Item No. 2 on the Order Paper. I am sure Senators are aware of the standing procedure regarding motions, that the proposer has 30 minutes, each subsequent speaker 15 minutes and the debate lasts 3 hours.
House Property Costs: Motion.
I move:
That Seanad Éireann notes with concern the continuing escalation in the cost of house property and calls on the Government to take steps to alleviate the difficulties being experienced by house purchasers.
I have noticed that it is customary on these occasions to thank the Leader of the House for giving time for discussion of Private Members' Business or non-Government business. I want, not in any ritualistic way, to thank the Leader of the House for giving time for the discussion of this motion. I quibbled with him this afternoon on the Order of Business over why another motion was not taken. I quibble with him again about that. But I want to say—and I think it should be said as this is my first term in this House—that I understand from people who have been in the House before this term and from officials around the House that the Leader of the House on this occasion has been very fair and generous in the time he has given to non-Government business. We all complain from time to time that the Seanad is not used sufficiently but, relatively speaking, I gather that during this sitting the Leader of the House has been fair and generous in the time he has allotted to non-Government business and I want to thank him for that.
It is unfortunate in one sense that this motion has been on the Order Paper for some time now and the price increases that have occurred are perhaps slowing down somewhat now but it is nevertheless a very important matter for discussion. I want to say at the outset that I do not in any way wish to be politically partisan or politically devisive in proposing this motion. I have noticed that on almost every occasion that the question of housing has come up for discussion in the Dáil, whether it be on Estimates or on particular motions, it has often developed into a statistic-throwing match with somebody on the one hand relating what has happened in the past six months and someone else on the other hand comparing that with what happened some years ago.
Whatever has happened we are dealing with the reality now that almost every Irish person is seriously concerned at the frightening cost of houses. People who a few short years ago could have purchased a house without undergoing enormous financial burden, nowadays find themselves in the position that they just cannot do it. It is a pity that that should be the case. Everybody would accept that it is a basic right of families to own their own homes. I would hope that we could start on that premise. It is the Opposition's job to be critical when we think the Government are wrong. But if we could be objective and constructive in our criticism and look to see what might be done to alleviate the problems we have and to try to discuss ideas, that might be useful in trying to deal with the problem of house prices today.
It is a very sad thing that our record in housing in Ireland over the past 60 years has been a bad one. The simple truth is that, even though we may pay lip service to the ideal that every family should have their own home, the reality is quite different. I do not come into the House today to blame this Government or to place full responsibility on this Government for the housing problem we have today. The truth is that successive Irish Governments have failed to have a sufficiently dynamic policy in housing to satisfy the need that exists. We are in a very serious situation now because our population is a young one and it is quite apparent that in future the demand for housing is going to be far greater than it is at present.
The Minister, I know, wishes to solve the problem. I know he does not like to see the rate of increase in house prices that we have seen. Everybody in this House shares this view. But the reality is that he has inherited a very big problem; he has inherited the absence of a sufficient policy from previous Governments, previous Fianna Fáil administrations and previous Coalition administrations. So I hope that we do not spend our few hours here this evening defending positions held or arguing as to the rights and wrongs of statistics or otherwise. We have to be constructive. Obviously, we have to oppose what we think we should oppose, but at the same time I hope that the debate will be a constructive one.
If we accept that every family has the right to own its own home then we have to accept that our policies in the past have not been sufficiently dynamic, have not been good enough and certainly have not realised the end that they set out, or they say they set out, to realise. The absence of a real, good housing policy has manifested itself now in some appalling examples. We have all seen on television or have experienced the appalling conditions in which some people live in Dublin particularly and in other heavily-populated areas around the country. We have seen people living in squalid conditions, in unhealthy conditions. We have more recently seen the development of the so-called mobile home business where people living in these cardboard boxes—that is all they are—have to spend their savings to provide the only home that they can actually acquire. Anybody who in the past winter, which we do not seem to have shaken off yet, has had cause to visit anybody in these houses could have seen the unsuitability of them as homes. They are really an entrepreneur's delight because the amount of money that must have been made out of these in the past few years must be quite enormous. People living in this type of condition, whether it be in overcrowded ghettoes in distressed areas in cities or whether it be in mobile homes throughout the country, are living in insecure housing. A lot of social problems have emerged directly from these living conditions—I speak of broken marriages, alcoholism, delinquent children and so on. There is a direct connection between these. Having said that, we have to look at the Minister's job at this time in the light of his having inherited very many problems. Unfortunately, the problems that have arisen in the past number of years have aggravated what was already a very serious situation.
Another point that I have noticed in the past year or two is the emergence of a "new poor" in Ireland. I refer particularly to young married couples who have purchased private houses at, to them, relatively enormous cost. Because of the interest repayments and the financial burden that has fallen upon them for taking this very worthy and laudable step of buying a house, they literally find themselves in positions where frequently they cannot even feed or clothe themselves properly. That is something of the background to the problem.
I will say just one word on local authority housing. I am aware that the Minister for the Environment denies that this Government have a bias against local authority housing. I know he has wondered where anybody could have got this idea. But I think that paragraph 58 of the White Paper, "National Development, 1977-80", is a sad reflection on the present Government. I quote just two or three lines from it. At the beginning of the paragraph it is stated:
At present, apart from Dublin and some other areas, housing needs are being met almost as they arise....
The paragraph later continues:
The continuing and accruing subsidy of up to £1,500 per unit per annum for normal rented local authority dwellings now being provided is placing a very heavy burden on the Exchequer. In the face of these high costs and given the progress already made towards satisfying needs, the level of activity in the local authority housing programme and/or the extent of Exchequer subsidies will have to be subjected to continuous critical review in the light of available resources. The local authorities will be requested to examine the circumstances of housing applicants in more detail to determine priority needs.
Any public representative doing his job is well aware that that suggestion just could not be true. The Minister refers to some other unspecified areas outside Dublin. The author of the document gives the impression in that paragraph that housing needs are, generally speaking, being met in the local authority sector. There is no real foundation for that suggestion. I do not know where the author of the document acquired the information that would give foundation to such a statement but I can tell the Minister for Economic Planning and Development or the Minister for the Environment, who is present, that there are thousands of people throughout the length and breadth of Ireland who would, from bitter personal experience, disagree with what this document says and who would be quite pleased to put the Minister right on the matter. I have complained in the past in this House that the present Government are adopting Tory-like policies and this is an example of such policy which is certainly not to the advantage of the Irish people. It is understandable that the Minister for Economic Planning and Development should experiment with the economy with the excellent intention of trying to stimulate economic growth, particularly in the building industry. But I think it is wrong that potential local authority tenants should be the guinea pigs of such experimentation. There has been too much emphasis placed on the importance of the private sector in local authority housing. If the experiment does not come off the only losers will be those people who are left unhoused and who because of present circumstances could not possibly finance houses for themselves. That is unacceptable and I would hope that the policy expressed in that White Paper is one that will not be continued to the full extent that one might read into the paragraph I have quoted from.
It is an excellent idea and entirely laudable that the Government should encourage people who might qualify for local authortiy housing to purchase their own houses. That should be fundamental to our overall housing policy. However, it is clear that a situation has developed—through whose fault it does not matter—in which people in the lower income group cannot purchase houses of their own. Being in that situation we decide whether housing is a priority or not. If it is, we must be prepared to put the resources into it to facilitate those people. The United Nations regard it as a basic human right. I do not have any doubt but that everybody in this House will say that every family in Ireland is entitled to a home of their own. If we say that, apart from the economics of it, we must be concerned socially and we must do whatever is necessary to put the situation right in that respect.
In considering specifically the present explosion in house prices and all the consequential difficulties that have flowed from this, we have to look at it in two contexts. First we must look at it in the historical context which I have already referred to. Successive Irish Governments have never been socially dynamic enough and have never produced a sufficiently good housing policy to try to solve the problems. That is a problem the Minister has inherited. It is not his fault. It is the fault of all Irish people whatever side of the House they sat on at any stage. This neglect in the past has created a very solid foundation upon which the present problems lie and makes it difficult for the Minister to find solutions.
The more immediate reasons for the problems we have been discussing at length in various places have been most excellently analysed and commented upon by Messrs. J. Durkan and B.J. Menton in the Quarterly Economic Review of the Economic and Social Research Institute which was published in September last. In effect this report concludes that the impetus provided by both Governments in 1977, by the Coalition and Fianna Fáil, brought a demand into an industry that was experiencing a very low level of activity and that the result was that the inevitable free market reaction occurred; prices soared and the supply could not meet the demand. The reasons given were the taxation changes in the budget of 1977; the tax concessions caused a big flow of money into building societies and consequently provided more money, particularly to better off people, to build new houses. Another reason was the double effect of the £1,000 new house grant and the abolition of rates on private dwellings. These Government moves created a demand far greater than the industry could meet with the result that a price explosion occurred.
There are other factors more negative in nature than the ones I have mentioned which have undoubtedly contributed greatly to the problems that we have. First of all we have the cost of building which everybody has complained about for a long time. I accept criticisms by the Minister in the past of the Coalition for not dealing with the Kenny Report or making up their mind on it more quickly. That is a valid criticism. I know that there are great problems in putting the suggestions in the Kenny Report into effect and there are some constitutional problems. I would be interested to know whether the Minister has reached any conclusions of his own. I know that he has been considering this for the past 18 months. I would be interested to hear what ideas he has as to putting the suggestions of this report into effect or what he would propose to do.
