There are others but it is unnecessary to get into too much detail. The overall picture is clear. Almost all of the influences which generated the housing boom in the seventies have been dormant or strongly adverse in the first half of this decade.

The income and employment/ unemployment changes have played a large part in weakening housing demand but some of the other changes are of special significance and I believe that the role of emigration may be one of those. To consider this it must be emphasised that the total housing market is made up of new and secondhand homes, not just new homes alone. New building is not an independent activity, it is a process of adjustment between the existing stock and housing demand and the new housing sector is very strongly influenced by what happens in the secondhand sector.

In addition there are problems both on the demand and supply sides of the market which explain why some of the present difficulties are so acute.

Declining real incomes and emigration not only depress housing demand but may also increase supply. If income difficulties are severe a household may have to trade down or move into the rental sector to secure their financial situation. If households are emigrating, they put a house on the market but do not repurchase. In both cases, part or all of the proceeds of sale will not return to the housing market.

The document sets out another table which illustrates the profound change which occurred in 1983, the year when emigration really took off. The table runs from 1977 to 1983 and it shows the total mortgage finance paid on all houses as a percentage of the value of new private house completions. For the years from 1977 to 1982 the relevant figure was 60 per cent, but in 1983 it jumped to 81 per cent. The total mortgage finance paid on all houses for that year was £563 million while the value of new private completions was £698 million. The construction division conclude as follows:

The stability in the relationship between the total volume of mortgage finance paid out (for old and new houses) and the value of new housing output, for the period of the seventies shown here, is notable, as is the change in 1983. It is unlikely to be coincidental that 1983 saw such a large increase in emigration. This suggests that there is now a leakage of finance from the market as a whole and may partly explain the paradox referred to earlier of a buoyant mortgage sector and a relatively depressed housing market.

Here we can see the effect of the failure of this Government's policies throughout the economy. There has not been any real success in implementing any of the policies they have been pursuing in the past three years. It is a sad record of failure for any Government. I accept that there may be decent people in the Government who are seeking to do their best. I accept that the Minister, Deputy Kavanagh, makes a valuable contribution to the Government but collectively their policies are not succeeding. The country's vital statistics are evidence of that sad fact. Unless there are some major changes at Government level in the type of policies they have been following, we can only look forward with gloom to continuation of the present depressing environment. The reversal we witnessed last week on the part of the Government may be an indication of an awakening within Government circles to the fact that their policies are not the right ones and that there is a need for major change. We can only hope that there will be further changes in the direction in which the Government have been leading the country and that we will not have to wait much longer for those changes.

Regarding loans in general and particularly in regard to the Housing Finance Agency, I should like the Minister to give the House some indication of the number of mortgage holders who are in default in terms of their repayments. I am aware, from experience in my constituency and from what I hear from other parts of the country, that a very large number of people are in serious default in respect of their repayments to building societies and local authorities. I am wondering what the position is in this respect in regard to the Housing Finance Agency. Sadly it is a consequence of the failure of the economy that people are being thrown out of work and that consequently their income position changes dramatically with the result that they are unable to meet the commitments they have entered into with the lending agencies.

I recognise that the Housing Finance Agency have the advantage in that the minimum repayment requirement is 20 per cent of one's income. That provides some hope for those who may be finding themselves in difficulty but, if their income and, consequently, their repayments fall, we must bear in mind that the debt is not eliminated, that it is being postponed and that there will be a big build up in the amount of capital and interest to be repaid in later years. People who can afford to do so would be well advised not to agree to make repayments to the Housing Finance Agency at the lower level of 20 per cent of their income. In their own interest, they should endeavour so far as possible to pay something of the order of the going commercial rate. Otherwise the amount of payment being postponed will build up against them whereas if they pay more than the 20 per cent they will be eligible for a deduction from the capital amount thereby reducing the overall liability in the long term.

We pointed to this difficulty when the agency were being established and we said it would present problems in later years for people who are not able to pay much more than the 18 per cent which was the minimum requirement at the outset. Incidentally, I should be interested to learn what influenced the Minister to change the minimum level from 18 to 20 per cent of income. There must have been some good reason for that change, some opinion formed in the Department as to the need for the change which, though it may seem small, was an upwards move from the original level.

We are entitled to know what the position is in respect of defaulters with the Housing Finance Agency, though one doubts that it could be as bad as is the case of the many thousands of building society mortgage holders who are seriously in arrears. Evictions are taking place. Only last week I witnessed one of these events in my constituency and this is an on-going trend. Each Monday morning the District Court in Galway City is faced with a batch of summonses demanding surrender of homes for nonpayment of mortgages. This is a feature elsewhere in the country also. Unless there is some improvement in the economy and an improvement also in employment prospects thereby improving income levels and consumer spending ability, we will be faced with a major crisis.

