Housing Finance Agency Bill, 1981: Second Stage.

Question proposed: "That the Bill be now read a Second Time."

I have a few copies only of my text as the Bill only came through the Dáil at a very late hour last night.

The purpose of this Bill is to help many people who cannot obtain adequate mortgages at present to buy homes of their own. It will provide the statutory framework under which a company, to be known as the Housing Finance Agency, will operate. The company will be established soon after the Bill becomes law.

The intention is that the agency will raise finance for housing mortgages on a self-financing basis. The funds will be additional to the money which otherwise would be invested in housing. In its first year of operation, the agency will raise £25 million to £50 million for these mortgages by selling State-guaranteed bonds linked to the rate of inflation and having a small real rate of return, to the operators of pension funds and life offices. A first-time purchaser of a new or an existing house with an annual gross income of up to £9,000 in the previous tax year may qualify for a loan of up to £22,500. However, this sum will be increased to £27,000 in special cases. The amount of the loan will be up to three times the borrower's annual gross income in the previous tax year or 90 per cent of the net value of the house, whichever is less.

The borrower will be charged an index-linked mortgage rate, taking into account the real rate of return to the bondholder and the administrative costs of the scheme. His actual loan repayments will be made on a pay-related basis. For example, a person who takes out a mortgage equivalent to three times his gross income in the previous tax year may repay the loan over a period of about 25 years by annual instalments, each equal to 18 per cent of his gross income in the preceding tax year. Taking recent trends in wage levels into account, this would be equivalent to about 15 per cent to 16 per cent of his current earnings. Where the loan is less than three times the borrower's income, the proportion of his pay taken in repayments may be less than 18 per cent. The individual loan applications will be processed by local authorities by way of a graft on to their traditional SDA house purchase loan schemes.

The idea of tapping institutional funds in order to give loan assistance to first-time house purchasers was put forward in a Fine Gael policy document published in October, 1980. The proposals were also included in the party's policy document of last May and in the Programme for Government 1981-1986. The reason underlying the new concept was the realisation that there is a need to open up some new source of house purchase finance because the existing sources of mortgage finance cannot meet the present demand for loans. The point is relevant also that if a person earning £9,000 a year borrows £22,500 from a building society over 20 years to buy an existing house, his gross repayments in the first year, at current interest rates, would be £3,846, or 43 per cent of his income. This is a tremendous burden.

The Government have adopted a radical approach in funding the new scheme by providing in the Bill that the new agency may issue index-linked bonds having a real rate of return approved by the Ministers for the Environment and Finance. At the outset the bonds will be issued only to pension funds and life offices and the issue will be on an auction or tender basis as regards the amount of the real rate of return. The manner of repayment of principal and interest will be decided by the Ministers. Provision will be made for a market in the bonds, but for the time being, this too will be confined to the pension funds and life offices. Senators will agree that it is appropriate that the agency should be funded mainly by these sources; the terms of the bond issue will safeguard the investments made, mainly by small savers, in these institutions.

While section 5 will authorise the agency to make loans to individual borrowers it is intended that for the time being local authorities will draw money from the agency and operate the scheme at local level. Obviously there would be no point in arranging for the agency to set up a local branch network corresponding to those operated by building societies when 41 local authorities already efficiently administer house-purchase loans schemes throughout the country.

In general, the new scheme is intended to help marginal house purchasers, that is first-time purchasers earning up to £9,000 a year. This limit will be the gross income of the borrower, excluding the spouse's income, in the tax year preceding the date of application. Many of these people find it difficult to obtain loans from other lending agencies. Persons qualifying under the existing SDA loan scheme will be given the option of repaying their loans in accordance with the proposed terms. In the course of time it is envisaged that the new scheme will prove so attractive to intending house purchasers that it could completely replace the present local authority loan scheme. Under the new scheme, the maximum loans available from public funds will be increased very substantially. In ordinary cases, the agency scheme will enable loans of up to £22,500 to be made, compared with the present maximum loan of £14,000 under the SDA scheme.

Special categories of borrowers, such as a tenant of a local authority house surrendering the tenancy of his house and buying a private house, will qualify for a loan of up to £27,000, compared with £18,000 available to him under the SDA scheme. The special maximum loan will also apply to the purchase of houses on certain islands off the west coast. In the case of a loan for the acquisition of a house, the new limits will apply where the contract is not made before 16 December. In the case of a loan for the construction of a house, the new limits will apply where the foundations were not completed before that date. The new limits will be kept under review.

It has been the firm policy of the Government to encourage the development of housing co-operatives. As a positive indication of this policy and in order to promote activity by these voluntary bodies, the Government have decided that, where a bona fide housing co-operative builds houses on sites provided either by housing authorities or by the co-operatives directly, members of the co-operative who have annual incomes of up to £9,000 or are local authority tenants can qualify for loans of up to £27,000 under the new scheme, provided that at least 80 per cent of the new householders are otherwise eligible for house purchase loans under the scheme.

Loans under the scheme will be advanced for the purchase of both new and existing houses and it is intended that the scheme will be open to both married persons and persons who are not married. Furthermore, an applicant for a loan will not, as in the case of SDA loans, be required to prove that he cannot obtain a house purchase loan from commercial agencies. While the loan will normally be restricted to first-time purchasers, loans will also be available where a home-owner wishes to buy a bigger house because his existing house is unfit or overcrowded. Loans will be made where a home-owner transfers to employment in another area and wishes to buy a house there. In particular, a key industrial worker moving into an area will be facilitated.

Loan repayments under the new scheme may be made on a pay-related basis. Where a person borrows three times his gross income in the previous tax year, he may repay the loan over a period of about 25 years on the basis of 18 per cent of his gross income in the previous year. This proportion may be reduced to 16 per cent, 14 per cent and 12 per cent where the amount borrowed represents 2½, 2 and 1½ times, respectively, the borrower's gross income in the tax year prior to his application. The pay-related approach to loan repayments will usually result in the amount of the principal outstanding increasing in nominal terms in the early years, but in case there may be any misunderstanding, I want to emphasise that the amount of the principal outstanding under the proposed system normally declines in real terms when inflation is taken into account.