The second and negative problem, as I see it, is the absence in Ireland of sufficient serviced sites. This is something which, particularly in rural towns, is becoming a very grave problem. Obviously, in the area of private house purchasers there is a difficulty in buying sites with the necessity to buy half an acre in some counties where one is outside the urban area. This adds to the cost and the State could, in some way, help to get over this problem.
Another incredible and outrageous problem is the shortage of skilled labour in the building industry. It is a sad reflection on our society. Again, I do not blame this Government for it. What happened was that when the demand grew so sharply the builders, at that time operating at a low level of activity, were not equipped to deal with it. Clearly something should be done to ensure that skilled labour is brought back into service in that area. We have enough people who could be trained. More recently and since the ESRI Quarterly Economic Review was published last September, we have seen a further unfortunate development for house purchasers, whether they are recent or potential, and that was the increase in building society interest rates. This is something over which we have no control; over the overall flow of interest rates fluctuations we do not have the control we would like to have. Ironically the increase in building societies' interest rates is a double-edged sword for, as well as increasing the burden on people who have purchased houses, or people who are budgeting to purchase a house, it has also provided more money for the building industry because deposit rates have gone up and people are more inclined to put money in when interest rates in building societies go up. I know that when this report was published last September they felt very strongly that there was inadequate financing in the building industry. I do not know what the present position is. The Minister might be able to tell us whether there has been an improvement but I would suspect that there should have been quite an improvement as a result of the deposit rates and interest rates increasing.
The ESRI Report at that time drew attention to what they saw as two particular problems facing the housing sector. I will quote from it:
The immediate problems faced by the housing sector are therefore twofold: (i) the inadequate finance and (ii) the level of price increase. Any measures taken to increase the availability of finance without ensuring that an adequate supply of houses is available to meet the ensuing demand could result in a further escalation of prices. Therefore for a resolution of the present ‘crisis', policies are required which not only increase the availability of finance but also increase the supply of housing.
Clearly in the context of our present difficulty, or crisis as the ESRI terms it, increasing the supply of houses is crucial to the resolution of our house price problem. Unfortunately, I cannot think of any easy way in which that can be done in the short term. Obviously in the long term it is something that must be looked at and in so far as the Government can do anything something needs to be done. To try to deal with this in the immediate future we have to look to other areas. Direct aid such as subsidising interest rates or possibly increasing the £1,000 new house grant will help but as the report points out the danger is that when that is done it is likely that a further inflation in house prices will be created. Consequently, we have to consider, in the short term certainly and maybe in the long term, direct control of house prices.
I know that the Minister has said in the past that the Prices Commission are not competent and have not got the resources to carry out that function. Having looked at this area for the purpose of this motion I see just how complex and difficult an area it is and I can appreciate why the Prices Commission could not do that. The only system of control we have at the moment is the system of the certificate of reasonable value. It is a system that was introduced by Deputy Molloy when he was Minister for Local Government some years ago and so far as it goes it is a good system but—and I am sure the Minister is aware of it—builders have found great fault with the system. They have been frustrated—and there is definite evidence to indicate that—because of the inflexibility of the system or the inflexibility of the operators of the system. The Construction Industry Federation say changes could be made that would not alter the controls that exist and which would suit their members better. I am just not competent to discuss that matter but I can see clearly that there are other facts which would back it up and evidence to suggest that more and more builders are now avoiding getting involved with houses where people will require a grant, or where people will require the benefits of the stamp duty. Where that occurs, there is no control.
Two things have emerged from this. First, where there is the enormous demand that there is at the moment—and there is every indication that the demand is greater at the upper end of the income scale—houses are being built over which the Department have no control. People are saying: "I will do without the £1,000 house grant," or, "I will not qualify for it," whichever it is. Secondly, last year reports from the building societies indicated that a greater portion of their loan finance was going to people at the upper end of the scale.
I do not know what the current position is there, but my understanding from the reports I have seen is that all the indications are that builders were going up market and that the limited building resources we had were being devoted disproportionately to the people in the wealthier brackets rather than to the people who, at the lower end of the scale, would not qualify for local authority housing but who badly require housing of their own and who are prepared to save up and pay their deposit. They have been priced out. Builders are not interested in servicing them because they are dealing with the upper end of the market. There are indications that there are bigger profits at the upper end of the market.
I was interested to see in Irish Business published in October last, a short article headed “Are House Prices Excessive?”. There is a table with it but the paragraph indicates some of the nice fruit available for builders at that level of the market. They took an estate being built off Sandyford Road in Dundrum in Dublin. They were five bedroom, detached, Georgian style, red-bricked houses. They asked a leading chartered surveyor and valuer to break down the cost of the house and they published the findings. The chartered surveyor costed everything on the high side but his findings showed that the builder is earning a minimum profit on each house of £10,821. They said “minimum” because 56 houses were being built and went on to explain that this would reduce the cost of each house. They estimated in their conclusion that the builder should earn a profit of about £12,000 on each house, and on each of 56 houses in one estate that is not too bad at all. I can understand builders who would prefer to concentrate on that end of the market than elsewhere.
The difficulty is that if we have limited building resources, if we have too great a demand, if builders can reap those sort of benefits—and they are excessive; there is no question about that—and if they have sufficient business at that end of the market for them to devote all their resources to it, it is understandable that they will do so. That is one good argument for the introduction of overall price control.
I find it difficult to make specific suggestions on what can be done or what should be done for the future. I see areas of potential, and matters which might be considered. As I have already said, in the longer term we must ensure an increase in the supply of houses. Obviously we must ensure that there is not a shortage of skilled labour in the building industry. Once we have increased the supply, we must ensure that the supply is maintained at a steady level. Many people to whom I have spoken—builders in particular—have explained that the biggest problem in the building and construction industry is the cyclical nature of it. Sometimes there is a boom and immediately after a boom it goes into recession. Obviously one cannot plan any type of housing policy in those circumstances. We must try to ensure that so far as possible supply and demand are equivalent. That is a very difficult thing to do I know, but the up-down tradition in the construction industry is one of the great reasons for the explosion we have seen in house prices.
We must also acknowledge that we have a young population and that the problem will get more serious in the future. The demand will certainly grow and unless we do something dramatic and radical about it now it will get a lot worse before it gets better. In the shorter term—and possibly in the longer term—we should introduce controls on house prices from the top to the bottom. This would have a flow-through effect right throughout the industry. Greater finance should be provided for local authority houses. I have already expressed my disagreement with what I regard as the Government's over-reliance on the private sector in this respect. If we are to talk in terms of making sure the supply is there, and that the demand can be met, we must ensure that there is a sufficient supply of finance into the business generally.
Part of this up-down or cyclical nature of the business is caused by the difficulty we have over interest rates. Building societies' interest rates are down. It is easier for people to purchase and pay for their houses. Unfortunately, funds tend to dry up in building societies when they are down too low. On the other hand, when they go up the whole situation turns the other way. One way or the other it seems to be a vicious circle. There must be some way in which we could introduce controls, whether through interest subsidies or whatever I do not know, but it is something that must be looked at urgently.
There must be a greater availability of serviced sites and control, to some extent, of building land. This is covered in the Kenny Report. I do not know whether the Minister has reached any conclusions on that yet, and I would be interested to know. Overall it is an extremely complex and difficult area. I have suggested some ways in which the position might be improved. I acknowledge that I am not a competent economist, or a competent builder, or a competent house purchaser because I have never actually pruchased a house for myself, but I know that the problems involved are complex and difficult. I wonder whether there is a good case to be made for establishing a permanent commission with the resources not only to control house prices but also to keep an eye on the variables and to advise the Government on how problems might be overcome. It is only through some system like that that we will eventually overcome our difficulties.
Finally, I know the Minister is as concerned about house prices and housing problems as anybody on this side of the House. I know he has his difficulties, and I know he had inherited more difficulties than have been made for him in recent years. I wish him well in the job he has to do. I regret that the problems he has in this respect are so great but I would ask him to take a different view of things, to try, if you like, to abandon traditional policies and to introduce some dynamic thinking into an area that would richly benefit from it.
I second the motion dealing with this very important subject. As Senator Molony quite rightly pointed out, there is no doubt that it is the ambition of most people, young or old, to own their own houses one day. Unfortunately, I must be super-critical of a number of the Government's policies. I was not entirely happy with the record of the previous Government. In the context of economic development the record of this Government in the past 18 months is nothing to shout about. In the four years of Coalition Government 25,000 houses were built per year. At the time it was hailed as a reasonable development. It did not meet all the needs of house purchasers but it was done at a time when there was a terrible depression not only here but in Europe. In June 1977 we were led to believe that a new era had dawned in house building and house purchasing. What happened? In their manifesto before the general election the Fianna Fáil Party said they would give a £1,000 grant for first-time house builders. This generated a type of over-response in the building business which should have been anticipated by the authorities. We were coming out of the doldrums. The industry was getting back on its feet and did not need the injection of this grant.
Instead of being of monetary assistance, which I am sure was originally intended, it made house prices much dearer than they had been the year before. In June or July 1977 an average three-bedroomed house cost in the region of £10,000 to £13,000 depending on the customers and the area they lived in. In February of this year the price of that same house would be £17,000 to £22,000, and in some cases much more. It would be very difficult to explain to a man who got a £1,000 grant for building his new house that he was better off under this Government because even at the lower end of the scale there was a jump of about £7,000, and even with the £1,000 grant he was £6,000 worse off. That £6,000 is a staggering sum because it has to be viewed in another light.
