National Mortgage and Housing Corporation Bill 2015: Second Stage

I move: "That the Bill be now read a Second Time."

I welcome the Minister of State, Deputy Damien English, to the House. I thank the staff of the Bills Office, the Seanad Office and the Leader's office for their unfailing courtesy in their dealings with me on this legislation. I thank, too, my assistants, Dr. Charles Larkin and Ms Ursula Ní Choill for their invaluable help. The background to these proposals is the twin crises in the financial sector and the construction sector in this country. My intention in bringing forward this Bill is to seek to address some of the issues arising out of those crises and thereby ensure the Seanad has an input into this important public debate. These matters have been a topic of conversation on the Order of Business on many occasions. There is a great commonality of spirit among Senators in this regard.

The problems we are dealing with are not new and have caused untold levels of hardship and humiliation at both the personal and national level. We have heard all the evidence at the banking inquiry as to how the financial crisis developed. The bank-State-property nexus that was the framework for that investigation highlighted over and over again the many distortions that existed in the market for residential and commercial property in Ireland and how a standard house went from costing two and half times average income in the 1970s to 12 times average income in recent times. Using Central Bank rules and the guideline that monthly mortgage repayments should not be more than one third of income, a house of €227,000 is all that is deemed affordable at present. However, the average house price in Dublin is €317,917. The consumer price index, CPI, has risen sixfold since 1976, but the price of a house has risen fourteenfold in the same period. Shelter, a housing charity in the United Kingdom, estimates that if house prices and chicken prices had been indexed together, a chicken would now cost over £50. In Ireland, while all other sectors of the economy have shown productivity increases and improvements, the residential and commercial property sectors have underperformed over time and combined to put housing out of the reach of more and more people. The question we must ask ourselves is whether we in this House and our colleagues in the Dáil can develop measures to deal with the dysfunctional housing market.

The Bill I have brought forward does not offer a quick-fix solution to the current problems. It is concerned solely with residential property and does not deal with the commercial property sector. The property sector requires a suite of programmes to fix the problems that persist. Many distortions have built up in the sector over several decades which have brought us to our unhappy present. My time on the banking inquiry showed me how important it is address policy towards the long term and acknowledge underlying issues early. The housing crisis is multifaceted. Affordability, availability of housing of all types, the ability to build and support social housing, and the epidemic levels of homelessness are difficult to address individually, let alone simultaneously. Any solution must bear in mind the big picture and acknowledge there is no panacea. Solving the problem is like eating an elephant; it must be done piece by piece.

The reality of the property market is that we have seen an upward trajectory in prices since the early 1970s, following a sustained period of modest increases. This was partly to do with credit availability factors, partly related to regulations and partly a consequence of fiscal expediency. The expansion of credit allowed prices to rise as the elasticity of income was not constrained. So long as asset prices increased in a virtuous cycle, we could expand the availability of credit. As long as credit was accessible cheaply from global sources, the conveyor belt was kept moving. Government regulations, with little mind to how they would work out in the long term and the impact in terms of increased costs and rent-seeking opportunities, allowed the price of accommodation generally to increase and created a situation where consumers and even some producers were disadvantaged. Finally, and most importantly for the average citizen, the fiscal system turned the property sector into a financial vehicle. From the point of view of taxpayers, it was tax efficient to buy a house, expand a house or buy another house, and the additional transaction revenues were lucrative for the Exchequer and easy to administer. Property-related tax expenditures were politically expedient and popular. The result was a willingness to ignore the ingredients of a healthy property sector, which are that housing should be abundant, affordable, adequate and appropriate.

The property market is now creaking under these collective bad decisions. We have an acute accommodation crisis in Dublin. Rents are beyond the reach of most professional wages, let alone unskilled and semi-skilled wage packets. New prudential lending rules from the Central Bank, which are necessary, further complicate the possibilities for people to purchase apartments or houses. On the supply side, there is limited development taking place. With supply constraints and a Central Statistics Office, CSO, figure for natural wastage by depreciation of 10% of housing stock, household formation demand will outstrip supply for the foreseeable future. I propose to address one aspect of this system, namely, the ability to finance mortgages and create a sustainable system of finance to ensure the provision of social housing and that people on lower incomes have access to mortgages. This country made a political decision in the 1930s to become a country of property owners. There are ways and means to continue that tradition, the proposals in this Bill being one component of that. The legislation is not a silver bullet. Much work needs to be done in other areas, but it is a step in the right direction.

