Vol. 860 No. 2
1. Deputy Michael McGrath asked the Minister for Finance his plans for the future of the State's ownership of AIB; the reason for his recent comments in relation to the price of AIB shares; his plans to dispose of a stake in the bank in 2015; how the proceeds of any such sale would be used; and if he will make a statement on the matter. [46375/14]
The purpose of my first question is to establish the Minister's intentions regarding the State's ownership of AIB in view of the appointment of a panel of professional advisers to assist in the possible sale of a stake in the bank and the Minister's recent comments about the share price. I am hoping the Minister will give some clarity on his intentions in the short and medium term regarding our holding at AIB.##
AIB's return to profitability is good news from the perspective of the Irish taxpayer, as it enhances the value of the bank for the taxpayer. The last valuation of our AIB shares, which was carried out by the National Pensions Reserve Fund Commission, NPRFC, at the end of 2013, valued the State's ordinary and preference shareholding at €10 billion. Including the contingent convertible capital notes, or CoCos, that we hold, this brings the value of the State's shareholding to €11.6 billion. Since then, bank stocks in many eurozone countries have performed well, and with AIB itself performing strongly I would be confident that the current value of AIB is greater than the NPRFC valuation at the end of 2013.
Now that the bank has returned to profit, is on a stable path and has passed the ECB's comprehensive assessment, my officials will engage with the management team to explore how we can reconfigure the bank's capital structure to make it fit for purpose. The regulatory rules and expectations have changed dramatically in the past couple of years and we need to lay out a plan to position the bank for this new environment. As part of this process we hope to agree a roadmap that will see the bank start to return cash to the State so that we can begin the process of repaying the taxpayer's large investment.
With respect to the State's shareholdings or ownership in the banks, Government policy remains unchanged - namely, that we do not wish to hold these investments in the banks over the long term. Subject to market conditions, therefore, we are willing to exit in a manner that maximises value for the taxpayer. In the last 18 months the State has exited successfully from some debt investments with the sale of our CoCos and preference shares in Bank of Ireland, in addition to the sale of Irish Life. Given the significant cash resources we hold, we are not under any immediate pressure to exit our remaining investments. However, given where our national debt is, neither do we have the luxury of holding on indefinitely.
We are not making any decisions with regard to reducing our ownership in the bank now, because, as I have just outlined, we have important decisions to make about how we should best reconfigure our existing investments in a way that benefits both the bank and the taxpayer. That is our main priority in the coming months. If we can deliver on this work programme next year and everything else develops as we would like, then we may be at a point at which we can consider selling some of our shares.
I thank the Minister for his reply. Does the Minister believe that the State will recoup all of the €20.8 billion that was injected into AIB? He has just said that he believes the current valuation of AIB is in excess of the €11.6 billion figure that the NPRFC put on the bank at the end of 2013. When I quizzed the CEO of AIB, Mr. David Duffy, at a recent meeting of the Joint Committee on Finance, Public Expenditure and Reform, he expressed the belief that within a ten-year period all of the money should be repaid to the State. I would like to hear the Minister's views on that issue. My view on the State's shareholding is that while I would not necessarily be opposed to selling a minority stake in the bank, I believe there is real long-term value for the State in holding at least some equity interest in AIB. It is a recovering bank in a recovering economy and is making significant progress. The best prospect for the State in terms of recouping all the money is to at least retain a significant shareholding in the bank for a number of years. I would welcome the Minister's views on that issue.
I have given the values as estimated by independent valuers. Since the valuations were made at the end of 2013, the bank's position has improved in terms of both profit and market share. Things are going quite well for AIB. It is hard to say exactly what it is worth, but I believe, as does the CEO of the bank, that taxpayers will get all their money back in due course, although it is difficult to say over what period of time.
No firm decisions have been made about the sale of AIB or a minority shareholding in AIB. We will do the preparatory work first, and then there may be a possibility of a sale towards the back end of 2015 or in the course of 2016. We do not have an agreed timeframe for that. We will appoint an adviser, take the advice, reconfigure the bank's shares and move on then. There are issues such as the preference shares and CoCos that must be dealt with, as well as the normal equity. There is a series of issues on which we need to take advice and to make decisions, but we are not rushing it.