In local authority housing £9,000 is the maximum loan with an income limit of about £68 a week. Remember, we are still speaking about the first £9,000. Repayments over a period of 25 years at current interest rates will work out at something between £22 and £23 per week which is about 33 per cent of the purchaser's total earnings. What standard of living could he provide for his wife and family on the remainder? That is not all. He has to find another £9,000 to buy the house. Senator Molony mentioned the new poor society. They are the people I am talking about. What lending agency is likely to give that man the extra £9,000? The commercial banks are not interested. The other lending agencies are not interested and the Agricultural Credit Corporation would not be remotely interested in a man like him. Nobody wants to know him. There are literally thousands of such people.
On the other hand, the new rich in our community are the bigger builders. They would not be very happy about a change in our building programme. Some of them are new millionaires. It is of very little use to the potential house buyers I am talking about to say that certain people have become almost millionaires because of what happened in June 1977. The whole question of our interest rates is causing a tremendous amount of embarrassment and hardship. We thought we were near the pinnacle a few weeks ago but my information is that they are due for another hike before very long. The figure quoted now is 17 per cent and it may be 18 per cent before the position gets better. If this is true it will be the straw that breaks the camel's back. For the type of person I am talking about, the man who is confined to an income limit of £68 or £70 a week, times were never as bad from the point of view of actually owning his own house.
There is another point I should like to bring to the Minister's attention. Senator Molony spoke about the possibility of setting up some type of commission to monitor what is happening in the building industry and, more important, to do something about it. It is obvious that the National Prices Commission cannot help house purchasers. During the first 12 months Fianna Fáil were in office house prices on an average increased by 33 per cent. At the same time the cost of housing materials, the input necessary for house building, rose by only 9½ per cent. In fact, there was a reduction of 1½ per cent in the price of imported foreign timber. I should like to know who got the gravy—the difference between 33 per cent and 9½ per cent. It certainly was not the house buyers.
Considering that the whole situation has been festering for the past 18 months I was astounded that there was not a change in the income limit in the budget. To be meaningful the loan would have to be raised to £15,000 because £9,000 is utterly ridiculous at this stage. There is another important category of house building about which I am not too happy. I refer to small farmers with a valuation of under £15 who, unfortunately for themselves, live in very poor accommodation. Heretofore in certain circumstances it was possible that the county council would build a house for them on their own land. However, at this stage as a public representative I am beginning to see that a great number of these applications are being turned down, basically for two reasons. One is that it is assumed by certain officials, under the direction of the Department of the Environment I am sure, that people in this category should be well able to build their own houses.
I will give the House some figures which show how difficult it is for a small farmer with, say, 20 or 30 acres to build a new house at the moment. By and large the only place he can get the money is from the Agricultural Credit Corporation in return for the deeds to his holding. He will possibly have to borrow between £18,000 to £20,000 before he is finished because many of these people have not got serviced sites as we know them. If he borrowed £19,000 or £20,000 at 17 per cent over 20 years, his repayments would be £3,400 per year or £65 per week. With an income limit of about £68 a week he would have a very poor standard of living on what he had left. There is no way those people will ever get a new house unless their interest rates are subsidised, or something to that effect.
In some cases where small farmers have their applications for a new county council house on their land turned down they are referred to the local village or hamlet where four or five houses are being built. This is totally unsocial because a farmer must be near his land. I should like to hear the Minister's views on this because I believe it is a policy which does not suit rural Ireland.
I should also like to ask the Minister how many local authority houses there are in Ireland at the moment with no sanitary service. I believe there are quite a few. I also understand that in order to qualify for a reconstruction grant for a local authority house the housing inspectors, rightly or wrongly, are demanding that sanitary services be included in the reconstruction. Is that true? Is it also true that because those houses have not got sanitary services it could be stated that they are no longer a useful type of residence and would be condemned in some areas? I understand that under the differential rent system their owners are being asked continually for an increase in rent. I would like to know the actual number of local authority houses that have not got sanitary services. I should also like to ask the Minister how many new local authority houses were built in the year ended December 1978—the exact figure in so far as it can be given.
There are a number of points which might be regarded as small but which are very big to the people concerned. A number of people in my constituency for one reason or another built houses five, ten, 15 or 25 square feet larger than the size which qualifies to be grant-aided, and they did not receive a grant. If it happened through no fault of the builder or the owner it is a very hard penalty to ask a man to do without a £1,000 grant he thought was justly his. A number of house builders found that their applications to the Department under the old scheme were lost along the way and they cannot be grant-aided because there is no proof, as such, that they actually applied. I cannot see why the Department could not devise a method of obtaining proof that the house was built, was the proper size, and therefore the owner is entitled to a grant.
Much more effort, much more initiative and much more money will have to be pumped into housing by the Government. There will have to be certain curbs. Perhaps the new-found millionaires are building a few extra houses, but the problem is that the people who are buying them and have bought them in the past 18 months are subsidising the millionaires. No Government would want that. There must be some curbs or only the very rich will have houses and we will create a situation in the next couple of years which we will not be able to reverse, I hope a new policy will be devised in the next few months and that people will be able to realise their ambition to buy their own new houses.
This is a worthwhile motion but in the past there have been many housing motions and I am sure the dustbins in the Custom House are full of discarded plans and all types of suggestions from many local authorities and Members of this House and the other House over the years. No solution has been found.
This is an enormous problem. It is a long-term and a short-term problem and it must be examined on the basis of long-term and short-term needs. Blame placing is no solution. We need reasonable suggestions on the changes necessary to meet the changing situation here and in other economies. The housing situation right across the board is in need of urgent and detailed examination. The fact that houses of substantial cost are being built and purchased is not the answer. Normally speaking that person has put on the market a lower-cost house and the housing pool has been increased.
The basic factors are the input of land, labour and the cost of materials. These are the essential factors in the development of the housing programme and in meeting housing needs. There are various other factors such as loans, grants and other matters. We have reached the stage where the question of land is of vital importance. A new and radical look must be taken at this aspect. Governments must be courageous in dealing with speculators who lie in wait and make substantial profits. Farmers and other landowners can make substantial profits from the sale of land for housing purposes. This is an area which must be tackled at the earliest possible moment. Some type of system should be developed under which the value of agricultural land is set and 25 per cent or 30 per cent above that should be the maximum allowed to be paid for that land. If the price of land is not controlled somehow, the price of houses can never be controlled. The price of land should be controlled and the developer or the builder should not be allowed to put on additional charges.
It is only on that basis that control of the entire house building situation can reflect in the price of the house and it must be reflected in the price of the house. For far too long we have seen people lying in wait with substantial amounts tied up and substantial fortunes to be made as a result of land being zoned for housing needs and land being made available for the provision of services—services that you and I and other people pay for. This matter must be examined. The £1,000 grant is only a very small problem if, in fact, it is a problem at all. The whole basic structure must be examined and we must make a radical effort to stop people lying in wait and making fortunes. When we can eliminate this situation in relation to land purchase and stabilise the price of land, the cost of a house must come within the reach of the normal man.
There is also the question of sanitary services and services on sites. We have some local authorities with sites, and some adjacent local authorities with services and friction indeed between them. It is very disturbing when we have this friction. Some type of national sanitary services authority should be set up to eliminate problems and to plan the sanitary services in their entirety.
The whole question of sanitary services, pollution and development as it were, is a matter that must be divorced from the present type of tight grip that we have. In order to speed up the process the local authorities must be given more power than they have because when matters are referred to the Department there is a time lag. Between the Department and the local authority there should be some type of authority that could deal with this matter in order to expedite the development and to ensure that development can take place on a planned basis breaking across the barriers of local authority boundaries which are the cause of so much friction between a planning authority in one area and a planning authority in another area, where one has the services and the other has the land.
The sanitary services situation is of major importance as, indeed, is the question of land value. These are the two vital elements in the development of housing needs and in the development of housing costs because if we cannot control the question of services or the question of land values we cannot control the situation. Regardless of whatever grants or aids of an artificial nature are given, whether the £1,000 is increased to £2,000 or the local authorities' loans are doubled or trebled as the case may be, the real situation is not being dealt with because the whole matter is based on the aspects I have mentioned.
An area that is in absolute need of overhaul is that relating to certificates of reasonable value. Efforts to control the price situation have failed. I do not think that a government can control the prices but if we could control the other elements the question of supply and demand would take care of the price situation.
When one submits to the Department of the Environment or to the Department dealing with the assessment of what is reasonable value an application in this regard, very often their assesssment is not in line with what reasonable men would regard as reasonable value and there is a "yes" or "no" answer. That is not good enough if we want to expedite the development of housing. If, for example, one applies for an increase under the consumer price index one will get an increase in relation to what the personnel who are examining the problem will regard as just and adequate. There is not any time lag. Nor is there any tying up of finances to allow for a further increase when an additional application is made for a certificate of reasonable value. It very often happens that the first application is made for £X and after it is rejected, the builder or the developer may hold it back for some time and then make application for a greater amount in the second instance. That application may be successful. The present criteria may well have been justified in the early stages of this operation but we are moving in a different type of market now, in a different situation, with different circumstances and different problems and on the basis of the different problems we must examine and update the legislation we have and indeed the regulations we have to cope with the ever-changing situation. I hope that the question of certificates of reasonable value will be examined in its entirety and that the application be treated in the same way as is treated an application for a price increase in any other area.
