Dáil Éireann díospóireacht -
Tuesday, 18 Oct 1994

Vol. 445 No. 9

Adjournment Debate. - Tenant Purchase Scheme.

Mr. Allen

Cork has a major housing crisis, with 2,500 applicants on the housing list and an average waiting period of three years by an applicant for a house. The 1988 tenant purchase scheme offered the tenants of Cork Corporation and other local authorities the hope of purchasing and owning their flats. Some of these tenants have spent more than 30 years in their family homes and, in anticipation of eventually being able to purchase them, in recent years they modernised and upgraded them through the installation of aluminium windows and doors and central heating.

A problem arose in regard to the weekly maintenance fees of £5 per week announced by Cork Corporation which would have to be paid on top of the purchase price by the tenants. Everyone in Cork thought this matter had been resolved when an agreement was reached by the tenants and Cork Corporation that a £3 per week maintenance fee would be paid. In response to numerous questions from me and other Deputies in the south, the Minister said that a comprehensive legal agreement was being drafted by the Department which would allow local authorities enter into a sale contract. The announcement by the Minister by way of letter to Cork Corporation that the offers to these tenants were being withdrawn came as a bolt out of the blue and shattered the dreams and ambitions of many people.

To add to that shock, the insulting comments by the Minister of State, Deputy Stagg, last Sunday that compensatory mechanisms would be in place were unbelievable. The Minister of State, Deputy Stagg must be aware of the housing crisis in Cork. He offered the tenants, many of whom have been living in their homes for more than 30 years, the opportunity to move out of their family homes and to be given top priority status on the Cork Corporation waiting list for a house which he said they could subsequently buy. To say the least, this is totally unacceptable to the majority of tenants who wish to stay in their family homes and purchase them.

A major public protest meeting is being held in Cork tonight. This meeting has been organised by the tenants who are affected and who are incensed at the insensitive handling of this affair by both Ministers. The serious situation brought about by last week's announcement should not have been made worse by the false promises made by the Minister last Sunday to dig himself out of a political hole.

I ask the Minister to give a commitment to meet delegations from Cork Corporation and representatives of the tenants affected. The hopes and aspirations of hundreds of families in Cork city and other areas to become home owners have been sunk by the political ineptitude displayed during the past days, weeks and years. Many of these families are neighbours of mine and during the weekend I saw how shocked and disillusioned they are at the announcement made by the Minister's office last week by way of circular letter to Cork Corporation.

Mr. M. Smith

It is Government policy that as many local authority tenants as possible should have the option of purchasing their dwellings and tenant purchase schemes for some time envisaged that, in principle, both local authority houses and flats could be purchased by tenants. However, as explained to the House in a comprehensive reply to Parliamentary Questions Nos. 228 and 235 last Tuesday, important issues have now arisen in the implementation of selling local authority flats. In response to concerns expressed by some authorities, a detailed examination of all the aspects involved in the sale of their flats was carried out by my Department in consultation with the authorities principally concerned and with the assistance of independent legal advice.

There are three main reasons flats would be a bad buy for tenants: first, the level of service charges that would be necessary, second, public liability insurance and third, the future saleability of purchased flats.

First, the management company which would have to be set up to look after the management and maintenance of the flat block would have to have its operations financed from a service charge levied on the purchasers and the local authority for those flats which have not been purchased. In addition to paying the cost of insurance, routine maintenance and day-to-day management, the service charge would also have to include a contribution to a reserve fund which would have to be set up to meet the cost of major structural works that would arise over time if the flats were not to deteriorate and depreciate in value. It is clear that the amount of any such service charge would be unaffordable to the vast majority of tenants and, together with the mortgage repayments, would result in considerably greater outgoings than current average rent levels, which are in the region of £10 per week.

Second, the management company would have to obtain insurance against public liability risks and, because of the high level of public liability claims relating to local authority flat complexes, it is clear that there would be considerable difficulty in obtaining such insurance at any kind of realistic price or, indeed, at all.

Third, it would not be desirable to sell flats to tenants if they did not have a reasonable prospect of being able to sell-on the flat in the future should they need or wish to do so for any reason. A second hand flat which did not have access to an adequate reserve fund and proper insurance cover would not be saleable and would not be regarded as suitable security for a loan by a mortgage lender.

Against this background any decision to proceed with the sale of local authority flats would ultimately prove to be a disservice to tenant purchasers. Notwithstanding any new legislative provisions that I might introduce, no practicable arrangements could be made for such sales that would prove to be satisfactory to tenant purchasers or to tenants who did not wish to buy.

It is essential to guard against a situation in the future where tenant purchasers, or their successors, would end up with a property which they no longer need or on which they were paying unaffordable service charges but which they would have no prospect of selling at a realistic price.

The difficulties outlined above may not apply in the case of all local authority maisonettes. Authorities have been asked to consider whether satisfactory arrangements can be made for the sale of maisonettes to tenants who express an interest in purchasing. I have impressed on the local authorities involved the need to draw the attention of these tenants to the various measures available to assist them in purchasing alternative dwellings and to facilitate to the greatest possible extent the tenants who apply to purchase.

I would be happy to accede to Deputy Allen's request to meet public representatives and representatives of the tenants. When the Housing Bill was being debated a few years ago, there was an earlier understanding from local authorities that the sale of flats could take place. As we were discussing that Bill, information came through that there were insurmountable difficulties. I made changes in the legislation — I was supported by all sides of the House in doing so — to facilitate those sales and I would have been happy to see them proceed. We have encountered very difficult problems in relation to this whole matter. While the difficulties appear insurmountable in many ways, I am happy to make my offices available to see whether there is any way we can sort out this problem for certain types of flat complexes with communal facilities where a great many people obviously could not afford to pay the service charges. I wish to be as flexible as possible because the attachment to ownership in Ireland is very deep. If these people wish to own their flat complexes I want to facilitate them but I cannot foresee a comprehensive answer where everyone could be accommodated. It may well be that we can sort out some of the problems.