The Bill proposes to create a national mortgage and housing corporation for the purpose of ensuring fair access to home ownership, addressing the accommodation shortage and ensuring the smooth operation of the property sector in Ireland. As of 2015, the affordability of accommodation for residential purposes in both the private rental and purchasing sector remains in doubt. In fact, Professor Ronan Lyons of Trinity College, Dublin has estimated that as many as 90% of households would require some form of subsidy to purchase a newly-built two-bedroom apartment compliant with Department of the Environment, Community and Local Government building regulations, Central Bank financing guidelines and the ready-reckoner rule that accommodation should cost no more than one third of disposable income. Models of Government-actor mortgage agencies in Canada and the United States show it is possible to modify market behaviour such that prices are tempered, social cohesion objectives are achieved and a more stable market is created.

The national mortgage and housing corporation is a body similar in design to the Government National Mortgage Association, Ginnie Mae, in the US and the Canada Mortgage and Housing Corporation in that country. The legislation draws heavily on those legislative models and most of it is orientated towards setting up the corporation. The corporation acts as an aggregator that uses links to the Government as a way to bundle mortgages together for the purpose of issuing covered bonds at a much lower rate of interest because governments can borrow at those low rates of interest. This system is in place already for Nykredit in Denmark, Ginnie Mae in the US and the CMHC in Canada. Rules governing the issuance of mortgages are strict to ensure the quality of the final asset is high. The process will ensure the price of funding will be exceptionally low. This reduces in part the cost of housing. As an additional component, the platform created in the Bill allows for constraints on prices in the housing market. In economics we call this the power of monopsony. The corporation and the platform will act as the dominant actor in the housing market for the purpose of investment and regulation. The result is that it can exploit the position to manipulate market prices such that it can begin the process of driving down housing prices. The basic analysis is that this will result in the redistribution of the consumer and producer surplus in the market. This additional economic credit accrues to the platform and the platform then uses that to engage in social cohesion actions for social housing and to facilitate low-income households to gain access to the property market.

In the main body of the legislation, I outline provisions to enable the national mortgage and housing corporation to perform mortgage aggregation and mortgage provision actions similar to those performed by Ginnie Mae and the CMHC. The rationale is that it would have access to especially low-cost funds due to explicit Government guarantees provided by the State. This does not require a drawdown from the Exchequer since it acts as a guarantee and, as such, results in a large non-explicit subsidy to the corporation for the purposes of financing. The design of the corporation and its subsidiary bodies includes fail-safes to protect taxpayers from bailing out the corporation. These rules are there to keep the corporation from getting into the same trouble as our now defunct banking system did.

This legislation needs to address regulatory problems. Ireland has ignored the regulatory impact of legislation and statutory instruments. Regulation adds thousands to the cost of a house in Ireland. Professor Ronan Lyons estimates that constructions costs are as high as €1,800 per square metre in the Republic compared with €1,000 in Northern Ireland. The lack of competitiveness in the construction industry is something we have not faced up to and this measure is designed to correct that. The legislation allows outside bodies such as mortgage brokers to package mortgages and sell them to the corporation. This would allow other mortgage originators to avail of low-cost financing through indirect market access as long as they operated within the parameters and rules of the corporation. The purpose of those rules in the Bill is to channel the mortgages into average and below average housing markets in order that building societies and banks do not invest in commercial property or push up the price of trophy homes as they did in the past. There will be explicit rules for the bank but that is a matter for discussion between the Minister and the Governor of the Central Bank. Those rules will act as a brake on house prices in Dublin with respect to the rest of the country. These proposals are compatible with EU competition policy and state aid and are the best way to proceed in terms of income distribution. It will have a large number of social benefits. Discussions between the Minister and the European Union would be positive because the failure of the financial sector in Ireland and the development of a hugely expensive construction sector could be tackled with the assistance of the European Union in these matters. We can be compliant with the rules.

By creating the national mortgage and housing corporation and constructing a lending platform that can aggregate mortgages and subsidise social housing and low-income access to housing finance, we can begin to correct some of the worst excesses of the property market for the average citizen. This sounds like a radical action. It is radical but some radical action is necessary. The monopsony power of such an entity could be used to drive down prices. We should try to find a way to fund social housing in a fashion that is less dependent on the Exchequer. By making the cost of financing cheaper and putting in place support structures for those at lower incomes, we can try to achieve a goal of the 1930s for people to own their own houses. That is what I propose. This legislation can begin to fix a sector of the economy that has brought destruction and misery to Ireland. In that spirit I commend the Bill to the Minister and to the House.