There has been reference to the question of the shortage of skilled personnel in the building trade. I have been a member of a housing committee and, indeed, of a planning committee, for more than 20 years. I understand the many problems of the past and indeed the development problems of the future in relation to skilled personnel. On one occasion I remember a Minister indicating to Dublin Corporation that they should double their housing programme but they were unable to do that because of the shortage of skilled personnel. That was at the time when there was full employment in the building trade. Although there are very many people on the labour market at the moment we are told by competent personnel in AnCO and elsewhere that there is required a substantial number of extra personnel such as blocklayers. We are told also that an additional 30 places will be available there this year. If we are to be serious about the situation on a national basis, if we are to tackle it in the manner in which many people would like to see the housing programme tackled, the question of an additional 30 places is farcical. We must broaden the scope of apprenticeship in order to ensure that in a reasonable period we have enough skilled personnel to meet the development situation that we all talk about. If we are successful in this sphere the question of the £1,000 grant or of the other aids will not be important. A crash programme is needed to train 2,000 to 4,000 people. We are told by several people in the particular industry that this is the volume of personnel required. Therefore, an extra 30 places in a particular centre will not alleviate the situation.
I shall not refute what the previous Senator said about Government policy because perhaps all Governments have been at fault. Perhaps not enough money has been devoted to housing in this year's budget but there are substantial increases. If the basic situation is not rectified then the overall situation will not be rectified.
I have one strong objection to building contractors and it relates to those contractors who leave estates unfinished. There is an estate in Tallaght, for instance, that is a fire hazard. The sooner we reject applications from people who are not measuring up to their responsibilities concerning the houses they build, the better. They should not be given licences to build further houses until such time as they complete their previous contracts. People who purchase houses have rights, too. Hopefully, when the Minister is replying he will say a word about this whole matter.
I agree with the Senator who said that it is a basic right of individuals to have houses. I trust that this debate will yield some type of suggestion and that the Minister will be motivated to new and higher ideals to meet the development situation and that he will have a word with AnCO and other institutions who indicate the type of programme they envisage for the coming year and tell them it is not enough, that they must get on with the job, that we have a target, that we have problems but that we intend tackling them, thereby ensuring that more houses will be built.
I am glad to be associated with this motion because I believe it will get a good reception from everyone in the House. One regret I have about it is that one of the people who signed it will not be here to contribute this evening. I refer to Senator Lyons whom I consider to be one of the best local authority representatives in the country. I trust that in a very short time we will see him here again.
The big problem at present is the price of sites, even for local authorities. In County Westmeath we found it necessary to devise a plan for the purchase of land in rural areas. The idea was to buy land—five or six acres—and to persuade the IDA to come in as partners with the promise that if there was a need for small industry or any type of industry in the area the land would be available for that. But we were tied by Department regulations. There is a non-written law or it may be a written law that in rural areas you may not exceed £1,500 per statute acre for sites for houses. There is not the slightest chance at present of getting sites for houses at £1,500 an acre.
We have overcome quite an amount of our difficulties by the method I mentioned, by having the IDA work hand-in-hand with us. The maximum local authority loan is £9,000 and in order to qualify for the maximum loan one's income must not exceed £67 per week. The repayments would be £22 per week. It is common nowadays for men to marry. Assuming that they pay £22 a week for 30 years, they will have paid more than £34,000 for their houses by the time they reach the age of 50. There is something wrong about the interest rate, to pay £34,000. Many people could not get married at present were it not for the fact that the EEC regulations allow wives to continue work after marriage. They would not have a chance of paying £22 a week out of a £67 per week income. The income limits should have been increased in line with the increase in the amount of the loan.
It is the policy of the Government to encourage people, to almost force them, to build their own houses. During the past year there has been a considerable drop in the number of local authority houses being built while there has been an increase in the number of private houses built. Therefore, the Government are succeeding to a certain extent. The average for last year was the same as the average for the four years of the Coalition when more than 100,000 houses were built. There were 25,000 built last year. I welcome the hand towards the building of a greater number of private houses because when local authorities build houses, they encourage the tenants to purchase but this is very difficult for a person with a very low income. The purchase period is 50 years and the repayments are about £10 per week. Because many people are unable to meet such repayments, houses are beginning to remain in the hands of local authorities. That is not good for a local authority because they are responsible for all repairs for as long as the houses remain in their hands. There would have to be some sort of more attractive figure to encourage people to purchase these houses and to take them off the backs of the Government and the ratepayers.
In every local authority there should be a solicitor to deal with all loans because very long delays are experienced in connection with loans. I had a case this week of a man who has been carrying a bridging loan for three years. His loan would have been paid this week were it not for the postal strike but he has been waiting a long time. His full loan goes into the bank and what he pays is interest so that nothing is paid off the principal. That should not happen. Senators Molony and Cooney would know all about equities. There is great difficulty in this area in respect of clearance. There is a holdup in the Land Registry office. It is often impossible to get out a new folio for a new site. It is a dreadful state of affairs that there are delays like that. For that reason I think there should be one solicitor in every county who would deal with all loans and other such matters and deal with them with the minimum of delay. Perhaps solicitors would not be too keen on that idea because they do not make a lot from dealing with SDA loans. For them the money is in dealing with building societies where people are getting loans of £25,000 and £30,000.
The previous Minister introduced the low-mortgage loan. This seems attractive but the first snag one encounters on trying to avail of such a loan is that if one is not on the housing list one does not qualify. This is unfortunate because people who are inclined to build their own houses would not be on the housing list because they would always have it at the back of their minds to build their own houses. One must be on the housing list for a year before qualifying for such a loan. There is another snag: many people who should be on the housing list cannot get that low-mortgage loan and also this loan would give people every encouragement to purchase their own houses.
The reluctance on the part of people in local authority houses to purchase is understandable when one realises that to purchase costs about £10.42 per week and that this is a repayment which must be made regardless of one's income whereas a tenant would have his rent reduced to perhaps about 75p per week in the event of his being out of work. That would be the repayment for an unemployed person with three children. In that way there is a loss to the local authorities and, consequently, to the ratepayers.
There has been reference to a shortage of skilled labour. There is no shortage of skilled labour but the problem is that those who are skilled do not wish to work with local authorities. They prefer to work on the lump system, telling their employers to pay the tax and not to bother about a stamp. They do the job quickly and move on to the next job. These people make very good money. There is no shortage of them as anyone building a house will confirm. The difficulty is in their unwillingness to pay tax.
I thought that people in differential rent houses should have been relieved of rates but I do not believe that everybody should be free of domestic rates. One could regard rates as another wealth tax. It would have been better to continue the rates system.
Senator Molony appealed to us to avoid a political-type discussion in dealing with the housing industry. Obviously there are some problems but I agree that these are not of any single group's making. Despite the comments from Senator Connaughton. I should like to draw attention to one or two aspects of the problem. It is very difficult to deal with it in any comprehensive way in this short time. First, there is the question of how many houses are required. Senator Molony indicated that there should be a greater building rate but to my knowledge no reputable organisation have challenged the figure which has been agreed as a result of recommendations by the National Economic and Social Council, and repeated in the White Paper, that the required housing is somewhere in the order of 23,000 to 27,000 a year. In articles that I have written I have mentioned a steady rate of 25,000. I have never heard anybody say that more than that is needed in the given demographic social conditions. I would agree with the Senator that the structure of housing might need attention. Each year roughly 8,000 secondhand houses move and are financed and most of the owners concerned will be going up market. Of the 19,000 houses that are built, assuming that the other 6,000 making up the 25,000 are local authority houses 7,000 to 9,000 are being taken up by people moving up market. As people move up market they are lifting the price so that is inbuilt into it.
The other point is the cyclicality of the industry. The facts are that since Fianna Fáil in the sixties managed to put the housing industry back on its feet we have managed to achieve our targets every year no matter what Government are in. We might have varied in the mix of local authority and private housing. One figure I have seen is that we have been within 25,000 by about 8 per cent in the last few years. One could say that the industry is not being subjected to cyclical trends, as in the case, for instance, in the UK where starts are something like 25 per cent down. In America it is predicted that the starts are decreasing by 20 per cent. This is a real problem in terms of using the housing industry to regulate the economy. We have not had that but what we have had is that the proportion of funding costs going into local authorities and being financed by State funds as opposed to building society funds has changed. That shifts the demand. We have been noticeably good in keeping the industry on an even keel.
Senator Molony referred to the ESRI document in which were challenged the predicted completions for 1978. The people who threw out that challenge have been beaten. In making their comments a good number of the variables which must be taken into account, like the CPI, cost of materials, average earnings and so on, have been off.
The public capital expenditure programme for 1979 on non-local authority housing is of the order of £79 million and if we take the low rise mortgage scheme into account that runs at £83 million. There is a problem there because going backwards through the figures for expenditure on non-local authority housing the figure in 1978 was something like £48 million while in 1977 it was £27 million. There one sees the inbuilt structural differences. The Government have brought the figure up to £79 million. That reflects Government policy which is to regenerate enterprise.