It is necessary for me to emphasise this fact because it was clear from the reactions of some Deputies when the Bill was being debated in the Dáil that they had failed to grasp the implications of this aspect of the scheme. In absolute terms the amount due by a borrower will increase — substantially so in some cases — in the earlier years of a loan. But all the time his income and the market value of the house are increasing to the extent that he is safeguarded against any major loss in the event of his being obliged to dispose of the house.

The outstanding feature of the new scheme is the way in which the real burden of repayments will be spread evenly over the duration of the loan. This will make it possible for many persons to become home owners who otherwise could not undertake the extremely high repayments burden in the first few years of a conventional annuity mortgage.

Another feature of the scheme which will be generally welcomed is that it will protect a borrower against the short-term effects of a loss of income due, for example, to sickness of unemployment, in that repayments required in any particular year may be restricted to the proportions of income to which I have referred, with the shortfall being made good in later years by the lengthening of the repayment period, if necessary.

The total repayments will be calculated to ensure that the agency is self-financing, taking one year with another. For this purpose they will be based on the agency's total costs, including the cost of servicing the index-linked debt. At this early stage it would not be practical to predict if borrowing will in the long run prove to have been more or less expensive than borrowing on a conventional annuity mortgage. That will depend on trends in inflation and mortgage interest rates in the future. For example, mortgage rates exceeded inflation rates for part of the sixties, while the reverse situation obtained for most of the seventies. The upward trend in interest rates in the last year or so has resulted in the mortgage rate exceeding the inflation rate in some other countries. In Ireland, while inflation rates generally are relatively high at present and may remain so for another year or two, the Government are determined to reduce inflation rates over the next few years.

During the period 1973-1980, increases in average annual industrial earnings exceeded the rates of inflation by 3 per cent. While increases in earnings are likely to be less than the inflation rate during the next year or so, earnings are likely to grow in real terms in the long run.

In any event, of course, repayments will cease when the total amount required to cover the agency's costs have been repaid, even if this is well before the originally envisaged maturity date. Where a person qualifies for the mortgage subsidy of £3,000 spread over three years, it is intended that the borrower will transfer the subsidy payments to the lender, thereby reducing the amount of the loan outstanding and shortening the repayment period.

In order to cut down red tape the income of a borrower's spouse will not be reckoned. Borrowers will be free to make repayments over and above the specified proportions of income at any time if they so wish. This will reduce the capital debt outstanding at that time and shorten the repayment period.

Under section 6 of the Bill, the Minister, with the consent of the Minister for Finance, will be empowered to issue formal general policy directives to the agency. The agency will, of course, be primarily responsible for formulating policies, but it may be necessary for the Minister from time to time to issue directives which relate to social and economic aspects of the agency's work.

Under section 14 the agency will be required to meet its costs from its operations, taking one year with another.

As regards the detailed provisions of the Bill, Senators will have noted the explanatory memorandum which was circulated with the Bill. A substantial part of the measure relates to technical provisions similar to those which apply to most State-sponsored companies. Section 2 provides for the formation and registration of the company. Under section 3, the share capital will be £100 and this capital cannot be increased or reduced without the consent of the Minister for Finance. Section 4 refers to the memorandum and articles of association and sets out the key objects of the company.

I have already referred to section 5 in some detail. Subsections (3)-(8) are based on the corresponding provisions of section 39 of the Housing Act, 1966, relating to the existing local authority loans scheme.

I have also dealt with section 6. Sections 7-9 are fairly standard provisions relating to the taking up of shares by the Minister for Finance, his rights as a shareholder and the disposal of any dividend etc. arising from such shares.

The Minister for Finance occupies a central role relating to the capital and shares of the company. I have in mind that when the company is being set up the board of directors will be drawn from persons with relevant experience in the commercial and public service.

Section 10 enables the agency to borrow money up to a limit of £200 million. In the first year, borrowing may be of the order of £25 million to £50 million. In particular, the agency may issue bonds. Section 11, which is a standard provision, empowers the Minister for Finance to guarantee borrowings and this would enable the agency to issue State-guaranteed bonds. By virtue of section 10, guarantees will also be limited to £200 million.

Sections 12, 13, 15, 17 and 18 are standard provisions.

I have already referred to section 14 which requires the agency to be self-financing. Under section 16, any transfers of bonds, debentures and other securities issued by the agency will be exempt from stamp duty in the same way as transfers of certain loan stocks. Before I conclude, I should say that I expect that applications for loans under the new scheme will be accepted within about six weeks. The first bond issue will be made within about three months.

I commend the Bill to the Seanad.

I welcome the Minister to the House and perhaps I do so as one Munster person to another. Housing is a top-priority with every person elected to this House or to a local authority. I seem to concentrate on health and education for various reasons but nine out of ten problems I am faced with relate to housing. I read the Bill and understand some of it but not all. I do not think it is such a great measure. When we left Government we had a good record of building 28,000 new houses.

I welcome the new thinking in terms of financial assistance towards housing for the young, the old, and indeed everybody. Members of the Oireachtas who do not have the privilege of serving in local authorities may not know as much as we do about the problem of housing.

The Bill has wide-ranging implications and I am worried about much of it. Will the people who are really in need of houses apply for loans from the new agency and not read the small print? I have in mind the tremendous cost of this money. At this stage I want to make it quite clear that it is very dear money.

The Minister suggested that at some time the agency will replace all local government schemes. I do not agree with that. People need homes. They cannot rent them or if there are some to rent they are in absolutely dreadful condition. The rent of even the smallest flat for a young married couple is crazy and the Minister is well aware of this. These people could go on a waiting list but that is something else because there are 500 applications for every 80 local authority houses. The applicants then try to buy houses and that is where the money is needed.

Here I want to put on record my tribute to the local authorities who have administered for many years a most successful SDA scheme. I ask myself, why the change now? Is this new agency needed because of local councils? Do we need another unit in addition to all the sections we have at the moment? I say this because I am worried about power moving from local government and local authorities. I am not saying it because they made it possible for me to come here but because I have served on such an authority and I know of somebody who has served for very close to 32 years on such an authority. I wish to put on record today the dedication of those men and women who serve very loyally. I suppose in provincial Ireland they are the people next to the parish priest.

The Minister referred to the cost of money. Am I wrong in saying that in respect of a loan of £20,000 in ten years time a person could find himself owing on that house about £40,000? It sounds mad but it could be true.