I congratulate Senator Barrett on this Bill and I welcome the Minister of State. I know he is a great listener and will pay attention to what is being said here. One of the great things we can do in this and the other House is to look around the world to see if we can learn anything from other parts of the world. That is what Senator Barrett has done in this case. I welcome the Bill. It is yet another of his very sensible contributions. This Bill is founded upon similar mechanisms that have worked in the US, Canada and European markets. However, the proposed national mortgage and housing corporation would be dissimilar to bodies such as Fannie Mae and Freddie Mac which engaged in reckless practices a number of years ago. They gave mortgages to people who should never have got them and a great number of those people defaulted on the mortgages after the crash of 2008. Subsequently, millions of homes were foreclosed in the United States. The figure could be as high as 4 million repossessions. Although it is quite difficult, I have gone through it a number of times now. The new national mortgage and housing corporation would act as something like a permanent building society. I am not talking about the Irish Permanent Building Society but a permanent building society. It would be considered a public good as it would help to address the massive housing shortage by allowing people to access cheap credit to buy their own homes. There is a social goal of this proposed mechanism, which would be founded upon prudent financial policy.

I welcome more competition in the Irish banking system. Banking experts point to the fact that there is no normal and properly functioning banking market in Ireland. It is clear there is no real competition within the banking sector in Ireland. As we have seen since 2008, there is reluctance at political level to tackle the banks head on. Today Senator Barrett has shown us what we can do. It will not be easy and I am sure there are technical problems with it, but an institution like the national mortgage and housing corporation would mean that the Government would be de facto stoking competition in the sector, which is good for the customer. Mortgages are a vital issue for people. I recently drafted the Central Bank (Emergency Powers) (Variable Interest Rates) Bill 2015 to empower the Central Bank to get banks to reduce variable mortgage interest rates. This is exactly what Senator Barrett will achieve with this. A variable interest rate would mean that when ECB interest rates go up, so too does the mortgage interest rate. Equally, when the ECB rates go down, so do the mortgage rates charged by the banks.

This has not been the case. The Minister for Finance is well aware of the bad behaviour of banks in this respect but has not yet been able to find a solution to it. Earlier in 2015, KBC Bank, Bank of Ireland and Ulster Bank ruled out, at one stage or another, cutting their variable mortgage interest rates. This is shameless profiteering by banks and something has to be done about it. One of those banks decided to give a lower rate to new customers but not to existing customers. That is not good business. A bank should look after its customers. It will hope to get new customers but it should not do it that way. However, I welcome KBC's change of tack announced last month to cut its variable interest rates.

We must remember that 300,000 people in Ireland are locked into high mortgage rates and cannot escape from them. To give an example, someone with a €300,000 standard variable rate mortgage with Ulster Bank is paying almost €650 a month more than someone with a tracker mortgage. That is nearly €8,000 every year down the drain that could be spent on something worthwhile such as a child's education. There are a massive number of people suffering and the Government should try to help them. We have a solution here. It is based on what has been done in other countries but that is the point of it. We should do that more often.

Measures such as this Bill need to go in tandem with other steps to address the housing shortage. For instance, we should be introducing measures to ensure better conditions for those who want to rent rather than buy. Let us consider the housing sectors of our European neighbours. According to EUROSTAT, approximately 40% of people rent in France, while in Germany the proportion is approximately 50%. Renting is seen as very normal in those countries, unlike in Ireland. We still have many problems when it comes to renting. For instance, a great number of landlords favour short-term contracts, meaning it is easier for them to throw people out quite easily when their contract has expired. In Belgium, the standard rental contract is nine years. In Germany, leases are for an indefinite duration. Tenants have very strong protection and, provided they pay their rent, they are virtually immune from eviction or major rent increases. These sorts of lease periods seem long but the thinking is that many people rent for the whole of their lives.

We should realise that Dublin needs to convert some retail property or vacant property into housing units. The Government should remove red tape and ease planning regulations so vacant and underused buildings can be used.

Senator Barrett has shown us a way in which we can get something done. We can get it done easily. I hope that the Bill will not be defeated. I hope the Minister of State will accept it or say that, although there may be some steps to take, they will be taken. I congratulate Senator Barrett and his team on being able to put this Bill together. The Senator has given us light at the end of the tunnel showing that the objective can be achieved. I urge the Government to pay careful attention to the legislation and ensure we learn from it.

I thank Senators Barrett and Quinn for bringing this Bill to the House. The issues of housing and finance are obviously very important to the country. I very much welcome the opportunity to discuss these matters in the House. First, I apologise on behalf of the Minister for Finance, Deputy Noonan, as he could not be present. He would like to have been able to take part in the debate. I am speaking on his behalf. He sends his apologies and will certainly be listening to the debate and take on board many of the comments made. I thank Senator Barrett for all his efforts and the work of his team on bringing the legislation to the Seanad.

Mortgage credit is a large and key component of the overall banking system, and when problems arise in this area it can pose significant problems for financial stability and the wider economy. I do not need to outline to anyone in this House the impact that the Irish property bubble and the subsequent banking crash have had on the Irish people. They caused significant difficulty for many households but, of course, the difficulty was particularly acute for people who took out large mortgages and who then faced genuine difficulty in meeting their repayment commitments on those mortgages. Many of them were young people with young families, and they are still under immense pressure trying to meet repayments and cope with arrears. In light of this experience, we should always be open and willing to examine the circumstances and practice in other countries to determine whether there are better ways of solving problems in Ireland and, even more important, to avoid getting into such problems in the first instance.