I should like to draw attention to the fairly important general point that people are now taking it for granted that we should all have known that the economy would recover from the mid-1977 situation and that, therefore, we should not have thrown in the £1,000 pump-priming incentive and that the rates concession was not necessary. It is all very well to say, now that the economy has recovered, that those measures are regrettable because they might have tended to push prices up. It is easy to be clever with hindsight. If we look back on the Coalition Government's Green Paper there was a lot of misery in it. It was not until the Fianna Fáil manifesto appeared that some optimism began to develop. The policy factors in the manifesto were helpful in restoring confidence in the private sector and in encouraging expenditure on housing and up-market expenditure, which is what happened.
As far as interest subsidies are concerned, it seems to me unwise to introduce subsidies at a time when there is a possibility of too much of a price-push. When the mortgage costs went to 13.95, nearly 14 per cent, the Coalition still did not introduce interest subsidies.
I did suggest it in the context of price control.
Yes, but the Senator pointed out the difficulty of price control in an industry like this. That brings me to the essential question, referred to by others, namely, the cost of land. It is interesting to note that the going price at the moment for local authority contract houses is about £12,000. I see a shake of the head. It is of that order. A contractor can go in on a contract with a figure of something like £12,500 and get serviced land, a designed house and supervision. If he himself wants to build, each serviced site will cost him something of the order of £5,000. This land problem, referred to by others, does exist.
In regard to the Kenny Report and the various unsuccessful attempts by the Coalition Government to deal with its recommendations, it is the market place that would dictate. Irish people are land-hungry and property-hungry. That hunger is innate. I would agree that we need a great deal more serviced land. If people realise that there is no guaranteed in-built natural inflation in the value of land, particularly in or around a big urban complex like Dublin, they will not speculate, they will not buy land, hold it for a while and sell, without ever putting anything on it. I would recommend that the Minister should consider getting a lot of money from the Minister for Finance—possibly some of the money we might get from the EMS—for the provision of serviced land some two or three years ahead of requirement. Serviced land which is just ahead of requirement will not influence the market. It has to be so far ahead of requirement that it will take the bottom out of the market. It would be worth spending an extra £20 million a year to do that. As someone sitting on the Government benches I make that suggestion.
It is unreasonable to use figures for price increases to suggest that they have gone from £11,000 to £19,000, or whatever it is. We should take into account that the price range, for local authority loans for private housing, was £10,500 in 1977 and £13,200 at the end of 1978. It is in that area that one can talk about the individual who is earning £70 or £100 a week, or whatever it is, and start working out that one third of his income goes on financing his house and he has to borrow. You cannot rely on the figure of £19,000; it is an unreasonable use of statistics.
The Minister will have to do something about the certificate of reasonable value. The land cost is a problem. At what value will the land be taken in assessment of that reasonable cost? If we use replacement cost accounting, which has been advocated by many leading people, such as Dr. Paul Carroll and others on the banking side, the cost goes up again. Some builders are selling houses on the basis of original cost. I am concerned when I see local authorities selling land at the going market value because they are adding to the difficulty by the creation of a market at the going market price. A good forward provision of serviced land, maybe the expenditure of an extra £20 million a year, might help us in that regard.
The European Monetary System was discussed last July in the Seanad. The policy of the Government puts us in a position, vis-a-vis exchange controls operating between here and the UK, that we do not have to worry about shifting interest rates being passed on to our mortgage rates. We have not got all the benefit from that yet, but it will come. The EMS will have a somewhat stabilising effect on the system, when it comes on stream.
Finally, there is a shortage of manpower. The price of manpower in the building industry is fantastic. I heard the other day that some people were trying to get bricklayers from the North of Ireland to help because of the shortage here. They would come for £200 a week each, no tax and accommodation prepaid. We do have a problem there.
In discussing this motion, we have been traversing territory which is all too familiar because quite similar motions, Adjournment Debates and supplementaries to Dáil questions got repeated airings—indeed, I suggest over-exposure—in Dáil Éireann time after time in 1978. I do not, for an instance, question the right of the Opposition Deputies concerned to use the time made available to them by that House as they considered appropriate, but, having made their case once or twice and having it effectively countered and their allegations proved to be without foundation, I can legitimately criticise the political acumen of the party leaders who decided to continue to make an issue of a cause which was lost before the debate even opened.
I would have hoped that Senators on the benches opposite would have kept themselves sufficiently informed of the proceedings in the Dáil, or that, before this, their backroom advisers would have got the message sufficiently clearly, to save the Seanad a repeat of this rather sterile exercise. However, the motion is before the House and I will address myself to the assertions which it makes.
The motion states that:
notes with concern the continuing escalation in the cost of house property...
Nobody, here or elsewhere, will challenge the fact that house prices have been rising steadily—not just over the past year or two, but for decades past; not alone under Fianna Fáil Governments, but during the occasional rare periods of administration by Coalition Governments. This has not been a phenomenon peculiar to this country. It is a trend which has affected every country in western Europe and, indeed, some neighbouring countries much more acutely than us.
In the course of the Dáil debates on the topic, Opposition Deputies made considerable play of the big jump in new house prices recorded by my Department's "Quarterly Bulletin of Housing Statistics" during the first three months of 1978 as compared with the immediately preceding quarter and, on that flimsy basis, projected that prices would increase by up to 50 per cent over the full year 1978. They persisted with this contention, even when subsequent Quarterly Bulletins made it evident that the rate of price escalation was being successfully curbed.
May I point out to the Seanad, as the bulletin quite explicitly states, that while the statistics of house prices are useful as indicators of general trends in average house prices over a given period, they cannot be taken as completely accurate records of building or other housing costs at any given time. For example, the houses concerned are not necessarily comparable, even from quarter to quarter or from area to area. This applies particularly in areas where the number of loans approved in a quarter may be relatively small and the average prices influenced significantly by individual housing schemes. Furthermore, the average price recorded can be influenced from quarter to quarter by changes in the distributions of loan approvals among the lending agencies. I intend to return later to deal with factors which can substantially influence the recorded trends in average house prices for which loans were approved.
Subject to this reservation, over the four quarters of 1978 the rate of new house price increases recorded by the bulletin fell from 11.7 per cent in the three months to 31 March 1978, to 8.4 per cent in the June quarter, to 3.4 per cent in the September quarter, and I am glad to say that the bulletin for the quarter ended 31 December last, which will be published shortly, will record, not an increase but, for the first time in years, a small reduction. Over the full year 1978 average new house prices, as recorded by the bulletin, rose by 24.8 per cent.
Some Senators opposite, like their party colleagues in the Dáil, would give the impression to the public at large that this Government are unconcerned at increases in house prices and are unwilling to take effective action to curb the rate of increase. Nothing could be further from the truth. Contrast our record in this regard with that of the last Coalition Government, under whose four years of administration average house prices rose by an unprecedented 113.5 per cent, including a staggering increase of 36 per cent in the cost of house building in their first year in office.
House prices have been rising continually in Britain, in Northern Ireland and on the Continent. The fact that we have managed, to an appreciable degree, to bring them under control in the Republic did not come about fortuitously. It came about because the Government were conscious of the trend in house prices and aware of the difficulties to which it would give rise in the case of persons of modest means and because the Government kept the situation under constant review and took the necessary initiatives to deal with the situation. This process of control was not an emergency operation begun early last year. Our initiative to control the escalation in house prices was put in hands soon after we resumed office in mid-1977, as part of a wide-ranging package of actions in relation to housing.
When Fianna Fáil took over Government again in July 1977 they discovered that the controls on new house prices, as operated by the certificate of reasonable value system, which the previous Fianna Fáil Government had introduced in 1973, had not been strengthened, contrary to what should have been expected after a period of rapid price escalation. Indeed, the controls had been weakened by the drastic curtailment, in 1976, of eligibility for new house grants. In those circumstances, the Minister for the Environment immediately extended the certificate of reasonable value system to all grant type new houses provided for sale, and also to flats. Previously houses in schemes of three or less, and all flats, were exempt from the controls. The effect of this and the liberalisation of the schemes of new house grants was to increase from approximately 40 per cent to 70 per cent the proportion of new private houses brought within the scope of house price control.
When further positive action by the Government was needed last year, it was promptly taken. House prices had been rising at an unacceptable rate during the first half of that year and evidence was available that this was being influenced by a definite move by builders out of the construction of modestly priced houses, eligible for grants and for which certificates of reasonable value were, therefore, required, and into the higher priced market where profits were greater and where they would not be subject to the system of house price control.
Against this background, building societies were informed in August 1978 that the Government had decided that, for a trial period at least, 60 per cent of the total funds available to them for mortgages should be allocated in providing loans not exceeding £13,000 each and that at least a further 20 per cent of available funds should be allocated in providing loans of between £13,000 and £16,000. The societies were also informed that certificates of reasonable value should be furnished by all applicants for loans not exceeding £16,000 for the purchase of new houses and that the apportionment of loans as between new and previously-occupied houses should be maintained at the levels then current. The Government decision was intended to ensure that available moneys should finance the purchase of the greatest feasible number of reasonably priced houses and that all purchasers of new houses with loans under £16,000 would be assured of getting reasonable value for their investment. This measure, while unpopular with building societies and with some builders whose profit-taking was affected, has shown significant results since its introduction in so far as the trend in average gross house prices is concerned.
As I have said, I am keeping the general question of new house price increases under continuous review and will take steps as appropriate to deal with the situation. In particular, I have had the certificate of reasonable value system specifically examined and changes in the system to strengthen it will be proposed in a Bill, the text of which will be circulated in the near future.
The building cost of local authority housing is governed by the response to open public tendering and by the standards of design and construction of dwellings, and the environmental quality of schemes and the amenities provided.