I am glad to hear that the Minister is not rushing it, because there is no need to rush it. The State came to AIB's rescue in its hour of need and injected an absolutely colossal amount of money to save the bank - almost €21 billion. People will be glad to hear that over time, albeit an indefinite amount of time, the State will recoup all of that money; the sooner the better, of course, for the sake of taxpayers and our national debt.
If a decision is made to sell some of the State's stake in AIB on the open market, to what use would the proceeds be put in terms of coming into the central Exchequer?
Would they be used to pay down debt, improve the State's capacity to invest in employment initiatives and so forth? The Minister indicated he is preparing the ground for a possible sale of some of the bank next year and given that he believes it is worth in excess of €11.5 billion at this stage, a 20% or 30% stake sale could raise significant moneys for the State. I appreciate it is early days yet but to what use would such moneys be put?
It is the intention of the Government and there is a Government decision that it would be used to pay down debt but if it goes to 2016 it will be for the Government in 2016, whoever composes it, to make the decisions. We are doing the preparatory work now. We have a valuation on the bank but the real valuation will be after some shares are sold. If, for example, the State was to sell 25% of it, we would have market valuation on the other 75%, so we would be in a better position. Once there is a market value, we would not be relying on estimates any longer.
2. Deputy Pearse Doherty asked the Minister for Finance if junior bondholders who refused to share in Anglo Irish Bank's losses are likely to receive payments as a result of the liquidation process at Irish Bank Resolution Corporation. [46338/14]
The liquidation process of Irish Bank Resolution Corporation, IBRC, the former Anglo Irish Bank, and Irish Nationwide Building Society, is ongoing. It has been reported recently by Joe Brennan in Bloomberg that once more bondholders may get paid around the same time as water bills will drop through the letterboxes of families across this State. Can the Minister reassure us that it is unlikely that junior bondholders in the former Anglo Irish Bank and Irish Nationwide Building Society will be paid from the liquidation, that any surplus assets from the liquidation process will come to the Irish State and therefore the Irish people and will he outline his expectation in this regard when the matter comes to a conclusion?
The special liquidators continue to implement the orderly and efficient wind down of Irish Bank Resolution Corporation Limited (in Special Liquidation) in accordance with the provisions of the IBRC Act and the instructions issued by me under the IBRC Act 2013.
In April 2014, the special liquidators announced that the loan sales process had concluded. The sales process of the IBRC loan assets, including their segmentation to meet demand from international buyers, delivered a very positive result with over 90% of the loan assets - with a par value of €21.7 billion - sold.
Following instructions from myself as Minister for Finance, NAMA was no longer obliged to purchase the unsold IBRC assets at their independent valuation as previously envisaged, as the expected proceeds to be raised from the sale of the IBRC loan assets will be sufficient to fully repay the IBRC debt to NAMA. The special liquidators have therefore devised a further sales process in respect of the unsold loan assets so as to maximise the return to all remaining creditors of IBRC, including the State. This sales process is currently under way and the special liquidators are unable to quantify at this stage the total sales proceeds that will be achieved from this process.
In tandem with the further sales process, the special liquidators have published advertisements and written to those known creditors in order to finalise their claims in the liquidation. Creditors in the UK and Ireland have until 31 March 2015 to submit their claims and those creditors in the US have until 31 May 2015. Once all claims have been submitted, they will be reviewed in detail and adjudicated on by the special liquidators. In order to finalise this process, further information may be sought from some creditors in order to validate their claims. Should the junior bondholders submit a claim and it is found to be valid then they will be legally entitled to a dividend provided there are sufficient funds available for distribution. The special liquidators are unable to comment at this stage on the level of dividends that each creditor will be entitled to until such time as the sales processes are completed and the total level of adjudicated creditors is finalised.
We should always remind ourselves that we are talking about €35 billion that was injected into both the former Anglo Irish Bank and Irish Nationwide, which now form IBRC, which crippled the State. One of the Minister's first actions on taking office in 2011 was to pay over the promissory note of €3.1 billion that was due on 31 March. Then we had the winding down of the bank but not the winding down of the debt. When the bank was placed into liquidation on that special night here that was called "prom night", it was stated in the Department of Finance briefing - I have that presentation and it was all very rushed - to finance spokespersons in February 2013, under the heading "Transaction Costs & Unsecured Creditor impacts", that: "It is not expected that any assets will be available to repay subordinate liability holders". Despite the fact that I did not agree to what happened that night because the debt still remains and is just stretched out, has the position changed in terms of that sentence? Is it still not expected that any assets will be available to repay the subordinate liability holders? There is a genuine fear as a result of what we have seen from Bloomberg that seven years on from the banking crisis the Deputy will be the Minister for Finance who will oversee the repayment to unsecured junior bondholders in the former Anglo Irish Bank who will receive millions of euro despite the fact the State has injected €35 billion into this bank and is also a creditor of it. Will the Minister outline the position the State takes in terms of the €1.1 billion due to it from the assets of the IBRC?