I would like to ask if we could have the five-year plan which Fianna Fáil had in mind before they left government in the form of a White Paper. I would like to see a long-term plan on housing again. Yesterday we had here a Bill on rented houses. I did not have to wait until Senator Quinn and Senator Robinson spoke on Committee Stage to know that money must be provided for housing. There is a new style coming into the Government's thinking. I wonder if they are wise. They have the attitude that the solution to all ills is a board of directors. We had provision for a board of directors recently in the Youth Employment Bill and now we will have a board of directors to give everyone a home. I have strong views about setting up boards of directors and more bureaucrats. Maybe here we should take a lesson from the Coalition Government, that of more jobs for the boys. That may be something we will copy when we will get back into government in the spring.

The Bill provides that the expenses incurred by the Minister in the administration of this measure shall be paid from moneys provided by the Oireachtas. That seems to be down in small print in many Bills now. We really do not know what will be the cost of administration. Are there going to be offices and staff for this new agency? If so, perhaps the Minister would have a word with the Minister for Finance who has a problem about decentralisation. If this is going to be a large unit put it in the mid-western region where we were promised decentralised offices. Counties Clare, Limerick and Tipperary would gladly accept it. When this Bill is passed will there be more money, the same money or is it a move of money from the Government to this new finance agency? Are the SDA loans gone? If they are, it is a dreadful mistake. Will this Bill affect the SDA loans on house repairs? I would like to pay tribute to somebody who has done a tremendous job in the area of housing and that is Father Harry Bohan of the RHO. He did much work in encouraging the building of houses in villages and in encouraging people to live in the villages.

I support the Bill because it means houses for people but I have a reservation about the cost. People talk about breakdowns in marriages but everyone must have a home. It should be made clear to people getting finance from this agency that they know the price they will be asked to pay. The Government gave the impression that they have all the answers. I am very worried about the cost. I wonder if this Bill was necessary or needed? Should the Minister not have looked at units that were there?

I wish to welcome the Minister to the House. I have no doubt that he will be there later than next spring.

I welcome the Bill and anything that will give a boost to the building industry. I have spent a good part of my life in the builders providers end of the industry and this £25 million or £30 million will be a great help. The building industry serves many purposes. It gives tremendous employment. It is essential that people are able to provide their own houses. Up to a month ago in my county we were three to four months in arrears with the payment of SDA loans but that situation has been straightened out. People have to borrow by way of bridging loans from the banks but the banks do not treat these people very well. In some cases they charge 18, 19, 20 and even 21 per cent and at the same time they are putting pressure on them to get the money which was not available. If Fianna Fáil Senators realised what they put these unfortunate people through they would be delighted to see this money being put into the industry.

I am concerned about some aspects of the Bill. When Fianna Fáil introduced the £1,000 grant something happened and the price of land and building materials rocketed. Part of it seemed to stem from the injection given to the industry. This will have to be watched but I do not know how that will be done. If money is readily available for house building, inflation in the building sector will be higher than anywhere else. I do not know the reason for this. In recent years a large percentage of our building materials have been imported while, at the same time, similar products are manufactured in the country; for example, nails, slates, sheet lead and many more. That came about when we joined the EEC when there was free movement of goods. I do not know if people can be encouraged to buy Irish goods. The cost of a door made in Ireland is £15 while the cost of the imported product is £12. I do not know what can be done. Of the money that is provided in this Bill, between 25 and 30 per cent will go outside the country if the import of goods continues at the present rate. It will not serve the purpose it was meant to serve. I feel I should bring this to the Minister's notice. We get promises from all the political parties but nobody seems to do anything about the price of land. There is no political party or individual in this House who has a clean hand. The situation is serious and we will have to do something about it.

The legal costs involved when a person gets a loan are tremendous. I think it would be advisable to set up some legal section, perhaps within this agency. I have heard many complaints from individuals. If a person borrows approximately £20,000 from a building society to build a house and if his income is £8,000 a year he has to pay 42 per cent of his income on repayments on the interest. That is a situation that cannot be allowed to go on. The one thing about this scheme is that borrowers are asked to pay more money at the early stages of the loan, perhaps prior to getting married although the scheme is not confined to married people. Any young person can borrow. It is much easier for people to pay a higher rate at that stage rather than later.

I welcome the Bill and I hope the Minister will be able to get it off the ground. I was glad to hear him say that we will have the applications available in the very near future. I am sure it will have no effect on the ordinary SDA loans.

I welcome the Minister to the House and wish him every success in his new job.

I am completely confused as to how this new agency is going to work and I am sure that most of the people who will be applying in the future will not have a clue as to what money they will need to meet their repayments under this new scheme. I would also like to join with Senator Honan in asking the Minister if this means the abolition of the SDA loans as we know them. If so, it may create some problems that are not obvious now.

I say at the outset that the provision of houses in this country is the responsibility both of the Minister for Finance and the Minister for the Environment. It is their duty to provide finances for housing for those who are unable to provide them. The previous Government introduced the £3,000 subsidy grant and this was of great help to young people when purchasing houses. In addition, they could get the £1,000 grant. However, the present Government have abolished the subsidy and this will cause considerable hardship.

The Bill is quite confusing and I am sure the Minister has found this to be the case. People applying for the scheme will not know what it will cost them in the future. The idea of linking the repayment of loans to a price index with a built-in inflation base is dangerous. If trends continue in the coming years as they have for the past 25 years applicants will have to face problems in future years. I am very worried about this aspect. Credit for trying to bamboozle applicants must go to the civil servant who prepared this document. I would not regard myself as highly intelligent but neither would I regard myself as stupid. I could not calculate the amount of repayments any individual who may be applying for this loan will have to pay over a period.

It is stated in the Bill that if a person gets sick or is unable for any other reason to repay the loan he may extend it for an additional four, five or six years but that does not help in any way. Before they buy an article the Irish people like to know where they stand. There may be other nations you could pull this one on, but Irishmen and women like to know the exact situation before they sign any document. They will be guided by solicitors, who will probably know less, they will be guided by county councillors who will probably know more and they will be guided by the officials in the local authorities who will be operating this scheme. It is stated that the individual loan applications will be processed by local authorities by way of a graft on to their traditional SDA house purchase loan scheme.