The Long Title of the Bill makes reference to government mortgage agencies in Canada and the United States. It is appropriate to consider the circumstances in other countries, and Canada is a country that can provide information and guidance to assist us in efforts to improve our mortgage and housing markets. In particular, Canada's financial system has worked its way through the global financial crisis in a more successful manner than that in most other countries. Indeed, it successfully avoided the worst of the financial problems encountered by other countries. For example, Canadian mortgage arrears and non-performing loans remained at very low levels throughout the financial downturn. Therefore, I welcome the opportunity presented by this Private Members' Bill to examine the Canadian system to determine whether there is any particular insight that could be of benefit to the Irish system.

However, we should also recognise and accept that, due to their fundamental character and historic backgrounds, the housing and mortgage markets of countries will differ from one another, and often in a very significant way. Ireland and Canada have different legal, financial, regulatory, political and social characteristics, not least through our membership of the European Union, and these factors need to be taken into account when considering any proposal – such as the one before us – to provide for a significant change to the institutional framework for Irish housing and financial services.

This is a very complex Bill and there was only a short time available for its consideration. We recognise the considerable work done on it by the Senator and his team. A preliminary analysis shows there are many significant issues arising from the legislation and I regret that the Government cannot accept the Bill as proposed in its totality. Nevertheless, I do look forward to listening to and contributing to the debate and to considering whether there are elements of the proposal that could feasibly be investigated for consideration at a future point for incorporation into the Irish system. As I stated at the outset, the Minister, Deputy Noonan, will take a genuine interest in this and follow the debate thereon.

The Canada Mortgage and Housing Corporation is clearly an important institution in Canada and it has a number of important functions. It was established in the 1940s around the end of the Second World War and it has been central to the Canadian Government's housing policy since then. One of its core functions is to provide assistance to low-income and other disadvantaged households to meet their housing needs, and to that end it provides funding for social housing.

Of course, there is also an unmet social housing requirement in Ireland. This is fully recognised and accepted by the Government. Primary responsibility for policy and the provision of social housing and, of course, housing policy more generally, rests with the Minister for the Environment, Community and Local Government, Deputy Kelly. In that regard, the Minister, through the Government's Social Housing Strategy 2020, has returned the State to its central role in the provision of social housing through a resumption of building on a significant scale and putting in place financially sustainable mechanisms to meet current and future demand for social housing supports. Over €1.7 billion in Exchequer and local authority self-funding has been committed to the strategy in 2015 and 2016 to support the provision of over 33,000 units in that period. The Government's capital plan goes beyond 2016 and commits €2.9 billion towards social housing out to 2021. The Minister for the Environment, Community and Local Government is supported in this task by his Department, the Housing Agency, local authorities and other relevant bodies. However, it is not clear what added value would be provided to this existing institutional framework by the adoption of the proposed new national mortgage and housing corporation, as provided for in this Bill.

The Housing Finance Agency, HFA, plays a key role in raising finance to enable local authorities to meet their statutory functions. In the area of housing, it advances loan finance to local authorities and the voluntary housing sector to be used by them for any purpose authorised by the housing Acts. The HFA plays a particularly important role in securing new funding sources for social housing. For example, in February 2015, the Minister for the Environment, Community and Local Government, Deputy Kelly, and the Minister of State with special responsibility for housing, Deputy Coffey, formally announced a €300 million housing investment programme, jointly backed by the HFA and the European Investment Bank. Such funding enables the HFA to offer 25-year fixed-rate funding at very competitive interest rates, currently 1.5% and 3.25%, to local authorities and approved housing bodies.

However, I note that some of the functions proposed to be assigned to new national mortgage and housing corporation in this Bill would appear to be already carried out effectively and efficiently by the HFA. The Bill, as presented, does not propose to replace the HFA and it would, therefore, give rise to the duplication of public agencies involved in the raising of finance for social housing purposes. I would have serious concerns about such a development from an efficiency and effectiveness perspective, and this provides an example of the concerns and risks that would arise in seeking to transpose a particular framework from another country directly into the existing Irish framework.