Senators will be aware that a feature of the local authority house building programme is the widespread use by local authorities of the open tender procedures for their housing schemes. This system has been generally satisfactory and has resulted in keen competitive tendering from building contractors when the work demand is not too high. The degree of competition for schemes has tended to decline in the past year due to the upsurge of alternative construction work coming on stream.
There has been a notable increase in recent times in tender prices, particularly in urban areas. This is worrying. The cost of local authority housing is met by the almost 100 per cent recoupment of loan charges by the Government. The high capital costs at present are imposing a heavy burden on the taxpayer. The capacity to meet this burden is not unlimited. Serious efforts have been made to contain costs and these will have to be intensified. This will not, however, entail any cut-back in the high standards of current local authority housing which I consider it essential to maintain.
Local authorities have been aware of the need to have an adequate land reserve and in recent years they have maintained a large reserve of the order of 55,000 sites over and above land being built upon or likely to be used in the short-term, to meet the longer-term needs of their programme.
Housing authorities have been authorised to acquire whatever land is needed for their programmes for three years ahead, effectively giving them a five-year reserve when allowance is made for planning time.
There is one aspect of house price increases to which I must specially refer. That is the standards of new houses and the quality of their domestic and environmental amenities. The Government have attacked the problem of unreasonable levels of house price increases but have been at pains to ensure that these actions will not reverse the well-established trend towards overall improvements in housing standards. This policy is common both to the private and local authority programmes.
With increasing national economic prosperity and rising social aspirations it is natural that our people's ambitions should be towards better and better housing. The results of this understandable and commendable development will be illustrated in a very interesting analysis carried out by An Foras Forbartha into private housing estates in the eastern region—Dublin, Meath, Kildare and Wicklow—comparing the position in 1976 with that in December 1978. The survey, which I hope to see published, was based on an investigation of 11,580 houses in the region completed in 1976 and 10,197 completed in 1978. It shows that over the survey period the following important changes had taken place: (a) Substantial increase in floor areas of houses; (b) Increase in detached two-storey houses; (c) Increase in four bedroom houses and decrease in three bedroom houses; (d) Increase in garages and decrease in car-ports; (e) Almost no houses without central heating of some type compared with 40 per cent in 1976; (f) Increase in timber ground floors with reduction in concrete floors; (g) Increased usage of brick facing; (h) Increase in tarmac roads and decrease in concrete roads.
Indicative of the trend towards higher standards was the fact that in the eastern region the percentage of all houses constituted by detached two-storey dwellings rose from 6 per cent in 1976 to 34 per cent in 1978. The number of four-bedroomed houses in the area rose from 27 per cent to 54 per cent of the total, the proportion with individual garages rose from 20 per cent to 49 per cent and the number with central heating increased from 60 per cent in 1976 to 99 per cent in 1978.
I want to refer briefly to the question of control of the prices of previously occupied, houses. While the rate of increase of prices of new houses can be regulated indirectly, for example, by means of the certificate of reasonable value system, by conditions attaching to the payment of the £1,000 State grant and by the direction of a substantial part of the inflow of building society funds to modestly-priced houses, there is no scope for similar machinery to regulate the prices of previously occupied houses. These prices are determined by market conditions generally and prices will vary considerably depending on the location, the amenities offered, the state of repair and the general potential of the property. The control of the prices of such houses by the Prices Commission would not be a feasible proposition. The commission have no functions in relation to other previously used items such as secondhand cars or furniture, and houses which have previously been occupied are no different in general to such secondhand articles.
While, for the reasons I have mentioned the prices of previously occupied houses are not susceptible to controls, it must be put on record that the average price of these houses, for which loans were approved by the main mortgage agencies, increased by 17.8 per cent as between the last quarter of 1977 and 1978 respectively—that is, at an appreciably lower rate than in the case of new houses. I am particularly pleased to mention also that over the last three months of 1978 the average prices of previously occupied houses fell by a whacking 6 per cent.
I have said enough to deal with the first part of this motion and to prove to the Seanad that the Government, have taken appropriate and effective action to curb the rate of increase of house prices.
The second part of the motion raises the need for Government measures to alleviate the difficulties being experienced by persons wishing to purchase houses. In drawing up our election manifesto in 1977, we accepted that the policies being operated at the time by the former Government gave rise to a very definite need for changed policies to assist intending house purchasers. Our manifesto spelled out the steps which we regarded as necessary to deal with the situation and it undertook to implement them.
Over the past year and a half we have honoured practically every one of the promises in relation to housing which we then gave. I would like to remind Senators briefly of some of these steps which have been taken by the Government since mid-1977 to help house purchasers:
Rates on houses have been abolished. I need hardly develop the significance of this concession which eliminated the heavy financial burden which previously had to be borne by house purchasers.
The new house grant of £1,000, was introduced in July, 1977 to assist first-time owner-occupiers. £13 million will be spent on new house grants in 1979 compared with £2.38 million in 1977. The sponsors of this motion should recall that, in 1976 the Coalition imposed severe restrictions on eligibility for the existing scheme of new house grants which, over a short period, would have had the effect of practically abolishing that scheme.
The SDA loan limit has been increased twice and it is now double the June 1977, level. The income limit was also increased by practically 50 per cent. Between September 1973, and June 1977, the Coalition failed to make any changes whatsoever in these limits. They simply sat on the fence and ignored increases in costs, prices and earnings and allowed the expenditure under the scheme to continue to drop. This is reflected in the fact that payments under the scheme were less than £17 million in 1977. Payments increased to £26 million last year and provision has been made for an expenditure of £43.5 million this year.
The subsidisable cost limit on each housing site developed by local authorities and made available for modestly priced private housing was increased last year from £900 to £1,500. At the end of August, I asked local authorities to step up activities under this scheme. At the close of 1978 they had on hands sites sufficient to accommodate 55,106 houses, over and above sites for dwellings then at planning and tender stages. Local authorities have been pressed to make a substantial part of this large land bank available for modest priced private housing. Not alone would this directly assist a particularly deserving category of potential house purchasers but it would help to secure a balanced social "mix" in the development of local authority lands.
In order to improve the supply of serviced land and thereby help to curb increases in house prices, capital expenditure on water supply and sewerage has been increased from £24.5 million in 1977 to £40.4 million this year and the Government gave a commitment in the recent White Paper, "Programme for National Development 1978/1981", that they will further increase the capital allocation for sanitary services in 1980 and 1981. This assurance will assist local authorities in their forward planning of the necessary infrastructural services which are essential to our efforts to keep land prices from increasing unduly.
A structural guarantee scheme for new houses, involving the Construction Industry Federation and my Department, was introduced from 1st January 1978.
In April 1978 grants to voluntary housing associations providing houses for elderly persons were greatly increased. Local authorities were allowed access to the Local Loans Fund for the first time for the major part of the capital cost of such work and a subsidy was introduced. Recently a circular letter was issued by my Department giving detailed guidance to local authorities and to voluntary housing associations on an improved package of financial assistance for this purpose. At this point I might comment that during their four-year term in office, the Coalition Government took no initiative whatsoever in assisting voluntary housing associations and housing co-operatives to provide housing.
A new outline specification, introduced in August 1978 for new private housing, will come into operation on 1 July next and will up-grade thermal insulation and increase the conservation of energy in the private housing sector. These improvements have already been introduced in relation to new local authority dwellings.
Tenants of local authority houses who wish to buy their houses may do so on very attractive terms. The gross prices of houses under the 1979 tenant purchase scheme, which was circulated to local authorities, have been increased only very marginally over the price applicable to the 1978 scheme. Tenants will continue to benefit from a discount of up to 45 per cent for length of tenancy together with discounts in lieu of the £1,000 new house grant payable to first-time owner-occupiers of private new houses and in lieu of rates remission which was applicable to new private houses prior to 1 January 1978. Tenants and certain applicants on local authority waiting lists can also opt to buy private houses with the aid of the low-rise mortgage scheme, which was recently revised—for example, to allow one-parent families to benefit under the scheme.
Where a person buys an existing house which needs repair or improvement, he can avail of the generous new scheme of grants for this purpose which was announced in December 1977. I might again remind some Senators that in January 1977 the Coalition Government emasculated the rather miserly reconstruction grants scheme then in operation with the result that expenditure on these grants in 1977 was as low as £2 million. The new scheme of house improvement grants is now so popular that provision has been made for an expenditure of £17 million under this scheme this year. Last year a total of 38,530 applications for house improvement grants was submitted to my Department compared with a total of 9,573—including applications for water and sewerage grants—received during the first half of 1977 under the Coalition Government's revised scheme of reconstruction grants.
Fair-minded Senators will accept that this is a record of solid achievement by the Government in the interests of the house purchaser. In the White Paper, "Programme for Economic Development 1978-1981", the Government indicated that a target of 23,000 to 27,000 houses per year up to 1980 will be sufficient to cater adequately for housing needs arising in that period and will enable further progress to be made in reducing accumulated needs.
Taking into account the generous provision made by the Government for SDA loans, the low-rise mortgage scheme, and local authority housing, and the mortgage finance which is expected to be available from commercial sources, we are confident that house completions this year should be in or around the 25,000 mark. Sufficient finance should be available to enable almost 19,000 non-local authority houses to be provided. In other words, the prospects this year for the house purchaser are good.