The decline is eating into the progress that has been made during the decades since we achieved our freedom. After the last war we began to encourage industrial development and, with the change in population trends in the sixties and seventies, we made progress that we hoped would be permanent but, unfortunately, many of the gains achieved are being eroded and frittered away. Many factories have closed and we dread the thought that we might return to the situation that prevailed in the inter-party Government days of the fifties when the keys were left in the doors of homes in Dublin and elsewhere while the occupants fled to England and other places because there was no opportunity for them here. They were not able to meet their commitments.

An Leas-Cheann Comhairle

Perhaps the Deputy would put the key in his own door and return to the Bill.

Mr. Molloy

Both you and I are in the happy position that we still have keys to our doors and homes to go to. We have not experienced the trauma suffered by the families I am referring to.

An Leas-Cheann Comhairle

I accept that, but the Deputy must return to the Bill.

Mr. Molloy

In those cases in which people are in arrears either with the Housing Finance Agency or in respect of SDA loans and where houses may have to be taken back, would it be possible for local authorities to be authorised to purchase these houses and rent them to the occupants instead of the occupant having to surrender the house and seek to be placed on the local authority housing list? I appreciate that in Building on Reality and in circulars from the Minister, local authorities are being encouraged to purchase privately constructed homes on the open market. That would seem to leave the way open for local authorities to buy these houses in respect of which the occupiers are no longer able to meet their loan commitments. The question of whether such a policy might be implemented has been raised with me on a number of occasions by people who find themselves in this sort of difficulty.

I should like to hear the Minister's thoughts on the matter and whether he would encourage local authorities to go to the aid of people who are losing their homes in that way. Rather than have an occupier leave his house, take out all his furniture and so on, the State might assume the ownership or part equity of the house. There are many options in this regard which should provide a fruitful field and which the Minister might investigate.

There was reference in the Minister's speech to the construction industry and I am sure the Chair will not object if I digress slightly to express my alarm at the continuing decline in the growth output and activity in the construction industry. From the noises the Chair is making, I realise that he does not wish me to pursue that road, so I can only hope there will be another occasion to record again the matter of this continuing decline and to draw the attention of the Government to the problem because there is a need for a more positive change in policy. As I have said, there were signs of a change last week but the Government must be encouraged to go further.

Sales of cement in 1985 are likely to be down 6 to 7 per cent on 1984. Indeed, the figure for August is down 15 per cent on August 1984. That is a massive decrease. I appreciate that there were weather problems involved, but that factor alone cannot explain the decrease. The number of jobs in the private sector construction industry have fallen by 44 per cent since 1980.

An Leas-Cheann Comhairle

Again the Deputy is moving away from the Bill.

Mr. Molloy

There was reference in the Minister's speech to this industry. Unemployment in the construction industry is at an all time high. The numbers unemployed in the industry have increased by 110 per cent since August 1980. That is the figure for the period from August 1980 to August 1985. That is a terrible indictment of the failure of the Government's policies.

Housing, we are told, will be assisted in some way by the money being made available to the Housing Finance Agency. That type of statement has been made before by the Minister but the completion rate does not bear this out and there is a continuing substantial drop in the number of new homes being built. I have already put those statistics on the record.

This is very distant from the target which the Government set themselves in their Programme for Government, announced when they came into office. They said their target was to achieve 30,000 new house completions per annum. In December 1982 in a parliamentary question I asked the Minister if his target would be achieved in that year. His reply was that no specific time scale had been laid down but it was the Government's aim to progress towards that objective as quickly as possible. "As quickly as possible" in this Government's language seems to be walking backwards, because instead of achieving anything like 30,000 new house completions the number of completions has dropped dramatically each year since they came into office. How much of the Government's statements, programmes, policies and targets are we to accept? Their optimistic statements that things are improving are never borne out when statistics are published later.

I know the Minister will not like me referring to these matters but it is my duty to do so in the interests of all those who have lost their jobs because of the failure of Government policy in this area. A great deal of the decline was caused by the Government's decisions on taxation and capital——

An Leas-Cheann Comhairle

You are getting away from the Bill.

Mr. Molloy

It was anounced by the Taoiseach that there would be a report on the operation of the building societies. In reply to a parliamentary question yesterday, he said that the report on the legislative and regulatory arrangements in relation to building societies had been completed and was received on 25 October. He went on to say that the issues arising from it were being considered and that such memoranda as may be necessary on these issues would be brought to Government. Does the Minister intend publishing that report?