More generally, Ireland has now a well-developed legislative and regulatory framework governing the provision of financial services, including the provision of mortgage credit. It now has more intrusive legislation and practices to regulate the providers of mortgage credit and other financial services. Much of this overall financial services regulatory framework now derives from our membership of the European Union. A further enhancement of this framework in the area of consumer mortgage credit, and which has been designed to provide minimum protections to consumer mortgage borrowers across the European Union, is the mortgage credit directive. Earlier this year, the Minister for Finance made decisions on various national discretions contained in that directive, and these were subsequently published on the Department's website. Work is now at an advanced stage on the transposition of this directive into Irish law with a view to ensuring that it will come into full effect from March next year. There is now a significant corpus of national and EU legislation in the area of financial services but, unfortunately, this proposed Bill does not appear to address this issue and outline how its provisions should be read in conjunction with that legislation.

Another key function of the Canada Mortgage and Housing Corporation is in relation to mortgage loan insurance. As a public mortgage insurer, the corporation has a mandate to provide service in all parts of Canada and for a range of housing forms. Accordingly, it is the largest mortgage insurer in the Canadian market. This approach suggests that the Canadian Government stands behind the full amount of the corporation's mortgage insurance obligations and, as such, it could represent a significant contingent liability for its public finances.

It is not apparent from the proposed Bill if it is intended that the Irish national mortgage and housing corporation would have a function in the provision of mortgage loan insurance in Ireland. In Canada, we understand that such a function essentially derives to the Canadian authority from the National Housing Act, rather than the Canada Mortgage and Housing Corporation Act. It is somewhat similar to this Bill.

Ireland's Housing Acts do not contain any provision to provide mortgage loan insurance to regulated banks, either with or without a State guarantee. I assume, therefore, that it is not proposed that the relevant Irish body would have a statutory role in the provision of mortgage loan insurance. Perhaps that matter could be clarified by the Bill's proposers at a later stage in the debate.

The sustainability of any mortgage system ultimately rests to a large extent on the underwriting policies and loan criteria applied to mortgage credit applications. While the provision of mortgage insurance in itself does not remove the risk associated with the extension of mortgage credit, it would have a bearing on who would bear the losses consequent upon a mortgage default and subsequent foreclosure and repossession of the secured property. In the absence of significant oversight of the mortgage credit creation process by a mortgage insurer or regulator, there is always the risk that mortgage insurance could, over time, encourage and facilitate the adoption of more risky mortgage lending practices by creditors. In any public policy consideration of the merits or otherwise of mortgage insurance, it should be noted that the provision of mortgage insurance would not act as a direct means of protecting the mortgage borrower. Rather, it would act to protect the lender, often with the cost of the premium being passed on to the consumer.

As Senators will be aware, the issue of mortgage insurance was a matter under discussion around this time last year when the Central Bank proposals for macro-prudential measures for residential mortgage lending were the subject of a public consultation process. The role that mortgage insurance could play in a proposed new macro-prudential environment was one of the specific questions posed for consideration by the Central Bank.

As Senator Barrett will be aware, the issue of mortgage insurance was also the subject of a report by the Joint Committee on Finance, Public Expenditure and Reform last December. Following its evaluation, the Central Bank considered that the most appropriate and effective way to secure sustainable and safe mortgage lending would be achieved by the adoption of sound underwriting practices in the first instance, as opposed to utilising insurance that would seek to cover for risk after the event. The Central Bank, which has a statutory and independent mandate to safeguard financial stability, did not consider an exemption from the loan-to-value rules for insured mortgages to be an effective practical amendment at this point. While it noted that mortgage insurance schemes have had varying degrees of success in other countries, often backed by a government guarantee, as in the case of Canada, this does not remove the risk of losses on mortgage lending. Instead, it transfers those risks and potential losses to the insurer. An insurance system would, therefore, continue to leave insurers and the State where it acts as a backer to the system vulnerable in the event of widespread falls in housing prices, as occurred here during the crisis. In this regard, it should also be noted that the Canadian Government has recently taken steps to reduce the contingent risk that could arise from mortgage loan insurance and the Canadian Mortgage and Housing Corporation's mortgage securitisation programmes. Nevertheless, if it is decided that it would be appropriate to revisit the issue of mortgage insurance in Ireland at some future point, it is possible that the Canada Mortgage and Housing Corporation framework will be worth evaluating. However, even if such a scenario were to arise for consideration at a future point, the Minister for Finance has indicated that the State should not assume any ultimate backstop responsibility for such an insurance system.

I also have some other concerns about the provisions of the Bill, if adopted. The legislation, which proposes in section 21 that the corporation could borrow up to €15 billion for its statutory purposes, could be regarded as a Bill that would fall within the scope of Article 17.2 of the Constitution. If so, it would have to meet the particular constitutional requirements associated with a money Bill.