In conclusion, I feel it is necessary for me to make the very important point that, in the context of the national economy generally, housing activity cannot realistically be considered in isolation from other major branches of the constriuction industry. When we resumed office in July 1977 the building industry was in a sorry state and its output was below the 1973 level. Worse still, the average annual level of unemployment in the industry had increased very sharply from 12,464 in 1973 to 24,532 in 1976.
The Government saw the need to increase substantially public capital expenditure affecting the industry and, at the same time, step up considerably the level of investment in roads, sanitary services and telecommunications. As a result, output in the industry improved during the latter half of 1977 and, last year, an increase of about 11 per cent was recorded and total output was an all-time record. While there were signs of overheating in some sectors of the industry, nevertheless, the Government are determined to meet the challenge of expanding infrastructural investment rapidly. We could have allowed the industry to grow at a modest pace of 4 per cent to 5 per cent per annum, but our dole queues would have remained as long as they were in 1977. Since the change of Government, direct employment in the building industry has increased by about 7,000. There should be a further substantial increase in direct employment in 1979, as a result of the increase of 27 per cent in the provision for public capital expenditure affecting the industry this year. This assistance by the Government will also result in extra employment in ancillary services.
In a nutshell, the overall scene in housing and the building industry is a complex one, but the Government have demonstrated that they have coped successfully with the challenge of getting the industry back on its feet.
Senator Molony stated that our national housing record for years past has been a bad one, that not enough has been done to help every family to have a home of their own. I do not agree with the Senator's view because, for the past six years, we have been adding more than 25,000 new houses each year to the national stock. This represents nearly eight houses per 1,000 population which is well in pace with the highest averages in western Europe; in so far as home ownership is concerned, we have the highest proportion in Europe apart from Finland.
In addition to new building it is only right that regard should be had to the policy encouraged and assisted by generous Government grants to bring existing houses up to proper standards. The new scheme of grants introduced by the Minister for the Environment in November 1977, has resulted in a huge expansion of this work with 38,500 applications having been received in 1978 more than double the intake in 1977.
With regard to the issuing of certificates of reasonable value, 1,899 certificates were issued in 1978 compared with 1,502 in the preceding year. The total of all price reductions amounted to £1.2 million, double that of the previous year. I am happy to say that we maintained a good standard of service to house builders, the average time taken to issue decisions being only 15 days from the supply of the required information. The CRV system received considerable publicity during 1978 especially after the Government requested building societies to insist on CRVs before advancing loans of £16,000 or less for the purchase of new houses or flats. It is not surprising that some house builders resent any form of price control but they must accept that, particularly where houses benefit from public funds by virtue of the £1,000 grant and relief from stamp duty, some degree of price restraint is indispensable. It would hardly be justifiable to bestow such benefits on excessively prices houses. On a number of occasions during the past year I met representatives of the CIF to discuss various aspects of the CRV system. The criteria are constantly adjusted to take account of changing cost factors and this system will be discussed at length in the context of the forthcoming legislation.
Senator Connaughton was anxious to know the number of local authority dwellings completed during the past year. The number completed in the year ended 31 December 1978 was 6,073. I should like to remind Senator Connaughton that in 1978 over 12,000 people purchasing or building houses for themselves for the first time were approved for the £1,000 grant. That certainly does not tally with his theory that houses have gone beyond the reach of first-time purchasers. In relation to his allegation that it was virtually impossible for people in unserviced cottages or houses to reconstruct them, redecorate them and have them serviced, the position is that grants for the purpose of reconstructing and providing water and sewerage facilities for a house amount to £950 which is a substantial improvement on what the grant was over a year ago. The total housing improvement grant is now £600 as compared with £200 which was formerly paid by the State; the full £600 is now paid by the State. The water and sewerage grant has increased to £350 from a possible £75 to £100 prior to late 1977.
I realise the spirit of the motion. The Government are keeping a very close eye on the cost of house property. We have been, we are and we intend taking all possible steps to alleviate the difficulties which may be experienced by house purchasers.
I do not intend to delay the House very long. I want to make a few observations on the subject matter of the motion from the point of view of a member of a local authority who realises the problems of many people seeking loans and anxious to acquire sites to build their own houses and the inhibitions that they experience. As a local authority member, I have learned also the cost of the implementation of vesting schemes where persons seek to purchase their houses. There is a contrast between the conditions obtaining at present for a housing grant and those that obtained during the term of office of the Minister's predecessor, when as the Minister is aware, the applicant had to have a low level of income. He got the ordinary £300 grant, plus £300, then a supplementary grant of £150 from the State and the same from the local authority. That brought the amount of grant paid, in a period of severe worldwide recession, to £900. We got out of the recession. The Taoiseach agreed that we were out of the recession in June 1977, when the new gift grant, as it was originally known—the £1,000 grant for newly-weds—was announced with a flourish. Without belittling it that £1,000 was held out to newly-weds, or those who were about to be newly-weds, as something being given them as a wedding gift in addition to the £900 grant in respect of which legislation had been implemented. It was soon discovered that that £1,000 was not a grant towards the erection of a house costing from £2,500 to £3,000 but it was a grant towards a house costing from £8,000 to £11,000 because in some cases, through no fault of the Government or the Minister, when the rush to acquire sites and to build houses started, the people in a position to bleed the unfortunate people buying the houses put up the charges.
In reference to that I should like to emphasise what Senator Dowling said. Senator Dowling was not sneering at the Government and he was not on this side of the House when he made the statements he made. I would like to emphasise, without casting any reflection on what is implied in the Minister's efforts in regard to housing, that the moneys provided by the increase of this £100 grant bears a very poor relationship to the increases in the cost of houses that were allowed by this Government to go unchecked. A certificate of reasonable value can be based upon anything. The basis of that certificate of fair value for a house could be affected in cases where the inspector took into account the location of the house, whether it had a back road or front road entrance or whether there was a particular sort of paddock or sportsground or anything else near it. These are the things that set the value up or down and unfortunately many houses were regarded as being fairly valued when it came to the question of higher valuations. I think that had fair application in this city of Dublin.
In rural Ireland if a small farmer wanted to build a house he got his grant if he was the qualified person I referred to. Having built it he considered that he was making ends meet between the loan and the grant and the cost of the house. The loan that can be got has been increased by roughly 30 per cent. I accept that that is a considerable increase and commend the Minister and the Government for that. However, it is insignificant in relationship to the cost of a house today in comparison with the cost then obtaining. The £9,000 that can be borrowed by a person with £68 or £70 a week is disproportionate to the cost of the house. The Minister is a fair-minded man, and so is the Minister of State who is present, but let them not be under any illusion as to the difference between the £15,000 or £17,000 which is the price of a house in rural Ireland and the £9,000 that the borrower can procure from the local authority. If a person's income is such as to qualify for that loan, building societies do not want to hear anything about him. This fact should be accepted. The Government are seriously interested in housing but they are providing an opportunity to builders to exercise their muscle as a result of the difficulties that exist in this matter.
It has been said that local authorities had between 50,000 or 60,000 sites. The majority of these sites might be around the city of Dublin. Small numbers of them may be located around the towns under the administrative authority of county councils. Collectively, the number of sites may seem large but it is inadequate. A purchase scheme has now been announced by local authorities in County Longford. As chairman of the county council and a member of the Town Commissioners I have first-hand information on the relative increase in the purchase cost under this scheme as compared to the 1977 scheme. The 1977 scheme provided for an old house to be purchased at £680. Today such a house will cost £2,100 or £2,200. If that is not three times what it was before it is difficult to see where the practice of misconstruing and misrepresenting figures will stop. It is escalation to an extent that should not be tolerated.
There is another aspect of housing. The tendency of this Government and of county managers to influence people in rural areas to seek housing in towns and villages is becoming more apparent every year. In County Longford there are 146 applications for rural houses and that is over and above what we are able to provide or are providing. At this moment people are living in atrocious conditions. They have not got a house and they are directed to go into Granard, Longford, Edgeworthstown or elsewhere to look for a house. If a family has had roots and social and economic links in an area for generations it is a terrible thing to tell them that they cannot build on their own land but must go seven or eight miles away. That is a policy that should not be promoted.
Longford County Council, despite political differences, nailed that proposal from the county manager last year. Nevertheless, advertisements have appeared calling for people who want houses in certain named villages and towns in the county. That is certainly not the county manager's policy because he is prepared to do what the council are anxious to have him do, which is, to let those who have roots in rural Ireland live in rural Ireland. When people are taken into towns they develop an urban outlook. They will have an anti-rural outlook. A vast area of the country will become depopulated. Ultimately there will be great ranches and certain arrangements will be made for improvement of estates on the lines envisaged in Europe. The people who fought for this country and the generation which follows this one will regard this generation as the generation that left our country denuded of population. I appeal, therefore, to the Minister to use his muscle to put rural Ireland on its feet and to stimulate rural housing.
An Leas-Chathaoirleach
If it is the wish of the House to conclude the debate by 8.30, in order to give the proposer of the motion time to reply, I will have to ask Senators to limit their speeches. We have 20 minutes after 8.30 which we could leave over for another day. What does the House propose to do? The proposer is normally given 15 minutes.
The House has made a decision and I will be bound by this.
There are two essential points that spring to mind which are fundamental to the issue being debated. One is the availability and supply of serviced land and that has been discussed in some detail and at some length. We will have to note the Minister's comments when he reminded the House of the capital expenditure provisions on water supply in the current year.