In the course of 2010 and 2011 a number of liability management exercises were conducted by the covered banks for the purpose of generating additional core tier 1 capital and to strengthen the quality of the capital base of the banks. Since this Government came into power the cash required for the recapitalisation of the banks was reduced by €5.8 billion through burden sharing with subordinate bondholders. The contribution from burden sharing with bondholders of this type amounts to approximately €15 billion since the banking crisis with almost €3.7 billion of that number coming from IBRC alone. That said, despite the significant efforts taken over the course of 2010 and 2011, there was a number of subordinate bonds with a nominal value of €280 million that continued to remain outstanding at the time of the liquidation of the IBRC in February 2013. These bonds remained outstanding both as a result of a refusal by investors to participate in IBRC's liability management exercise in 2010, that is to take a voluntary loss, and also as a result of an unfavourable English High Court ruling against the bank in July 2012.
Thank you, Minister.
There is an important sentence here if I could read it. It is important to note that it remains to be seen if there will be proceeds available for the repayment of these creditors as they rank behind both preferred and senior unsecured creditors in priority. Unsecured creditors will get paid if there is money but there is a ranking order and it is not clear yet whether the €280 million worth of junior bondholders will pursue their claim as creditors, whether they can validate their position as creditors and, if so, if there will be any money left over when all other unsecured creditors are paid in full.
The question before the Minister is quite simple. I appreciate that we still do not know what amount will remain when the entire IBRC is liquidated. However, that briefing provided to finance spokespersons contained the statement that: "It is not expected that any assets will be available to repay subordinate liability holders". Does the Minister stand over that statement? I take from what he said here today that this may not be the case and it is likely that subordinate bondholders in the former Anglo Irish Bank and Irish Nationwide Building Society could be paid from the assets of the liquidation. That is very different from what was stated clearly and is down in black and white in this statement, that "It is not expected that any will be available".
With regard to the €1.1 billion the State is owed from IBRC, and this is in regard to the repayment of the senior bondholders who were covered under the guarantee in respect of the former Anglo Irish Bank and Irish Nationwide Building Society, where does that fall in regard to the line of creditors who are now lining up? Is the Minister anticipating any payment or recoupment of that money to the State as a creditor of IBRC? The fact that we have lost that €35 billion is one of the great shames but there is still a possibility within the liquidation process that we will recoup a substantial amount of money and where does the State rank in terms of the line of creditors?
The sentence the Deputy quoted was the expectation at the time.
The expectation at the start of the liquidation process was that we would be fortunate if the liquidation of IBRC covered the secured creditors. It transpired that the liquidation had gone better than expected, resulting in a surplus, which surplus will now be used to cover some of the unsecured creditors. As the State represents 70% of the unsecured creditors, this means that there will be money available for it. There are other complications, including many legal cases, and I am sure the Deputy is aware of one of the bigger ones. The liquidator in prudence must set money aside, rather than distribute to unsecured creditors to cover legal liabilities or damages that might occur. The position is unclear. The liquidator is advertising for any person who believes he or she is an unsecured creditor to make a claim which he or she will have to validate. As preferred and senior unsecured creditors have a priority over junior bondholders, it is not clear whether there will be any money left. The expectation when the question was previously answered was that there would not be any additional money for unsecured creditors. That was the view at the time.