I will have to get the Minister to explain that one to me also. It is also stated that a person taking out a mortgage equivalent to three times his gross income in the previous tax year may repay the loan over a period of about 25 years by annual instalments. What about the small farmer in the west who is not recorded at all for any tax purposes? How is he going to be assessed? If you are going to go on statistics and tax returns, how are you going to assess the small farmer in the west whom Senator Hussey spoke about, who has an income of only £15 or £16 a week, or £1,000 a year? How can you assess that farmer on a tax-return basis? He will have no records, but he will be a first-time applicant for a loan under the scheme. I can see major confusion as to how this is to be worked.

Senator Reynolds mentioned the need for additional moneys because local authorities throughout the country had not sufficient moneys for the SDA loans which they had in operation. They were not getting sufficient capital and delays were long in certain cases over the last number of years. All local authorities could lend more money if it was available to them. If this agency brings in additional money to supplement the moneys from the Department of the Environment then it will do one good thing.

I want to issue a note of warning here. For the first time in my experience as a member of Mayo County Council we in Mayo are on the point of issuing orders for the eviction of people who are unable to pay back their existing loans. I have checked this out with other local authorities and I find that the same situation exists throughout the county with young people who borrowed smaller amounts up to previous limits. The maximum loan is £14,000 at the moment. I always warned young people who came to me for advice to try to keep down loans because their repayments could be enormous and inflation and the demands on their pay packets would make it extremely difficult for them to meet their loan obligations. Many people with loans of even £3,000 or £4,000 are unable to pay them back at the moment. It will be very regrettable if such people have to be evicted. Yet under this legislation we are going to hang not £14,000 but £20,000, £25,000 or greater amounts around the necks of young married people who will have responsibility for the repayments. That should be an indication to the Minister of the need for additional housing grants to offset the spiralling increase in the cost of housing. The prices today will be higher tomorrow and the more quickly one builds the cheaper the house will be.

Senator Reynolds was correct when he said the £1,000 grant was devoured by developers to a great degree when it was introduced. It was a great boon to an individual builder building one house, but the people who really went to town on the £1,000 grant were the major developers in the cities and not the small builders who were building in rural parts of the country. I would welcome any legislation which would ease the big burden on young people.

A word much used in connection with the £1,000 grant is showing its head here again: the spouse. That has become a great word around the country. Everybody knows now what a spouse is. A spouse was supposed to be attached to another spouse. If the Government could take back that word easily without the attention of the media they would do so. They are trying to say now the spouse is not taken into consideration in regard to this loan. The spouse does not mean anything here now. The spouse, man or woman, meant a lot in the last decision of the Department of the Environment but the word is not in this document. In this modern day the marital partnership may not be regarded as permanent.

People who are not able to pay in a certain time can be granted an extended period which was not available under the old scheme. Under this Kathleen Mavourneen system it can go on and on. It may work out at the end of the day although I am not sure that it will.

I wish the Bill every success. I will have more to say on it at a later date.

I welcome the Minister to the House especially since he brings us this legislation which is so badly needed. Many of us who have served on county councils over the last few years will realise the distress that many applicants have had to suffer under the present SDA loans system, not particularly on the issue of incomes and their limit. Senator O'Toole mentioned the question of spouse, but he must have realised who created all this mess. The decision to increase the money available on paper was very popular but they did not make the money available.

I welcome this Bill as comprehensive legislation and good thinking. I would like to highlight many aspects with the old SDA loan never catered for. The first thing is the relationship between income and the amount of loan available: in other words, at present it caters for a category who were excluded from the SDA loan. Contrary to what the other side of the House believe, I understand that the SDA loans still exist and are available to the income groups entitled to them. I treat with scepticism the criticism that single people are excluded. The most needy must be catered for and the SDA loan caters for and was intended to cater for that category. The minor adjustments that were made recently by the present Minister were absolutely necessary to make sure that very needy people, married people with families, could provide their own housing.

Senator Honan described 28,000 houses as a great record. I would question that figure, provided by the Fianna Fáil administration, as being a reality. Certainly the west saw very few new starts last year. The record is that until we got the OK from the present Minister that the moneys were available, not one new start was made in Galway County Council area last year. I hope they can stand over that as a proud record in Government.

I do not think that was so.

The welcome aspect of the loan is the attractiveness of the repayments. Under the present system, whether it is an SDA loan or a building society loan the repayments in the initial stages are a crippling burden on people starting to establish a family home. It is stated that it can be as high as 43 per cent of their income. Here we have a maximum proportion of current income of 15 to 18 per cent. That is very attractive to the person trying to get off the ground. Demand is by far the greatest in the initial stages after marriage and the establishment of a home.

Much red tape was attached to the SDA loans with regard to titles and security. What are the requirements for the new loans? The old system required two guarantors and the site and house had to be mortgaged in the name of the local authority. Do these requirements still remain? Very often people who had applied for loans found that they had to incur very great expenses on bridging loans until the legal transfer of the loan into the local authority's name. I hope that this new Bill will short-cut the red tape and delay involved.

At what stage will the payment of the loan be made and will the period of time for the sanctioning of the loan be shortened in comparison with the present situation? Most local authorities have to budget carefully in advance and an application after being processed is held until the finance is available. That often entails a delay of six, eight or maybe 12 months in certain instances before the sanction is forthcoming from the local authorities. It was always emphasised that applicants were advised not to start construction until they got the sanction. While that was a good thing, very often in the time between the application for the loan and the sanctioning of it escalating prices caused an increase in the cost of the house of £2,000 or £3,000. I hope that the long delays in sanctioning applications will be cut short.

The local authority are to be the agency who will make these loans available. Here the Minister realises that he is not in any way diminishing the powers or functions of the local authorities when he is making substantial proportions of this money available through the local authorities throughout the country. Therefore, local authorities need not worry about any reduction in their powers. I welcome the fact that the Minister has seen fit to operate this through the local authorities and I hope he will continue to see the local authority as the administrative agency for this scheme.

The increase from £14,000 maximum in the present loan to £22,000-plus under the new scheme is welcome. I fail to see why there is so much criticism from the other side of the House. Senator O'Toole said that he did not like to see this great big burden hanging around a person's neck. I would not say that it is a burden hanging around anybody's neck. The availability and the acceptability of the finance is the big question. People who are at present held up under the old system would gladly accept this scheme. To say that it is a big burden around their necks for years to come is untrue. You can borrow only £14,000 under the present scheme and you have to go, cap-in-hand, to some other agency like the bank to find the additional amount, or do I take it from the other side of the House that they intend to commit everybody to £14,000 houses and leave it at that? Where is the other finance to come from? It is not easy to come by, particularly for certain categories of people who have to look for the additional finance. These very often are not the people the bank manager wants to see coming in, which initially they are forced to do to look for the rest of the money at exhorbitant interest rates. The interest rates as quoted here are attractive in comparison with some of the very short-term lending available from banking institutions.

