I welcome the opportunity to speak on this Private Members' motion and thank Deputies Michael McGrath and Cowen for putting it on the agenda. The first line of the motion is highly significant and has been lost by a lot of people. It refers to the significant fall in home ownership rates in Ireland, which is a real issue as far as I am concerned. Home ownership rates have been declining faster in Ireland than in the UK, the US, Spain and many other European countries.
Evidence shows that home ownership leads to better outcomes for families and children and more stable environments, communities and locations for people to raise families. When there are many people in the short-term rental market, the commitment to an area cannot be as strong because they are not home owners. Home ownership is deep in the core and DNA of the Irish people. They want to own land and many have a history of not being able to do so over generations. It is something deep in our culture for people to want to own the roof over their heads, not just for themselves but for their families. That is the essence of this motion. The Government is doing everything it can to destroy the basic philosophy of many Irish people, which is to own their own homes.
The response of the Government to this motion is like something out of never-never land or Disneyland. I do not know what fairy tale it is telling. It referred to the Government's Construction 2020 strategy. In six years time all of us or some of us or 30,000 people will have a house.
The recent Government social housing strategy announced in the budget set a target of 2020, and the Minister for the Environment, Community and Local Government spoke of an even longer period. The idea is that some people may have a house in six or seven years. People will not have houses in the short term but they must live in the meantime. The promise of houses at some undetermined date down the road is not cutting it with the people, and that is if we could believe the promises, which we cannot.
The essence of the Government's response in the social housing strategy document is that much of it will occur off-balance sheet. That is another Irish Water job, as the new housing agency could be set up as a semi-State company where money can be borrowed off-balance sheet. It is the Government's answer to everything. It wants to do much by way of public private partnership, with multinational pension funds facilitating the purchase of hundreds of houses in different locations and taking in people as tenants with no fixity of tenure. That issue must be addressed. The Government's strategy is to have a never-never period and somebody else will do the work off-balance sheet. The Government will argue it has a strategy, a plan and, above all, a public relations document and a press conference to announce it. That is as far as Government policy goes in these areas.
A simple issue has been mentioned by a number of my colleagues, which is the reintroduction of the tenant purchase scheme by local authority tenants, many of whom have been in their houses for a long time. The Government has abolished that scheme despite people crying out to be allowed to purchase their houses. The local authority could use that fund which would be obtained from people using the local authority to purchase or construct new social housing in an area. It would be sustainable and renewable development but that seems to be beyond the grasp of the Government.
The rental market which people are being forced into is getting ever more difficult because of increasing rents arising from a lack of supply. There has been an increase in the country's population over the years, as the census has indicated. There has been an increase in the school-going population and people need more houses, but the market is not there. As a result, people cannot afford rents and those on rent supplement cannot even meet what is required to make up the balance of payment. Many landlords do not want to take rent supplement as there are better pickings, as they might call it, in the private rental market.
I will highlight one aspect of the rent supplement, which is the ability of the Department of Social Protection and specifically community welfare officers to determine different rates for the supplement in different counties, depending on the local market, rent conditions and the price of housing. It is remarkable that the new regulations announced by the Governor of the Central Bank, Professor Honohan, failed in their entirety to grasp that concept. Ireland is not just one market and there are different prices for houses in Dublin city centre, the west coast, the midlands, Cork or other regions. The Central Bank regulations are seriously flawed as they do not recognise the differences in the market between different parts of the country. Perhaps the Central Bank believes one size will fit all. Life is not so simple. As a result, the regulations introduced by the Central Bank are anti-Dublin and go against family home ownership. They are designed to assist the banks in making sure there is a big rental market, and the Central Bank is making it more difficult for families to own their own homes. It is making it twice as difficult for families in Dublin to own their own homes. The Governor of the Central Bank, along with the deputy governors, in making those statements yesterday did not recognise the basic idea that people want to own their own homes, even in Dublin. The Central Bank has not been able to take that into account.
Yesterday's statement from the Central Bank seemed to be a major criticism of the lending banks. In the opening paragraph of the statement, Professor Honohan indicated these regulations were to "reduce the risk of bank credit and house price spirals". As the regulator of the banks, the Governor of the Central Bank is essentially saying that he still does not trust the banks when it comes to lending for housing and the property market. He is afraid the banks will cause a lending spiral and he wants not just to deal with them by way of regulation but by way of legislation. He is saying that he has no control over the banks he is meant to control and that he does not trust them.
In the next paragraph, Professor Honohan refers to loan-to-value aspects in lending. It is a valid but unsatisfactory point of view. Everybody knows the most important element to consider when taking out a loan or mortgage is the ability to repay, which is based on income and risk analysis of a person's employment, specifically the likelihood of it continuing. There would also be some insurance policy on a mortgage by way of mortgage protection. The old-fashioned approach of linking a mortgage to house value is an implicit assumption that if a person cannot pay a mortgage, the property will be worth more than the loan and it can be repossessed. That process is designed to help financial institutions repossess houses but it should be based on people's ability to pay, on risk with regard to income and on consideration of insurance policies or mortgage protection. To link a mortgage to house value is to connect it unnecessarily to asset value, which is not related to ability to pay. Professor Honohan takes that into account but there is too much emphasis on a house value and not enough on ability to pay.
The Governor of the Central Bank also argues that banks should lend responsibly and regulations should not be required. If he needs legislation to deal with this issue, what is he saying about how he is doing his job of regulating the Irish banks? He should not need legislation. If the Central Bank did its job thoroughly, banks would be kept in check but he is essentially saying that he needs help as he cannot control the banks.
The proposals are particularly harsh on people who are not first-time buyers. Such people may have bought a small one-bedroom starter home, house or apartment and have never missed a repayment but they cannot trade up because of the deposit requirements. They may be in negative equity or there may be little equity left in the house. The most important failure of the regulations announced by the Central Bank is that the process utterly ignores the payment record of people renting over years. How can somebody who pays rent month after month and year after year be expected to put aside up to a 20% deposit for a house? If ability to repay a loan could be proved and there is evidence of rent being paid, it should be considered. In many cases, the cost of taking on a mortgage would be less than rental costs but the Central Bank has not considered that either.
There are developers sitting on sites and unfinished housing estates because they are waiting for the market to rise in order that they can make more profit in two years rather than releasing housing stock to the market. The Government has singularly failed to deal with that matter. Within a few months, houses could be brought to the market but they will be left for two years in order that prices can rise. The Government should be able to move on the issue now but it has failed to do so. That is part of the reason we have moved this motion.