3. Deputy Richard Boyd Barrett asked the Minister for Finance if he has read the Credit Suisse global wealth report 2014; if so, his views on the staggering inequalities in the distribution and concentration of wealth here that it suggests; if, on foot of the report, it is now a matter of urgent priority to establish a database on wealth distribution here and a wealth tax to ensure greater equality in the distribution of wealth; and if he will make a statement on the matter. [46336/14]
Very often when some of us on this side of the House rail against unfair water charges, property taxes or what we believe is the Government's failure to adequately fund public services such as housing, health and education, the Minister regularly cites the phrase "there is no pot of gold" in terms of there being an alternative source of funds that could be taxed to avoid this unfairness and give us the resources we need to invest in public services. The Credit Suisse report suggests there is a large pot of gold in the hands of a tiny group of people. I would like to know if the Minister has seen the report and, if so, his views on it and whether he believes it indicates the need for a wealth tax.
The Credit Suisse global wealth report 2014 provides a broad range of data in the area of global household wealth and its composition and distribution in the period 2000 to 2014 for over 200 individual countries. The authors of the report acknowledge that the study of global household wealth is still at an early stage of development and that no country has completely reliable information on personal wealth. This obliged them to assemble and process information from a variety of sources. The authors state much work remains to be done to refine estimates of wealth by country and improve the estimates of wealth distribution within countries.
I note that the report indicates that Ireland lies in the group of developed economies where the top decile or the wealthiest 10% of adults share greater than 50% of the wealth. This places Ireland towards the lower end of the wealth inequality index in the developed world. As I have stated on a number of occasions, wealth can be taxed in a variety of ways, some of which are in place in Ireland. Capital gains tax, CGT, and capital acquisitions tax, CAT, are, in effect, taxes on wealth, in that they are levied on an individual or a company on the disposal of an asset or the acquisition of an asset through a gift or an inheritance. Deposit interest retention tax, DIRT, is charged at 41%, with limited exemptions, on interest earned on deposit accounts. The local property tax, LPT, introduced in 2013 is a tax based on the market value of residential properties.
To estimate the potential revenue from a wealth tax, it would first be necessary to identify the wealth held by individuals. I am informed by the Revenue Commissioners that they currently have no statistical basis for compiling estimates in relation to a potential wealth tax. Although an individual's assets and liabilities are declared to Revenue in a number of specific circumstances, for example, after a death, this information is not a complete measure of financial assets in the State, nor is it recorded in a manner that would allow analysis of the implications of an overarching wealth based tax.
I am advised that the Central Statistics Office, CSO, institutional sector accounts do not give an indication of the number of households or persons classified by the categories of wealth they hold. These statistics are based on aggregate information collected from financial institutions and do not contain the demographic details which would enable such a breakdown of the statistics to be given.
When the Government wants to impose a property tax or force people to pay unjust water charges or the Department of Social Protection wants to means-test them, it is possible to put in place an invasive process to find out the value of people's property and so on, yet when it comes to finding out about the personal wealth of the super rich, we are told the process of compiling accurate information in that regard would be very complicated and difficult. That is not acceptable. We should find that accurate information. If the Credit Suisse report is even 50% right, it is shocking that the top 5% of people in this country hold 40% of the wealth, which amounts to just under €250 billion. Even a 0.5% tax on that amount could provide an alternative to unfair water charges, property taxes and other austerity measures. There are 88,000 millionaires, including 5,000 who have between €5 million and €10 million and 3,000 who have between €10 million and €50 million. This is extraordinary wealth, yet we are being told the imposition of a wealth tax would be too complicated a process.
I suggest to the Deputy that it is illogical to be violently opposed to a property tax, while at the same time advocating a wealth tax. I do not get that line of argument.
I will explain later.
Socialists all over the world are in favour of property taxes. There is, therefore, a contradiction in the Deputy's position.
Following a discussion between the Department of Public Expenditure and Reform, the Central Statistics Office and the Central Bank, the Central Statistics Office undertook a household finance and consumption survey, HFCS, to obtain information on household wealth. The results of the survey are expected to be available in early 2015. The main aim of the HFCS is to provide structural information on household assets and liabilities based on a representative sample of households. This will address gaps in knowledge about the economic well-being of households, the distribution and type of wealth and liabilities among households and individuals, as well as factors that affect financial planning for households and individuals. The data collected by the CSO as part of its household finance and consumption survey are not being collected for the purposes of calculating the potential yield from a wealth tax but to collect general information on the financial position and behaviour of households. The Government has no plans to introduce a wealth tax, although all taxes and potential taxes are, of course, constantly reviewed. There is work in progress that will provide the data about which the Deputy speaks.