I also note that the same section in the Canadian Act has a borrowing cap of CAD $15 billion. This borrowing cap represents slightly more than 1% of the overall Canadian residential mortgage market. The Bill also proposes a €15 billion cap for the proposed equivalent Irish body. However, in Ireland, such a cap would equate to approximately 11% of outstanding residential mortgage credit. This would have significant implications for the overall Irish mortgage market and the State's balance sheet. While it is not clear if it is proposed that the Irish mortgage and housing corporation should have a much greater role in the mortgage market than the Canadian corporation, if that is the case, the matter would require significant evaluation and consideration. By way of a comparison, it should be noted that the total outstanding loan book of the Housing Finance Agency is approximately €4.1 billion and this figure includes agency loans for non-residential purposes.

A number of other drafting and legal issues would arise if the Bill were progressed further. One of these is the proposal to give the new corporation the power to exercise and perform all rights, powers, functions, etc., of the Minister for Finance under any contract entered into. This would constitute a significant delegation of a Minister's power and responsibility to a statutory body. In the corresponding Canadian Act, it is noted that it is the powers of the relevant Minister under the housing Acts or any contract entered into under those Acts that is transferred to the particular Canadian corporation. No such limitation applies in the Bill before us, and even if such a limitation were to apply, the Minister for Finance would not, as a matter of course, enter into individual contracts under the Housing Acts or otherwise have a significant range of statutory powers under the Housing Acts to delegate to this body.

Having outlined a number of reasons the Government does not support the Bill, I nevertheless fully accept the genuine merits behind the proposal and the real public service that is being demonstrated by raising such an important issue for discussion and consideration by the House. The housing and mortgage issue is one of significant importance to the Government, the Oireachtas and the public at large. However, the key step that is now required is to provide additional homes to meet existing and growing demand for housing. The Government is conscious of this requirement and public initiatives are needed to stimulate the provision of new housing. Accordingly, in budget 2016 the Minister for Finance outlined plans by the National Asset Management Agency, NAMA, to deliver a target of 20,000 residential units before the end of 2020. Approximately 90% of these units will be in the greater Dublin area and approximately 75% will be houses, mainly starter homes. NAMA will deliver these units by working with developers. This commitment will require funding from NAMA of the order of €4.5 billion.

The Government remains open to considering new initiatives and funding sources to assist in the provision of housing. Senators will be aware that a commencement order in respect of Activate Capital, which will provide a fund of €500 million and will be capable of financing the construction of more than 11,000 new homes, is also before the House today.

I again thank the Senators who proposed the Bill for the opportunity to discuss the legislation. The Government has an obligation to carefully analyse any financial legislative proposal that comes before the Oireachtas. I am aware the proposal is well-intended and will be of much benefit in the more general consideration of measures to improve the housing and mortgage markets. However, I hope the proposing Senators and others will appreciate that my contribution to this debate and the Government's reasons for opposing the Bill are equally well-intended. For the reasons I have outlined, it is regretted that the Government cannot support the Bill proceeding from Second Stage to Committee Stage. Nevertheless, we will take much from both the proposal and the debate and will consider this in the ongoing evaluation of housing and mortgage policy issues. I thank the Senators again for introducing the Bill. They will appreciate that, given the timeframe involved, we were unable to fully analyse and consider this wide-ranging Bill. I have outlined some of the Government's concerns and set out a number of issues that we can discuss during this debate and when other opportunities present.

I commend Senators Barrett, Quinn and Crown on their introduction of the Bill. Senator Barrett, in particular, did much work in drafting the legislation. The Fianna Fáil Party fully supports the legislation, although I have a number of questions which I will raise presently. The Minister of State also raised a number of concerns in his somewhat disappointing contribution setting out the Government's response. The purpose of this debate is to have the Bill pass Second Stage in order that it can be tweaked or amended on Committee Stage by the Government, other parties or Independent Members. The Minister of State referred to the legality of aspects of the proposal, and I do not dispute the points he made in that regard. However, most of us agree that the Bill is a good idea. Rather than allowing the Bill to proceed to Committee Stage, the Government has instead chosen to allow it to die on the vine.

I will first address certain aspects of the Bill on which all sides agree. Many people will know Mr. Michael Dowling, the chairman of Mortgage Brain Ireland, from his role as a radio commentator. Mr. Dowling has stated that in his 25 years in the industry, he has never seen a more dysfunctional mortgage market. We all agree that profit and competition are the only things the banks understand. A vehicle such as the corporation proposed in the Bill - in other words, another lender in the market - would assist in this regard.

Senator Quinn outlined the substantial variations in the variable mortgage interest rates that the banks are charging customers and compared them with the rates at which lenders are borrowing money. AIB, for example, which is not the worst culprit in the variable mortgage market, raised a five-year bond of €750 million for lending purposes at a rate of 0.66%. The pillar banks and the small number of other banks operating here - namely, Ulster Bank and KBC - will not act unless there is competition in the market. Senator Barrett's Bill would introduce further competition to the market.