An Leas-Cheann Comhairle

Not under this Bill.

Mr. Molloy

This Bill deals with the Housing Finance Agency.

An Leas-Cheann Comhairle

Additional funding for the Housing Finance Agency.

Mr. Molloy

Yes, but this is only one of the agencies providing funds for house construction. There are four main sources of finance——

An Leas-Cheann Comhairle

You may deal with only one today.

Mr. Molloy

We cannot deal with one in isolation because if there is a dramatic change in the amount of funds to one agency, obviously that will affect the operations of the other agencies and, overall, will affect the output of housing. They are all inter-related and I do not see how I can make any contribution without referring to some of these matters. I will move on but first I want to ask the Minister if he will publish that report.

When the Tánaiste was appointed Minister for the Environment he said that every effort would be made to ensure that these moneys were used to construct homes which would use the maximum volume of material produced in this country, and he had some derogatory things to say about the quantity of imported goods being used in building projects up to that time. It is worth putting on the record a quotation from "Foreign Trade in Construction Materials — 1984" published by An Foras Forbartha:

Imports of construction materials increased by £45 million or 12 per cent to £411 million in 1984 as compared with 1983. Exports rose by £29 million or 15 per cent to reach £225 million in the same period.

Almost all product areas showed an increase in the quantities imported. The share of the Irish construction market held by imports rose from 48 per cent to 56 per cent between 1983 and 1984.

That was at a time when activity in the construction industry was falling. That was a deplorable record. They are sad statistics because they are evidence of jobs lost. We should have a more active policy to ensure that home manufactured building materials are used in the construction of houses and other building projects.

It is accepted that, as Minister for the Environment, Deputy Kavanagh is the person with primary responsibility for the construction industry and he will have to take whatever measures are necessary to reverse that trend. He has not fulfilled the stated intention of the Tánaiste when he spoke here in 1983. I would appreciate it if the Minister would refer to that report and tell us what action he feels might be taken even at this late stage to try to reverse that terrible trend.

Mr. Kavanagh

Would the Deputy excuse me, because I must collect my questions for Question Time?

Mr. Molloy

By all means. Sometime in 1984 the Minister anounced that he would set up a committee to advise on the implementation of measures to reduce the costs and delays associated with house purchases. The terms of reference of this committee were never disclosed to the House to my knowledge and perhaps the Minister would tell us what they are, who were the members, what happened since their appointment and has an annual report been published. If so, is it available and when can we expect to see some results of the recommendations made? Primarily I am anxious to get some information about what has happened. It is all very fine setting up committees but many of them fade into the distance and are never heard from again. I want to draw the Minister's attention to the fact that this committee——

An Leas-Cheann Comhairle

I accept the Deputy is dealing with the overall strategy——

Mr. Molloy

I am dealing with a house purchasing committee.

An Leas-Cheann Comhairle

This is a limited Bill amending the housing finance legislation.

Mr. Molloy

I do not want to stray too far, but this refers to house purchases and I cannot see how it is not related.

An Leas-Cheann Comhairle

You have strayed so much it is very hard to keep you to the Bill.

Mr. Molloy

During 1984 some local authorities informed applicants for Housing Finance Agency loans that because funds were limited the funds would have to be conserved for the most urgent cases. Some of these local authorities stated that single persons making applications for Housing Finance Agency loans would not qualify and they were refused. There were a few. I raised it in the Dáil and the Minister said he has given no such instruction to the agency and the agency had not imposed restrictions of that kind. Yet some local authorities, one in particular, introduced their own rules because they got a limited allocation from the Minister and decided that they would apply a set of rules which they had not been instructed to apply by the agency or the Minister. In the interests of smooth and efficient operation of the agency in the future, I would like an assurance from the Minister that if local authorities are only acting on an agency basis for the Department they will not be allowed to introduce extraneous rules of their own design which would affect the applicant's standing in regard to his application. Will the Minister give an assurance that he will not again have action of that kind taken locally?

One aspect of the housing market that concerns me and which comes under the aegis of this Bill is local authority tenants, their opportunity to purchase their own homes, and the delay that has taken place so far. We are now into November and the 1985 local authority house purchase scheme has not been made available to local authority tenants. Will the Minister explain why there has been such a delay in 1985 in announcing the details of this purchase scheme? These schemes are announced on an annual basis when there is an updating of the sales price mechanism for making the assessment of prices at which local authority houses are made available to tenants. Until the sale scheme is made available for 1985, no tenant who applied in 1985 can buy his house. The Government have put a stop to the purchase of local authority houses for anyone who wished to buy them from 1 January 1985. This is a disgrace and I call on the Minister to remove that ban by announcing the details of the 1985 house sales scheme which facilitates the purchase of local authority houses by the tenants.