In terms of a tax on the family home and a tax on wealth - in other words, people who have multiple homes or commercial investment property and large cash reserves and other financial assets - it would not be that difficult to work out the difference between the two. The Central Bank's view is that wealth is half financial and half asset related. For 90% of the population, a significant amount of their wealth would be accounted for by their house, if they had one. On the 5% of the population who hold 40% of the wealth, it is fair to assume that the vast bulk of this wealth which amounts to €250 billion is not accounted for by their family homes. Most of it is multiple property assets that are revenue producing and financial assets, shares and so on. A distinction, in terms of a wealth tax, must be made between the family home in which people need to live and revenue producing commercial property and other assets which are generating, on average, profits of 3%, 4% or 5% per annum. Even a 1% tax on this wealth would not impact on those involved. They would still be super rich, but we would have a lot of revenue to offer alternatives to unfair water charges and property taxes.
The Deputy is correct that a lot of wealth in Ireland is represented by family homes. However, very often there is no strong connection between the asset value of a family home and the income of the people in the household. Once one passes Newlands Cross a lot of the wealth in the country is represented by farm land. While a person with 100 acres of land worth approximately €10,000 an acre would have an asset worth € 1 million, that is the asset value. The income stream for the person concerned, in particular if involved in dry stock or beef production, would be low. Also, as the asset passes from generation to generation, to deem people like that to be extraordinarily wealthy-----
Separate them out.
-----and to use them as a statistical base for a wealth tax is unreal.
4. Deputy Michael McGrath asked the Minister for Finance his plans to introduce changes to the pay and file arrangements for 2015, particularly in respect of filing dates; his views on the need to give certainty as soon as possible for professional advisers and self-employed persons; and if he will make a statement on the matter. [46376/14]
The purpose of this question is to seek clarity on the Minister's intentions regarding the pay and file arrangements.
I understand the issue affects up to 600,000 self-employed persons and small businesses. Last year the Minister rowed back on plans to change the pay and file return date for 2014, although he signalled his intention to bring it forward. I am seeking clarity on his intentions and if it is still his plan to change the date.
The Deputy may recall that following a consultation process on changes proposed to the pay and file dates, I decided not to introduce any change to that regime for 2014. However, given the success of the forecasting process for budget 2014 and the concerns expressed by many stakeholders about the potential disruption that could be caused by such a change, I have decided to leave the dates unchanged for 2015 also.
I thank the Minister for clarifying the issue, as it is important that small businesses and self-employed persons have certainty for the next 12 months. They will welcome the news that the pay and file date will not change for 2015. That leads me to the next question of whether it is still the Minister's intention to change the pay and file date in the future. We do not want to have a constant threat hanging over the sector, which is vital to the economy, that the pay and file date may change. The press release issued last year indicated that there would be no change in 2014, but it made clear that the Minister's intention was still to bring forward the date. The Minister has now rolled on the process for another year and indicated that this will not happen in 2015. Is it still his underlying intention to change the date, as it is important for us to have clarity in that regard?
The purpose of the proposed change was purely pragmatic; it was to ensure budget estimates could be forecasted accurately. Once the budget date was moved from the first week of December to the middle of October, it gave rise to a difficulty in forecasting. In 2014 the departmental forecasts have been very accurate and this remains true for 2015. There were no data to predict the November figure, but, as published yesterday, the profile was exceeded by approximately €38 million. When we are considering a sum of €6.2 billion, coming within €38 million of the amount brought in is indicative of very accurate forecasting. I do not now see the necessity, for budgetary reasons, to bring the dates forward. I do not expect any change in the life of this Parliament. What future Ministers will decide will be up to them.
I thank the Minister for providing clarity. The experience in the past 12 months or so bears out the point that we and many others raised at the time that the income stream from self-employed returns was in the region of €1 billion. Even if the estimate was out by 15%, the difference would be €150 million. In the overall context, such a sum would be somewhat immaterial and not have justified the massive inconvenience that would have been caused by changing the pay and file arrangements. There would have been cash-flow issues for businesses and consequences for professional advisers, who are responsible for putting together and filing returns. It would have brought the process back to the summer season and August, the normal time for examinations and study leave, as well as holidays and so forth. As that would have caused problems, I am glad that the Minister has committed to not making a change in the lifetime of the Government. It is a welcome clarification and the sector will appreciate it. As the Minister indicated, it will be a matter for future Ministers to decide on future policy.