I wish to ask about the point that Senator Barrett made. He mentioned the differences with transferring the functions of the Minister for Finance to the new agency or bank, and that they seem to be different from what the Canadian Act is doing. I am referring to the last paragraph of the Minister of State's script on page 6. It appears that what Senator Barrett is proposing would go further with this corporation in taking some of the functions from the Minister for Finance, and that it would be issuing loans on behalf of the Minister. It mentions giving the proposed corporation the power to exercise and perform all rights, powers and functions of the Minister for Finance under any contract entered into. I would be surprised if that were the case, but perhaps the Minister of State could clarify the position.

The Minister of State mentioned the Housing Finance Agency, and his colleague, the Minister of State, Deputy Coffey, has announced €300 million in new lending in that regard. The forecast for this year was about €4.2 billion in mortgage lending, but we will fall well short of that. Those figures are from Davy Stockbrokers. Up to the end of the first nine months of this year we have been at €3.2 billion for new mortgage lending. House building in Dublin is grinding to a halt now. The small amount that was being built is faltering. Fewer than 4,000 units have been built in Dublin, which is way below what is required, not to mention the rest of the country. One of the reasons for that concerns the new deposit rules that have been introduced by the Central Bank with the approval of the Government. They are too stringent, and I said so at the time. Prudence is required and a 10% deposit should be more than sufficient if one can prove ability to repay and not allow over 40% of net take-home pay as a maximum of what the mortgage payment is. We all know people in this position. I was talking to couples last night who are paying €1,400 or €1,500 per month in rent for a two-bedroom apartment, so there is no ability to save. A bank should be allowed to take into account a regular schedule of rent repayments, as was allowed under the local authority affordable housing scheme. Under that scheme, if one proved that one was renting for a certain amount on a regular basis it would effectively go towards a mortgage application.

A 15% deposit is required for mortgages up to €220,000 and it is 20% over that figure for first-time buyers, but it is unattainable for people. That is why 50% of all properties sold in Dublin city and county have been either to cash buyers or investors. The problem is that people cannot get into the market, so a whole generation is condemned to renting. Renting may be fine in some European countries and I hear people equating it with what happens in France, Spain and elsewhere, but it is different here. I am not getting into the whole Minister Kelly and Minister Noonan argument over rent certainty, which is not going to happen. It is a complicated issue but we do not have many institutional investors, as in the United States, who will sign 15 or 20-year leases with people. That is never going to happen here.

The reality is that most people want to buy. However, even if professional couples, nurses or gardaí have the requisite salaries they cannot obtain a mortgage to buy a standard house in Dublin or most other parts of the country. That is because they have to come up with a deposit of €60,000 for a €300,000 house, not to mention furniture, realtor fees and solicitor's fees. It is impossible, so the market is not working. We regularly debate other issues, including homelessness and repossessions.

As regards the Minister of State's summation on page 7, I bet my own house that NAMA will not in 1 million years reach 20,000 houses delivered by 2020. No one believes that will happen. There is not a chance of it happening. Even now, NAMA is continuing to sell apartment blocks and houses en bloc to investors for rental purposes. In my own area, 27 apartments were sold like that to an institutional investor. Therefore, people seeking to buy an apartment will have no chance of doing so. They should forget about it.

What Senator Barrett has proposed works in Canada. I would question the percentage figure for overall mortgage lending in Canada. He said it was only 1%, but is that on new mortgage lending or on the total book? It is probably the latter. I could be wrong but I cannot imagine that CAD $15 billion is 1% of the new mortgage lending in any given year. If he is equating that to 1% of the overall mortgage book, he is skewing the figures a bit.

There is a lot of good in what Senator Barrett has brought forward. I hope that the Minister for Finance will genuinely look at this because the market is not working. It will not work if we leave it to AIB and Bank of Ireland. I have a great deal of regard for the Minister, Deputy Noonan, but he is very pro-bank. He is their biggest cheerleader. I understand that profitability had to come back into the banking sector. I also understand that one needs a profitable institution for the taxpayer to get the money back from AIB, but look at what Bank of Ireland is doing. I have been talking about the restrictions on withdrawals but look at what Bank of Ireland has been doing to variable rate customers. AIB is not the worst culprit, but it is all profit for the banks and nothing for the punter. That is the problem unless the banks get real competition.

If this Bill was enacted and a corporation like this was established, we would see variable mortgage rates tumble because the banks would want a bit of that business. Competition and profit are what they understand. If they are losing profits and see a competitor who is eating their lunch, to use a famous phrase from the past, they will change. If they are allowed free rein, however, they will not do so. That is why this Bill is necessary. Senator Barrett and his staff have put an immense amount of work into producing a very comprehensive Bill. There is a lot of merit in it. I had hoped it would have been allowed through on Second Stage to show in a tangible way that the Government is willing to look at this. I know the Government is, because we all agree that the market is not working.