Senator Molony has suggested control of house prices. In that context we are essentially talking about controlling also the price of serviced land. I do not know what machinery can be devised for that which would be effective or equitable. There are certain difficulties about it. One is that the machinery, if it is not efficient and smooth, can be entirely counter-productive and can disrupt the entire industry and adversely affect prospective purchasers.
The second point is that anomalies may occur which are counter-productive. Persons who purchased before the controls were introduced and who are forced, through family circumstances or some misfortune, to sell shortly after the controls are introduced, can find themselves at a very great financial disadvantage. Removal of controls can mean that a substantial financial benefit can accrue to those who are not entitled to it by any measure of fairness or equity but simply by being in the right place at the right time. The record shows that attempts to interfere at the top in that way are fraught with difficulties. It is much more practical to make progress where we know the economics of the business are capable of being effective. I support the point made by Senator Mulcahy that substantial future investment in servicing land is likely to have a much more beneficial effect in reducing one of the basic costs in house construction.
From time to time it has been suggested that in some way this problem can also be helped by adjusting stamp duties upwards or by additional capital gains taxes or something like that. They may be good ideas for land speculation but as far as the consumer is concerned they are not likely to have much effect. They may also be counter-productive because the outlay on acquiring the land and bringing it into service must be reduced in order to benefit the consumer. That type of argument, while it may be well-meaning, is not really getting to grips with the problem.
Another point which is of immense importance in the day to day working of the industry and as far as the consumer is concerned is the availability of money. We know the problems that exist with the high points and the low points. The building societies are saying they must compete with many other financial institutions. Nevertheless, young people in particular trying to acquire their house for the first time, newly married people, find that suddenly, because of a shortage of money, the deposit of, say, £1,000 has to be on deposit for a year instead of for six months. Perhaps a month later, the position gets worse and they find it has to be there for two years. That type of on again, off again decision is extremely disruptive to the industry and is extremely disruptive socially. There is a case for the regulation of financing.
An Leas-Chathaoirleach
Would the Senator be prepared to give four or five minutes to Senator Harte?
I will conclude by saying that some form of financial equalisation provisions in the financing institutions may ease the flow of funds and even if it did not itself increase the volume of money available it would bring more order and regularity into the market to the betterment of the industry, the workers and the consumers. In that regard may I say that the extension in the budget of the power to grant loans to the Trustee Saving Banks is an extremely important move in the right direction.
Because of the shortage of time I will have to express what I was going to say in different terms. Irrespective of which Government are in power, people are entitled to ask the question and to have it answered: why is a house, which is an essential consumer commodity, not subject to the same checks and controls as other consumer commodities? Some will say it is not possible to control house prices. I do not accept that. By what mandate are any Government authorised to allow a basic human need to be subject to manipulation and manoeuvring by speculators? I can only conclude that it is the result of manoeuvring and manipulation by speculators that one sees, over an 18 month period, an increase in price of 30 per cent through 36 or 37 per cent. Whether it is a Coalition Government, or Fine Gael Government or any other Government that are in power, it is a basic human right that is being denied to many people. A decision is made on the basis of the length of their purse strings. That is not in accordance with our social responsibilities. All of us have responsibility in this sense.
The Minister did not like the criticisms; he may have found that some of the criticisms were not constructive. The Opposition has not done enough to highlight the problem in the housing area. It is the Government's responsibility to ensure that everyone has a chance to own a decent home or to rent with security of tenure. Drastic measures are needed to implement this principle and the onus is clearly on the Government to take those drastic measures. I read the Minister's speech and I agree that measures have been taken but the fundamental right of everyone is to have shelter, to have a home and to purchase a home. That right should not be interfered with by the deeds of any pressure group or for any other reason. A man who needs a mortgage has not got the capital. Having worked excessive overtime, shift work and so on thereby disrupting his family life, he suddenly realises that he still cannot meet his commitments. Lay people have a right to ask questions.
We have been relying on competition to reduce prices and it has failed. Land a house stands on is a consumer product and we should not make any mistake about that. The material that is put into the building of a house is subject to price control; the equipment inside the house is subject to price control but the structure, which is built out of consumer products, is not subject to control. We should say to the speculators that enough is enough and that they must come to terms with the fact that their profits are in excess of what they should be. I am not in a position to produce figures, because of the short time which is left to me.
In the last 18 months we have put in jeopardy the basic human rights of a substantial number of people in order to allow people with private capital to make a quick buck. That is not an emotional statement. It is a statement of fact. Thousands of people all over the country come with housing problems to public representatives. They cannot provide their own homes and must look for local authority housing. They find that is not available to them either. There is a social responsibility there and we have to do something about it.
I want to apologise that because of the shortage of time I will not be able to review and comment on many of the points made in the debate. I hope I will be forgiven for that.
Senator Harte, who has just spoken the few words that time permitted him to do and Senator Donnelly who spoke before him and also Senator Mulcahy who spoke earlier reflected the two different sides of the problem. The reality is that economically—and what Senator Donnelly said made very sound sense—it is not a palatable thing to have to introduce price controls because it causes problems particularly in an industry like the building industry. But, one has to look at it from another point of view as well. Both Senator Donnelly and Senator Mulcahy have concerned themselves with the health of the building industry. The reality is that there is a social side to it and that side was brought to light by Senator Harte. I would be the last person to suggest introducing any type of artificial control but we must have regard to the circumstances that obtain in the housing industry. Whatever the Minister may say, house prices have increased by something in the order of 40 per cent in the past 18 or 20 months and, in the context of our history and our traditional house building, something must be done. The simple truth is that people are skimming money off the top. Where the money is going I do not know. It certainly is not the consumer who is getting the benefit of it. Various reports indicate that excessive prices are being charged for houses. That is a problem that must be dealt with and we will either try to deal with it or we will ignore it.
I was most disappointed with everything the Minister had to say. He came into this House with a supplied typewritten script of 14 pages. He stitched the Fianna Fáil manifesto, everything he had done, on to the record of the House. When I proposed this motion I specifically hoped that this would not happen. He said that he regarded this debate as a rather sterile exercise. I am sorry that he saw the debate in that light. It is a sad thing that a Minister of State responsible for this sector should see a debate of this nature in that light. That motion was tabled on 3 May last. The Minister of State is on the record of the Dáil, and on record here tonight, as having said that at the end of the first half of last year he was concerned about the unacceptable rate of price increases for houses. We put that motion on the Order Paper before the six-month period the Minister had complained about was up. We put it on, not to criticise the Government. Of course, there will be criticisms and commentators have said that certain fiscal policies adopted by the Government have added to the problems of price increases and have acted as catalysts. That criticism is made not simply to knock but because of a heartfelt belief on both sides of the House and also in the Dáil that something needs to be done.
I am sorry, for example, that the Minister of State did not give us his views on the Kenny report. He said in the past in the Dáil that he had considered the report. I am sorry because land and the cost of land is a very significant feature in all of this. Even apart from that there are problems. I quoted an example from Irish Business of last October, where a builder was estimated to be making something in the order of £12,000 per house in an estate of 56 houses had the site cost allowed for and that £12,000 was exclusive of that. The figure on that estate alone would work out at something in the order of £364,000. There is something wrong when that can happen. I did not knock the CRV system; I acknowledge that it is a good system; but I do not think it is as effective as it should be. It is a system that could be used or extended so that all houses are included in it.
Senator Mulcahy and the Minister both defended the housing records of successive Governments down through the years. The reality is that there are parts of Dublin where people are living in conditions they should not be living in. The reality is that in one six months last year the housing list for local authorities increased by 30 to 35 per cent. These are facts. People are looking for houses and they want to be housed. If we say simply that we are building 20,000 or 25,000 houses a year and that that is enough, certainly we shall not go anywhere near solving this very serious social problem.
I do not know where we go from here. I get the impression that the Minister is quite satisfied that everything is all right and that there is no need to take any further steps. He said that the Government are keeping a close eye on house prices. That is very fine but he has not acknowledged that a problem has arisen and it is not a problem peculiar to the last 18 months. It is something that has happened before. It happens largely because of the nature of the building industry, because of the difficulty about the availability of finance, because of recessions or economic booms or whatever it might be. The stop/go cyclical nature of the business tends to cause problems. Economically one can deal with it in one way but, unfortunately, there is a very serious social aspect.
I am dreadfully disappointed that the Minister has not acknowledged the existence of any problem at all in this area. I am hampered by a shortage of time. I have points made out that I would like to have gone through one by one but I cannot do it. If the Minister is satisfied on those statistics that everything is all right I would suggest to him that he is wrong. The Minister should look at the position outside and see the reality and ask people who are not entitled to local authority houses and are trying to build their own houses out of their own financial resources and who cannot do it, who, as Senator Donnelly said, have not had the £1,000 with the building societies for a year or two years and who put in the £1,000 which is hard saved and wait six months and find that their budget is gone all wrong because house prices have gone up another 10 or 15 per cent. Those are real problems affecting real people. Unfortunately, the boom that we have had in the building industry for the past 20 months has been a builder's boom. Some builders—not all builders—have made a lot of money out of this and have charged unjustifiably excessive prices. At the same time the people who have been getting those houses are people who are well off and who, as many people are aware, were simply changing from one stratum in the housing league to a higher one. Unfortunately, time hampers me and all I can do is ask the Minister to re-think his present stand.
Question put and agreed to.
The Seanad adjourned at 8.30 p.m. until 2.30 p.m. on Wednesday, 28 February 1979.