5. Deputy Richard Boyd Barrett asked the Minister for Finance his views regarding the continued upward spiral in house prices and rent, and the increasing concentration of property ownership in the hands of a small number of very large corporate investors, in terms of macroeconomic stability and the capacity of ordinary families to access affordable accommodation; his proposed measures to deal with this situation; and if he will make a statement on the matter. [46337/14]
Rents in Dublin have risen in the past year by 17% and by 8% and 7% in Cork and Galway, respectively. They are spiralling out of control. This is related to the concentration of wealth that I mentioned and, specifically, the increasing concentration of commercial residential property in the hands of big corporate investors. It demonstrates the folly of the big sell-off of many NAMA properties and other residential property and loans to the big corporate interests that do not give a damn if people are priced out of the market as long as they can make money.
I am aware of the price changes that have taken place in the residential property and private rental markets. Nationally, residential property prices rose by 16% in the 12 months to October 2014 according to the Central Statistics Office. The most recent daft.ie national rental index indicates that rents nationally were 10.8% higher on average in the third quarter of 2014 than a year previously.
The Government's view is that the impetus for recent price and rent developments comes from a shortage of supply, particularly in Dublin and, to some extent, in the other major cities. As part of economic recovery, there is an increased level of housing demand, particularly as a result of the growth in the number of people at work. However, thus far, supply has not responded adequately to match demand, leading to increased prices and rents. The Deputy will be aware that Construction 2020: A Strategy for A Renewed Construction Sector sets out the Government's strategy to address these issues and remove blockages from the system in order to get the market moving and increase supply. Some 75 time-bound actions are included in the strategy. My Department is party to a range of actions which, among other issues, focus on appropriate and sustainable development financing, transparent and sustainable mortgage lending, the application of the tax code to the construction and property sectors and addressing legacy issues associated with the property bubble.
I have introduced a number of targeted initiatives in various budgets since 2011 to aid in revitalising the property and construction sectors and help to increase the supply of suitable residential housing stock in certain urban areas where supply limitations are most pronounced. The Finance Act 2013 introduced the real estate investment trust, REIT, tax regime. The acquisition of properties by REITs is part of a broader effort to have a more sustainable, professionalised, long-term property rental market for the benefit of both investors and tenants. More recently, as part of budget 2014, I introduced a number of measures, including, subject to state aid approval, the extension of the living city initiative to include Cork, Galway, Kilkenny and Dublin and the broadening of eligibility criteria to include all buildings built prior to 1915.
Additional information not given on the floor of the House
In the budget I extended the home renovation incentive to rental properties whose owners were liable to income tax. In the coming months I will launch a public consultation process to examine if owners of zoned and serviced land are hoarding land and delaying development. I have also signalled that the capital gains tax exemption introduced at the bottom of the market will be discontinued from January.
Access to development finance is a key issue that needs to be addressed to ensure the proper functioning of the property market. It is clear from work undertaken by my Department that the funding model for development is fundamentally changed from the previous mainly debt-based model, with more equity now needed. In this context, the Ireland Strategic Investment Fund, ISIF, under the auspices of the NTMA, is exploring ways, through its commercial mandate, to support financing projects that will enhance the supply of housing. In addition, NAMA has stated it expects to fund the delivery of 4,500 houses and apartments to serve the greater Dublin area in the period from 2014 to the end of 2016.
There are encouraging signals to indicate that policies introduced by the Government are having an effect. In particular, there has been a large increase in housing commencements in the first half of 2014, while applications for planning permission have exceeded 2013 figures each month and are up by almost 20%. Increases in housing supply should lead to a moderation of price and rent rises in the property market, in turn improving access to affordable accommodation. In addition to the measures I have outlined, my colleague, the Minister for the Environment, Community and Local Government, has recently published the Social Housing Strategy 2020: Support, Supply and Reform which sets out to address issues of social housing provision, as well as accessibility and affordability. The strategy proposes to provide 35,000 social housing units in the next six years through a combination of construction and acquisition and to meet the housing needs of up to 75,000 households.