On the question of the availability, the injection of the proposed £22 million in the current year will give an added boost to one of the most sensitive industries in the country, the building industry, which at the moment is progressing satisfactorily. Many of the other ancillary supply industries are also going well. The number of people employed in the industries directly or indirectly related to the building industry will have to be increased. We have heard over the past two or three years of great numbers of layoffs in industries related to the building industry. We all must welcome the fact that the industry has got a tremendous boost and that employment which has had such a severe rebuff for the last two or three years will now get off the ground again. The number of building firms that have gone to the wall over the last few years is a direct result of the industry being starved of finance.

I congratulate the Minister on the timely introduction of this measure so soon after coming into office. I hope the people who have been in a limbo situation for the last two years will now see an opportunity to go ahead and start the house to which they are entitled.

Like the other speakers, I welcome the Minister to the House and wish him success in his new portfolio. Anybody who comes to this House with good news for housing, social welfare and so on is very welcome.

I welcome this Bill because I feel that it will in some way help to resolve the grave housing problem with which the country is faced at the moment. The provision of housing is one of the most important social functions that any Government could be engaged in. No matter how many houses we build — different parties and different Governments may claim credit for the provision of 28,000 houses, 30,000 houses and so on — we are only scratching the surface. We have a very young population. We claim that 50 per cent of our population is under 25 years of age. We know too that the trends are changing. Heretofore people provided themselves with a house before they decided to get married.

Now young people are more inclined to get the bird first and find the cage afterwards. The decision of the present Government to which I am completely opposed, to confine the provision of SDA loans to married people is not right. That is a bad decision, and the Minister should look at it again. Over the past few months I have met quite a number of young people who were anxious to build their own house, who were anxious to get married when they had that house built, but unfortunately they will not qualify for the SDA loans. This is creating problems, regardless of what the Government might think. Young people who show that kind of initiative should be encouraged to proceed rather than be stopped from providing those houses.

I would not like to see the SDA loans done away with. I hope when the Minister is replying that he will be able to clarify that point because one of the advantages of the SDA loans was that you had a fixed interest rate and people knew exactly what they were going to pay and they could budget for that. In the new system that is not the case. It would be very difficult for anyone to calculate what his final payments might be or what his overall payments over the 25-year period would be. I have certain reservations about the setting up of boards of this kind because they are adding to the already overburdened bureaucratic system. I can see no reason why the Department of the Environment could not carry out the functions being given to this agency. We have seen in the past planning appeals taken away from the Department and Minister and given to a planning board. I am not so sure that they have done any better job than the Minister would have done, and I see no reason why the Minister who is responsible to the electorate and who has to face the electorate every two, three or four years, should not be left with the final decision. He is as capable of giving a fair and just decision as any planning appeal board. The same would apply in cases like this. In the Department of Agriculture responsibilities have been handed over to ACOT. Again I am not so sure that that board can do any better job than the Department or the Minister responsible for running that Department could have done. I am reluctant to give my blessing to the setting up of additional agencies like this. It is making it more difficult for the ordinary people to get at those people. We are setting up more faceless people. The vast majority of the Irish people would prefer to approach the Minister responsible rather than have to go to a board or an agency such as this.

Certainly the building trade needs a boost. More than ever before there is a great need for the provision of new housing. Those of us who are doing our constituency work meet this every other day. Young couples come to us pleading for houses, couples who are trying to raise their families in flats and so on. It is a very sad situation. It is difficult for the Government to find money for everything, but this is one area where no public representative would grudge the allocation of the money. I hope that the setting up of this agency will not mean that funds already invested in housing will be withdrawn. That would be a terrible thing to happen. I would like to see additional money provided for the building of houses. Not alone will this measure provide houses that are badly needed but it will also create employment in the industry and the other ancillary industries. This is important when our unemployment figures are so high.

Again I welcome the Bill. It will not be the answer to all the problems and I am sure the Minister accepts that. I hope that as the Bill proceeds and as the administration of the Act proceeds, over the next six or twelve months, if there are anomalies and problems, the Minister, the agency or whoever is responsible will correct those problems, and that they will be monitored carefully and put right.

I join with the other Senators in welcoming the Minister to the House. I also welcome this agency Bill. The intention of this Bill, as I understand it, is to be self-financing. Other Senators did not place much emphasis on that fact. In today's economic state, surely an effort to provide some agency which can work without an immediate input from taxpayers is to be welcomed.

Other Senators have dealt fairly adequately with the social need for housing. From my experience as a county councillor I would ask that in the administration of the scheme and the giving of directions to the local authorities there would be some relaxation in the schemes or guidelines drawn up to give sanction for these loans to applicants. So many rigid judgments have been made of guidelines previously given. For instance, no local authority will sanction a loan until the legal transfer has taken place. Senator O'Toole is concerned about the west and we have many problems in the west about titles. An easement in the title requirement for sanction of the loan would help greatly.

I would like also to see, in the administration of funds, part of the funds allocated immediately, irrespective of whether the title matters had been drawn up or not. Once planning permission has been given and an undertaking or contract has been drawn up — either between the previous owner of the site or his solicitor or representative — this should be sufficient for sanction of the loan. Matters should then be let go ahead. I would like to join with Senator Honan in her praise of the RHO and what that organisation is doing for the west. Housing development is necessary and this Bill will be of great assistance to the RHO in providing houses for people who want finance urgently.

Is é an chéad dualgas atá orm ná fáilte a chur roimh an Aire. Is fear macánta, dea-bhéasach é i gcónaí, fear cumasach, agus gúim gach rath ar a chuid oibre fhad is a bhíonn sé in a Aire.

Go raibh maith agat, a Mhíchíl.

I can truthfully say that I welcome this Bill to the extent that it will expedite the erection of more houses and will give a badly needed boost to the construction and house building industries. If there is any industry that tends to create even more employment it is the building industry. It makes the money go around, so to speak. There are many ancillary industries supporting the construction industry.