Will the Housing Finance Agency approve loans for the private purchase of local authority flats from tenant purchasers? In the document Building on Reality it was stated that arrangements would be made to facilitate tenants of all local authority apartments and flats to purchase their flat or apartment if they wished. Details of this arrangement have not yet been published so the arrangement has not been made. Any person living in a maisonette, flat or apartment, or in any local authority dwelling which is not a house, does not have the opportunity to purchase it at present. The Government made a commitment that they will be allowed to purchase.

In the event of such a person being able to purchase when the scheme is in operation, in the event of his reselling the house, would the purchaser qualify for a Housing Finance Agency loan or would there be restrictions? I have come across cases where the local authority refused a loan to an applicant because the house proposed to be purchased did not have a bathroom. Yet the house for which the application had been made was a local authority house which had been purchased by the tenant who now wished to move elsewhere and sell it. The person wishing to buy the house was refused a local authority loan because the house did not have a bathroom. It does not make sense.

With all the new increased grants for improving old houses, installing bathrooms, piped water and so on, there is nothing to stop the person who buys the house from installing a bathroom. Strange as it may seem, the house next door to the one I have in mind was bought with a building society loan. I call on the Minister to make whatever changes are necessary to ensure that people wishing to buy such local authority houses can get a local authority loan. If the Minister does not do that, he will eventually create a sort of ghetto. It is not good housing policy, and I do not know if the Minister is aware of the consequences of that decision. I ask him to change the rules as quickly as possible.

Recently the Minister sent around a circular to local authorities announcing certain changes in the method of measuring houses for grant purposes. In many cases, if one does not qualify for the grant, one will not qualify for some of the loans, mortgage subsidies and benefits available. The manner in which a new house is measured for grant purposes is very important. The Minister and the Department are being very niggling in their instructions issued recently, a matter which we hope to raise later on by way of parliamentary question if the question is reached. It seems that the intention is to ensure that, if a garage is built onto a house, it can at no time in the future be capable of becoming part of the house. If a garage can become part of the dwelling area of the house having regard to the number of windows in the house, or the location of the door connecting the garage to the house, and having regard to the general size and standard of finish, the garage will be included in the measurement, thereby putting the size of the house beyond the grant size and thereby denying the person the new house grant.

The experience has been that people scrape the barrel and borrow money to build their own homes and many people put a lot of work into it. They want to get a reasonably comfortable house for themselves, their wives and children. That is a very desirable objective. They hope, if things improve in the future, to improve the dwelling. That is the practical objective of most applicants for housing grants. If this attitude is to be rigidly adopted, and it seems that it is to be because a circular was sent out for this purpose, every possible way that an applicant might circumvent the grant size measurement is excluded. These were considered loopholes by the Department and they consider that some crimes were being committed. However, people are to be applauded for building their own homes and, if, at some time in the future, they get enough money to convert the garage to an extra living room, I congratulate them on that. They do this on their own initiative, paying for it with their own savings and they are not a burden to the State. The small new house grant they got was probalby the catalyst that helped them along the road.

They should not be denied that small grant now because of this new measurement system. The instructions went into great detail. If one has the walls plastered in the basement one will not qualify for the grant. The walls have to be unplastered and the block face visible. If a radiator is installed in a basement, one will not get the grant. There is a whole series of ridiculous measures which exemplify the thinking behind the minds that drew up those regulations. I am surprised at Deputy Kavanagh and Deputy Fergus O'Brien and all the others approving that document and sending it out for local authorities and inspectors to implement. I do not accept it. I am referring to the document sent out recently introducing severe regulations for the measurement of a house for grant purposes. It is an extraordinary document. I wonder if the Minister was aware that it went out.

Mr. Kavanagh

I am well aware of it.

Mr. Molloy

I am amazed that the Minister agreed to such a thing.

Mr. Kavanagh

It is very fair.

Mr. Molloy

I do not know what is the thinking behind it. I accept that there is a need to conserve whatever State funds are available to ensure that they are invested to meet the greatest need, and that the money is spent where the need exists, but I do not believe that the new method of measurement for grant purposes is helpful. It will have a very detrimental effect. Rather than encouraging people to build their own homes it will act as an obstacle for many of them.

Debate adjourned.