On the Deputy's question around the increasing concentration of property ownership, historically the private rented sector has been characterised by small-scale landlords. Attracting large-scale investment in professionally managed residential property, for example, using REITs and other options for long-term investment, can have an important role to play in helping to deliver the professional high standard sector tenants deserve. As part of Construction 2020, the Department of the Environment, Community and Local Government, with the housing agency, is developing a national policy towards professionalising the private rental sector, to include issues such as investment, standards and regulation. A key element of their research is to assess the policy treatment of the sector, with a view to making recommendations to encourage more and larger scale investment in order to increase the supply of good quality, secure and affordable rented accommodation.
In summary, my Department continues to monitor developments in both the purchase and rental property markets. In line with the Construction 2020 strategy, the Government will continue to work on addressing remaining challenges in the property and construction sectors.
There is a rapidly spiralling housing and homelessness crisis. A major proportion of the income of ordinary people is going towards keeping a roof over their head, which is adequate proof that the Government's policy in this regard has failed dramatically and that radical action is required. Construction 2020 and other pie in the sky projects will not cut it any more. People just cannot afford to put a roof over their head. This is because the process has been left to the market and the Government made a critical decision to allow NAMA and other bailed-out financial institutions with property portfolios and so on to flog them to big corporate investors who do not give a damn about affordability; they only care about how much money they can make. The State should intervene in the market; it should control rents, take back some property and charge affordable prices, instead of charging on the basis of making a profit, as the people involved in the market are doing. If we do not do this, the issue will get out of control. As the National Competitiveness Council has indicated, workers will be forced to go on strike in order to have their pay keep pace with accommodation costs.
Although rents have risen rapidly throughout the country and particularly in Dublin in the past 12 months, they are still not where they were a couple of years ago. There was a collapse in the rental market similar to the collapse of housing values. As the economy is being restored, rents are going up again, although they are still not back where they were a couple of years ago.
There is not a shred of evidence to support the Deputy's theory that rising rents are connected to NAMA's policy of selling assets, which it is required to do. The problem is there is a lack of supply which sometimes is connected to regulation. One of the issues to which one can point is the regulation introduced some years ago that all apartments or flats should have en-suite facilities. This compares to the bedsit arrangements where there was a bathroom in the corridor that served two or three bedsits. That took 5,000 bedsits out of commission as they could no longer be rented.
That is why I extended the home extension scheme to landlords. I am allowing them to restore bedsits that are out of commission by carrying out the work needed to provide en-suite facilities, thereby enabling them to abide by the regulation. It is a supply side problem. When an economy that had been sinking begins to rise, it is very difficult to switch on construction, but it is now happening extensively around Dublin.
I accept that there is a supply problem. We should immediately use €4 billion of NAMA's cash reserves to start a massive public works programme involving the construction of affordable housing. It is not that NAMA is creating this problem but that it has no interest in solving it. More to the point, the people to whom NAMA sells these assets have no interest in the problem. I am not making a moral judgment; I am simply making a statement of fact. Big corporate investors in property do not give a damn about affordability or the housing and homelessness crisis. The Minister's job is to give a damn about these things. They will charge market rents or what they can get, even if it makes property unaffordable for significant numbers of people. Those who increasingly control the private rented sector and the property sector do not give a damn about whether ordinary people on low and middle incomes can afford property. As long as they can rent stuff to the people who can afford it, they will make money. The Minister's job is to make sure housing is affordable. That is basic. The economy cannot function if substantial numbers of people in the economy cannot put a roof over their heads. That is elementary. The State has failed to intervene by taking control of rents, prices and enough property to make sure rents and prices are kept down.
As I said, there is no evidence to support the theories the Deputy is propounding. The Minister for the Environment, Community and Local Government, Deputy Alan Kelly, made a major announcement last week on housing, including social housing. He set out a number of initiatives, which are fully funded by the Government's decision, to deal with this problem. It is a very progressive and far-seeing programme and NAMA is playing its part. The Deputy will have noted that there was a big residential element to yesterday's announcement of the development of Boland's Mill, although I accept that the emphasis is on commercial offices. NAMA is working through its client developers to supply houses and apartments in Dublin. My contention that supply is coming back is supported by a survey conducted by one of the specialists in this area, as published in yesterday's newspapers, which found that there had been 370 multiple starts - groups of houses or apartments - to date in 2014.
Who can afford to buy them?
There is a demand and they will be bought. I am not saying there is no problem. All I am saying is the problem is being addressed and that the Deputy's analysis of the problem is fundamentally flawed.