Then there is the question of houses. I used to wonder years ago how it was that, with all the houses being built, there was still a great demand for them. You would think, with a small population such as ours, that we would have come to saturation point years ago. It looks as if we never will come to saturation point as far as house building is concerned.

Of course, we have a wonderful distinction in this country — we all love to have our own house. That sentiment was expressed for all time in the words of a beautiful little poem: "A little house, a house of my own, out of the winds and rains way". That is in our blood. It is hard for us to realise how in EEC countries people are content to live all their lives in rented accommodation of some sort, in flats and so on. We love to have our own house and that is very good, indeed.

This Bill is designed to create an agency. I am sure, as the Minister has something to do with it, it will be an excellent agency. However, one always has a suspicion when one hears of a board, or an agency, or a corporation, or something of that nature being set up. One begins to think, perhaps a little uncharitable, is this just another gimmick to put something on the long finger? In one section the Minister has given power to himself to advise this agency, as needs be. Indeed, I am very glad of that.

Section 6.

In section 6, the Minister may, from time to time, with the consent of the Minister for Finance, give to the agency such general directives as to policy in relation to all or any of the objects specified in the agency's memorandum of association as he considers appropriate. That is a very satisfactory clause. Speaking of the memorandum, section 5 states that this agency may "specify the class or classes of houses in respect of which such loans may be made".

The Minister probably at this stage could not give us any details or any idea as regards the size of the houses he has in mind. One thing I would warn against is having houses built that will eventually turn out to be too small. There is a demand, of course, in certain areas for small houses suitable for retired couples and such. Generally speaking, with a rising population we should not have the houses too small, because there is always a difficulty then in extending these houses. I would hope that the Minister would hear in mind that new building materials are coming on the market every day, new insulating materials that help very much as regard reducing heating costs. I hope that the regulations will be adequate to make sure that as a result of using the most appropriate materials heating costs in our future houses will be considerably reduced.

There is one paragraph in the Minister's address which is rather disquieting, especially in view of the fact that figures have just been released showing that the rate of inflation is now well over 23 per cent. The paragraph is that "total repayments will be calculated to ensure that the agency is self-financing, taking one year with another". That is excellent in itself. Would that all agencies and semi-State bodies would be self-financing. His address went on: "For this purpose, they will be based on the agency's total costs, including the cost of servicing the index-linked debt". That index-linked specification is new in the case of providing funds for a particular industry. "At this early stage, it would not be practicable to predict if borrowing will, in the long run prove to have been more or less expensive than borrowing on a conventional annuity mortgage." That sentence seems to be rather disquieting. The Minister said then "That will depend on the trends in inflation and mortgage interest rates in the future". Well, as inflation is going at the moment and there seems to be no hope of stopping it, that could lead to very serious consequences. I trust that the Minister, when replying, will make reference to the points I have raised.

I would like to join with the other Senators in welcoming this Bill. It is important in that it is for the first time getting a contribution from the insurance companies into the area of housing. For years, we have been unable to get money in from them because they have been able to give better returns to their depositors from other types of investment. It is a welcome development, because there is no doubt that, in recent years, particularly, the building societies have been under strain in getting adequate inflows to finance our housing needs.

I also welcome the Bill because it is filling a gap which has been very sorely felt in housing policy, that is, the problem of the lower income person who is purchasing a house. Persons who are on council lists and usually on very low incomes, if they get housed have available to them a very generous differential rent scheme and very generous purchase terms. The people who are unfortunate enough to be slightly above the cut-off point have been forced to bear very heavy burdens. They usually have to get the loan, which at present at £14,000 is grossly inadequate to meet the cost of housing. They are being forced to get expensive topping up borrowing. The net effect has been that these people, with immense initiative in that they are prepared to go out and build for themselves in the rural areas, have been pulling the devil by the tail for years — especially during their early married years. I really welcome this Bill in that it extends the availability of loans to people up to a £9,000 limit, and provides a realistic loan that will meet the full cost of the house and allows those people to make their repayments in a manner which they can afford. For that reason, it is correct that the agency charge a real rate of return — a real mortgage rate. This is a point which Senator Cranitch raised.

There are generous assistances available to people who are borrowing to buy a house. To pay tribute to the last Government, they did introduce this scheme of the £3,000 mortgage subsidy in the first three years, which is immensely valuable in that it relieves the early tough years. I do not share the anxiety of Senator Cranitch that it is unreasonable to ask a real rate of return on the mortgage rate, given the general subsidies that are available.

I would ask the Minister to consider two other problems in relation to people buying houses, or building for themselves and that is, the question of solicitors' fees, which are still excessive. They are moving up towards £1,100 on a new house. I cannot see that the solicitors are providing an adequate service to justify that sort of a fee from a couple setting up on their own. On a point Senator Hussey raised regarding the exclusion of single people from the SDA loan. I have to differ from him on that. We are dealing, in the SDA loan, with a highly subsidised interest rate. It is down at 12½ per cent, away below a real mortgage rate. It is incumbent on the Government to allocate scarce and highly subsidised money such as that to the place where it is most needed. There is no doubt in my mind that the married person, or the person who is intending to marry within a very short time, is a much higher priority than single people who decide that they want a house of their own.

I also welcome the fact that the Minister has sent a directive to the county councils saying that in the case where the income of the spouse, or the intended spouse, is only temporary, that would not be taken into account in considering eligibility for the SDA loan.

This Bill is setting up an agency that finances through a mortgage rate and is offering a real rate of return. That is not subsidised money. Similarly, single people will not be barred from access to it. That is a most welcome feature also, of the Bill. The final point I would like to mention in regard to what Senator Hussey said about setting up a new agency, is that the welcome feature of this agency is that it will be comprised of persons with expertise in this area. It will give a confidence to the insurance companies and pension funds which are taking up this offer, that it will be properly administered. I welcome it for that reason.

Firstly, I would like to say how pleased I am with the reception which this legislation has got in the Seanad. I want to thank very sincerely those Senators who welcomed me here today. This is my first appearance, in this Government, in the Seanad. I also want to give an assurance to the Seanad that this is the only seat I will ever occupy in the Seanad.

The Minister never knows.

I can assure Senator Honan that no matter what the fates have in store for me in the other House, I will not be seeking election here.

