Dáil Éireann díospóireacht -
Thursday, 6 Mar 2003

Vol. 562 No. 6

Local Authority Loans.

Mr. S. Ryan

I seek clarity regarding the definition of an eligible person for affordable housing under Part VI of the Housing (Miscellaneous Provisions) Act 2002 and Part V of the Planning and Development Act 2000 and to identify problems with its operation for first time buyers. I hope the Minister will come forward with solutions for the categories of people involved after the debate.

The income limit for local authority loans is €80,000 for two earners and €32,000 where there is a single applicant, with a maximum loan of €130,000. Apart from the fact that the income limits and maximum loans need to be revised upwards to take account of the huge increase in new house prices in recent years and the modest wage increases arising from national wage agreements, there are particular problems relating to certain applicants who are eligible for affordable housing under the Part V scheme.

This relates to applicants who exceed the limits of €32,000 and €80,000 and who are unable to secure a loan from a financial institution. The Minister of State will be aware that the Act states "affordable housing may be sold or leased to an eligible person" and goes on to define an eligible person as:

one who is in need of accommodation and whose income would not be adequate to meet the payments of a mortgage for the purchase of a house because the payments calculated over the course of a year would exceed 35% of a person's annual income (net).

We now have the untenable situation whereby a person who is eligible for Part V affordable housing under legislation passed by the Oireachtas is unable to secure a loan from the local authority because they are over the income limit. At the same time they are unable to get a sufficient loan from a financial institution to purchase a starter home on the open or private market. This needs to be addressed.

I am informed that it was envisaged that the Part V process would be financed through the commercial lending institutions. However, they are not prepared to become involved with this particular scheme because of the clawback provisions. I favour that provision. What is the Minister of State's view?

Affordable housing under the Part V process is now becoming available in the Fingal County Council area and I commend the management of the council for the way it has dealt with this matter. This will be of great benefit to many first time buyers who have aspired to a home of their own for many years. I am aware of applicants who have been waiting up to four years with the council for these houses and who have now been informed that they have been taken off the list because they are over the income limit and thus cannot be provided with a loan.

I will quote some examples from constituents' letters:

I am currently just under the €32,000 limit set by the Department of the Environment to assess eligibility for the affordable housing scheme. However, given inflation is running close to 5% per annum, I imagine I will not meet the income criteria when it is renewed in October 2003.

Others say:

"I wish to confirm I am just within the salary criteria since October 2002. My salary is €31,750. When it is renewed I will be over the limit."; "I have been approved for the affordable housing scheme for the past two years. My application is due for renewal in the next few weeks. At the moment I do not exceed the €32,000 but I am fairly close. When this happens I will not be approved for the scheme by Fingal County Council."; "I applied to Fingal County Council in 2001. I was promoted in work in the ESB and have just gone over the limit and will be taken off the list."; "In 2003 I will apply to Fingal County Council for the third year running. I am on the housing list. This year I may find I am slightly over the €32,000 income and therefore will not be eligible. "; "I wish to confirm I will be borderline on the income limit of €32,000."; "I may have a problem."; "Our situation is that we are just over the income limit for shared ownership but can only qualify for a mortgage of €145,000 from a building society. What can I do?"; "I have now been taken off the list for affordable housing from the council."

These are quotes from people who were on the housing list and qualified for affordable housing. There is an anomaly here which must be addressed.

Minister of State at the Department of the Environment and Local Government (Mr. Gallagher)

I thank the Deputy for this opportunity to clarify the question of eligibility criteria for affordable houses provided under Part V of the Planning and Development Acts 2000 to 2002.

Part V and the arrangements directly associated with it are focused on producing a supply of affordable houses. These provisions allow local authorities to ensure the availability of houses at a price below that of the open market. The benefits of this price-discounted housing are then to be allocated to persons in need of accommodation. This must be done in accordance with a scheme of allocation priorities, adopted as a reserved function by the elected members of a local authority.

Schemes of allocation priorities must be based on the criterion that eligible persons would otherwise have to spend more than 35% of their net income on meeting mortgage repayments for a comparator market value house but these schemes are not required to, and do not, specify any qualified income limit for eligible persons, nor any maximum on the loan to be drawn down.

The loan limit of €130,000 referred to by the Deputy is not directly related to access to Part V housing but to the maximum loan permitted to be made available by local authorities to persons who are unable to obtain mortgage finance from the private sector. It may frequently be the case that persons availing of local authority housing loans will be eligible for affordable housing provided under a Part V agreement but Part V affordable houses will not be restricted to these applicants.

I emphasise that Part V criteria derive not from circulars issued by my Department but directly from legislation enacted by the Oireachtas in 2000 and at the end of 2002. Clawback provisions have long been a feature of tenant purchase and affordable housing schemes and they will now, appropriately, apply also to houses provided under Part V. The requirement for clawback is to ensure that the various schemes produce a real benefit in terms of accommodating eligible persons with housing needs and that this objective is not threatened by short-term speculative interests.

Normally, if a house is resold before the expiration of 20 years from the date of the purchase, the person selling the property must pay to the housing authority a percentage of the proceeds of the sale. This percentage is equal to the percentage discount allowed by the local authority on the original sale of the house where the house is resold within the first ten years. The amount payable is reduced by 10% in respect of each complete year after the tenth year during which the person who purchased the property has been in occupation of the house as his or her normal place of residence.

The private lending institutions have accommodated themselves in the past to clawback provisions of this kind. On the new Part V arrangements, my Department is currently in discussions with representatives of the private sector lending agencies with a view to resolving any concerns that they might have regarding the clawback.

I am confident that with the addition of Part V and the further development of affordable housing initiatives a wide range of options is being provided to those in housing need and that these will permit a major and desirable expansion of affordable housing.