I was struck by the concern of every single contributor to the debates on Second and Committee Stages in the Dáil and on Second Stage in the Seanad of every public representative to see that as many people as possible not alone occupy their own houses but, in fact, be proprietors of their own houses. That concern spreads right across party boundaries. I subscribe to the view that to occupy one's own house and to have a stake in it is a very good thing. Things may change. There is not quite as strong a need in other countries to own one's own house. Certainly, in parts of the Continent, most people are in rented accommodation. Legislation forced on us by the Supreme Court earlier this year may mean that, in the future, there will be more investment in property for rent. Deputies, Senators and, indeed, councillors rightly reflect the wish of most Irish people to own their own houses.

I was struck by the deep knowledge of housing on the part of Deputies and Senators who are members of local authorities. Senator Honan asked about a White Paper being produced on housing. A complete White Paper will be ready I hope, in the spring, summer or early autumn of next year. I would hope to have agreement amongst the Whips of the parties in the Dáil and perhaps if there is an interest in the Seanad, to have at least a one day discussion, perhaps more, on general housing in the country, using the White Paper as a basis for that discussion.

In the two-day debate in the Dáil I learned a lot about housing from people who are actually dealing with applicants for houses at local authority level, SDA level, insurance company level and building society level — people who have to get mortgages from those sources. It might clear our minds and we might find a lot of agreement across the Houses if we had a proper, lengthy debate on housing generally, to try to sort out where we should be going. I hope that the White Paper will set down where we should be going with regard to housing right through the eighties and can be used at some stage as a basis for discussion.

To continue along that line, I agree entirely with Senator Honan when she talked about the patriotism and general devotion of local councils. I have said a number of times — most recently at the lunch I hosted for Senator Lawlor's association on Wednesday last — that I see the whole basis of democratic government starting at the local public representative and his intimate knowledge of his own area. I certainly want to assure the Senator, as I have assured others, that it would be my objective, while Minister for the Environment, to push as much power as I can out of the Custom House and back down to local authorities. Side by side, or hand in hand, with the acceptance of that power goes the responsibility to exercise the power. It is not all one-way traffic. I will certainly be glad to do anything I can. Indeed, it was the basis of my thinking when writing to the chairmen and mayors of the various councils in the last couple of months, asking them to have special meetings to see in what way local government could be reformed. I have received some interesting observations, not from all the authorities yet, but I am sure that I will have received replies from all of them by the end of January, in which case I hope to come back to the Seanad again with some further proposals in regard to the reorganisation of local government.

Senator Honan referred to the shortage of local authority housing. That, of course, is correct. I am afraid that, as Senator Burke mentioned, sufficient money was not provided earlier in the year to build enough local authority houses. In fact, there is probably very rarely enough money available for local authorities but, in 1981, the amount was cut back quite significantly. We managed to get some extra finance during the year and allocated more to them. That was a very necessary step because, otherwise, there would have had to be lay-offs in local authorities or, indeed, in the sectors employed by local authorities in this regard. Senator Honan referred to long-term planning with regard to housing and I have already referred to a White Paper. I hope that at some time we can arrange to have a suitable motion put down in the House where the White Paper could be used as a basis for discussion.

Senator Honan also referred to house improvement loans. These loans will continue to be administered by local authorities under the 1979 Housing Act. The agency will be concerned with house purchase, rather than house improvement. Both Senator Honan and Senator Tom Hussey spoke about the fact that the agency would represent extra public funds for housing. Indeed, the objective of the agency is to provide extra housing to fill a gap in the present structure, as Senator Bruton recognised, and to provide another option in the methods of getting funds when people in a certain income bracket experience difficulty in getting mortgages for houses. This agency will, hopefully, be an assistance to them.

Senator Reynolds rightly said that this will prove to be an injection of funds into the building construction industry. That is correct and it is one of the reasons why I have been pushing a little bit to get this legislation through the Houses of the Oireachtas. It is a measure that is very badly needed and I would hope that it will be operating in the next four or five weeks, so that we can accept applications from people wanting to purchase either new or old houses. I do not think that any Senator mentioned the fact that funds from the agency can be used to purchase a second-hand house as well as a new house.

Normally, people say that when public money is being made available, or machinery is being set up to provide money over which the Government have a control, it should be confined to new houses and I tend to agree with them. Before I came into the Department, I learned from people outside the public service, in the construction industry, that one cannot separate sectors of the construction industry; they are all tied together. People who live in a second-hand house will but a new house if they can sell their existing house. There is a link between all sectors of the housing industry. Local authorities, under the SDA loans scheme, sometimes give loans for secondhand houses, certainly for people in local authority housing, but in this case any applicant, whether he be a local authority tenant or otherwise, can now apply to buy a secondhand house.

Senator Reynolds also mentioned something about which I am extremely concerned and about which he has spoken to me privately on a number of occasions. Traditionally, we think of a house as being built of virtually 100 per cent native material — wood, cement, slates, nails all these things he listed. That is changing, undoubtedly. Senator Reynolds would have a better idea of how big the imports are and how significantly they are eating into the home market. It is one of the reasons why all Governments of all shades have continually repeated that we must be competitive, not just because we want to sell goods abroad, but because we must also protect our home market from imports which now have a right to come into the country under our obligations under the EEC regulations. It is something that we should all be very cautious about. It is very difficult to blame a contractor or, indeed, an individual who in the example quoted by Senator Reynolds, is offered precisely the same door at two very different prices. It is very hard to see how such a huge price differential exists. The door which Senator Reynolds spoke about was sold in this country, hundreds of miles from where it was manufactured and processed, for £12, where the native Irish door manufactured almost on the spot is 25 per cent more expensive.

Everybody connected with any manufacturing or processing business must remember that the more uncompetitive our goods become, not alone in world markets but in our home market, the more jobs will certainly be lost at home. The Senator gave a perfect example of this. For years we believed correctly that almost 100 per cent of the components of a house were home-produced. Now we find that this market is being eaten away, purely because our goods are not attractive enough in price to compete with goods from abroad.

Senator Reynolds also referred to the price of land for building. As he said, it is a thorny problem with enormous constitutional implications that have been the cause of concern to every local authority. It is something for which a solution has to be found. I, on behalf of the Government, have set up a special committee composed of people, including officials from my Department, with a deep knowledge of this problem. We hope to come forward, as soon as possible, with a solution. Certainly, there will be an attempt to solve this very difficult problem.

Senator O'Toole said that the provision of houses is the responsibility of the Minister for Finance and the Minister for the Environment. Is that true? Is it the responsibility of the Government, either through the Minister for Finance or the Minister for the Environment, to provide houses for everybody? I do not think it is. The individual has the responsibility to provide his own house. There are categories who cannot and never would be in a position to provide their own houses. The State has a responsibility there, obviously exercised through the Minister for the Environment and the Minister for Finance. There are further categories for whom the State provides structures and means of getting finance. Grants are part of the encouragement to build houses. But I am not sure that it is the responsibility of the Minister for Finance or the Minister for the Environment to provide a house for everybody. I quite strongly disagree with Senator O'Toole on that. Perhaps he did not mean it quite as bluntly as I am putting it but that appears to be what he was saying. It is the Minister's responsibility to organise the housing market and to provide houses for people who are not and never could be in a position to provide houses for themselves. After that, it is the individual's responsibility to provide and pay for his own house.

Senator O'Toole also said that the mortgage subsidy scheme has gone bad. That is not so. The mortgage subsidy scheme will still be available to people who qualify. That is not quite as attractive a scheme when one reads the details as it appeared to be when it was announced. I will not put it any stronger than that. Anybody who qualifies for the mortgage subsidy scheme will get that subsidy. The difference will be that it will be channelled back to the agency and will come off the debt owed by the borrower to the agency.

The Senator also wanted to know what I meant by saying the operation would be grafted on to the SDA loan scheme. Local authorities have over many years operated the SDA loan scheme very efficiently and tribute must be paid to them in this regard as well. I do not see any point in setting up a whole new range of offices throughout the country like building societies or banks to operate it. The local authorities are extremely competent and I intend to use the expertise that is available in these offices to handle the loans and the agency.

Senator Burke referred to the record of our predecessors in regard to housing, particularly local authority housing. I have referred to that already and I accept what he says. He and Senator Carey referred to the difficulty of the house and the site having to be mortgaged back to the agency and the red tape that has to be gone through before one can get one's money. Unfortunately, I do not think it would be possible to cut much of that red tape. The agency will be responsible to the Government and the Government could not be seen to be lending money to people without proper titles being established to the house and the land on which it is built. But the agency will be able to help in that it will not be waiting for the completion of the house before giving out the loan but will give a series of payments throughout the building of the house. There is no intention, of course, of diminishing the powers of the local councils in that regard.

Senator Burke inquired about guarantors. Frankly, I am surprised that there are still local authorities looking for guarantors in this regard. Most of them take a very sensible attitude to this. They know most of their customers or they can make inquiries locally about any person looking for a loan from them. I would hope that wherever this practice is still in existence, the local authority would desist from it. The housing agency will certainly not be engaging in it.

I agree with Senator Hussey when he said that he was reluctant to see more semi-State boards being set up. I tend generally to share that point of view. But this is quite exceptional because — and this point was made by Senator Bruton — for the first time we are getting into the housing sector money from pension funds and from life insurance offices which has not been available for housing. Obviously, when pension funds are invested it must be clear to the people who have money invested in them that the money for buying their pensions and which they have entrusted to the pension office is safely invested so that when they reach the age of 65 pensions will be available to them. It is for that reason that I want this to be seen to be a responsible agency, properly funded and recognised not only by the people who get loans because they will be guaranteed by the Minister but also by the public who invest in pension funds, as an agency that has status and backing that will safeguard what is essentially their savings.

Senator Cranitch welcomed the Minister's right to give instructions to the agency. That is, in fact, one of the key clauses in the Bill; the Minister retains for himself the power to indicate to the agency how he would like to see the scheme operating. Senator Cranitch is right to identify that. He also inquired about the limits and the size of the houses for which money would be lent.

There is a price limitation in that nobody can borrow more than £22,000. It could be argued that somebody who is building a house for £100,000 would make use of the agency to borrow the £22,000 and supply the balance of £78,000 himself. It is most unlikely that somebody who would be buying that type of house would be using the agency because it is not an attractive proposition for somebody like that. It was mentioned that, on the other end of the scale, somebody on £1,000 per year might use the agency. Nobody on £1,000 a year would saddle himself with a debt of £22,000, no matter how attractive it was, or how long term the repayments were. Somebody on so small an income certainly would not be buying his own house. Generally, a grant is available to those people who would be using the agency funds and the grant is payable on houses from 35 square metres up to 125 square metres. So in that sense the agency funds would be limited to nothing below 35 square metres and nothing above 125 square metres.

I have already referred to the point, correctly identified by Senator Bruton, that is, the importance of, for the first time, getting pension funds into the housing market. He also immediately spotted the reason for the exclusion of single people from various schemes. Before I conclude I want to say that this new agency and the funds available through it — I mentioned this a number of times in the Dáil yesterday — will not be attractive to everybody as a means of providing money for themselves to build houses. Anybody who can afford to put together the deposit of £8,000 or £10,000 will still use the SDA loan scheme because, as Senator Bruton said, it is quite massively subsidised to the tune of 5 or 6 per cent, because the money is lent at 12½ per cent. If one is earning under £7,000 a year one has a choice between using this scheme or the SDA scheme. The present trend is for people to get married much younger than heretofore so that it will not apply so much to young people who would find it difficult to put together the deposit now required under the SDA loans scheme, which is limited to £14,000 and the SDA type house would be £24,000 or £25,000. So, taking off the grant and even the mortgage subsidy which is paid six months later, there is a big gap to be bridged. Also, somebody who does not mind paying a very high percentage of his income in the early years may still go to a building society but on SDA houses people could pay £160 or £180 a month on an income of £8,000. Many people cannot afford that. This provides an alternative way for both those categories. That is that they will pay, in the initial years, only about 18 per cent of their income. But the price for not having to put together a mortgage and for not being obliged to pay this high percentage of income repayments is that the shortfall on what they pay in the initial period is moved forward and becomes part of their debt to the agency and must be picked up as they go through life. People who would be very attracted by this scheme are young people with no money who see themselves as not alone getting the normal wage increases through their lifetime but getting promotion in their jobs so that the salary they receive through their lives will be increasing. There was a lot of doubt about its attractiveness yesterday in the Dáil. I do not share that doubt. Time alone will tell. In the meantime I would like to thank the Senators for giving the Bill such a warm reception.

Question put and agreed to.
Agreed to take remaining Stages today.