I commend Senator Barrett for bringing forward this legislation which has prompted our debate. I would welcome answers to the couple of questions I posed in order to obtain clarification.

I thank Senator Michael D'Arcy for giving me the first space from the Government side.

He is such a nice man.

In particular I also wish to thank the proposers of this Bill, Senator Barrett and his team, for their comprehensive work and for having raised this important matter. I fully support the Senator in his efforts to provide affordable finance for home ownership in Ireland. The current financial system is not fit for purpose. We lack competition in the market, which is evidenced by the fact that Irish mortgage holders pay significantly more than the European average on variable rate mortgages, if they can get them. I have yet to hear any credible reason that is the case.

The past three decades have seen the effective removal of mutual societies from the Irish financial landscape. I support the concept of the mutual, of which in the past there were many fine examples in Ireland established by groups such as teachers to enable access to home ownership, using the resources of the many. Three decades ago, we also saw local authorities being significant lenders to low-income households. They played a valuable role in securing home ownership for large numbers of Irish people, but are nowadays relegated to a minor role of lending to those refused by three lenders. That ensured they had an impaired loan book in a period when almost anyone could get a home loan.

Banks are now repairing their balance sheets and let us acknowledge the truth of the situation here, namely, the mandate is not one of social good, but responsibility to their shareholders. I have long suggested that we need to have a significant debate on the idea of a third banking force in Ireland. I very much welcome the issues being brought before us today.

As many Members know, I have championed and supported improvements in the rental sector for some time, but it is long overdue that we should have a serious debate on the issue of home ownership. Access to home ownership has been central to Irish society for many decades. By 1998, Ireland had one of the highest rates of home ownership in the European Union, yet we are now below the EU average. Although the term "a nation of home owners" has been ascribed to the British, it could also have been ascribed to the Irish.

Successive Irish Governments have promoted home ownership and it can be argued that for many decades they did so successfully. It is true, however, that the Irish focus on home ownership has left those renting in the cold historically. It has also left a negative attitude to renting with little protection for those who rented privately and little support for the sector.

It has had its impacts, for example, in what we are now seeing regarding renting.

There are good reasons, however, for supporting the aspiration to own one's own home, not least the fact that home ownership is perhaps the most secure form of housing. Leaving out the level of repossessions in the past number of years, we must remember that the historical rates of repossession in Ireland have been among the lowest in the world. The Irish are less poor in old age than their incomes would suggest because they do not have the same housing costs. We have to acknowledge that the Irish have a historic association with land ownership that cannot be forgotten and will not go away in spite of our recent negative associations with home ownership. In fact, there is arguably a human desire to have the widest possible control over one's environment, particularly one's home, and the Irish are not alone in this regard. In the United Kingdom, for example, after its particularly difficult housing crash in the late 1980s, a survey of those whose homes were repossessed showed that in spite of their experience, the vast majority wanted to own their own home in the future. Even in countries most associated with strong rental systems, the evidence shows that before the global financial crash many of those societies, including Sweden, were moving towards larger home ownership markets.

No one will argue that the events in the years 2002 to 2008, inclusive, were not a huge mistake. The financial system expanded available finance in an already overheated market. Professor John FitzGerald estimated that there were approximately 200,000 units of unoccupied housing in Ireland in 2006 and yet the average house was costing ten times the average industrial wage. Professor P.J. Drudy coined the phrase "out of reach". That was the reality for many people who bought homes that they simply could not afford in those years. It is often now argued that we need higher house prices and higher rents to kick-start the housing market again but if those years showed us anything, it is that high prices and high rents do not deliver a fair and equitable housing system.

It could be said that the Irish have paid the price for their obsession with home ownership and while it is widely recognised that the economy is in recovery with many back at work - unemployment is currently below 10% - we must acknowledge the significant and serious overhang in debt, in particular mortgage debt and mortgage arrears. This has, again, been highlighted by the Commission in its country specific recommendations for Ireland for 2015. It bears repeating that, as of the first quarter of 2015, there are 38,000 principal dwelling homes in mortgage arrears of more than 720 days. That is a substantial group and this raises significant concerns. The Governor of the Central Bank, Professor Patrick Honohan, confirmed to me at a recent meeting of the Joint Committee on Finance, Public Expenditure and Reform of which I am a member that approximately 50% of those home owners have already had legal proceedings initiated against them. We must not forget that we have almost 40,000 buy-to-let mortgages in arrears as well and those mortgages are held over the homes of families who are renting, leading to considerable insecurity in the rental market.

Mortgage arrears is a significant issue not only for those who, unfortunately, find themselves in that situation, but because they are a block on the recovery of the economy. As to whether that means we should not revisit home ownership, we must take a step back before we reach that conclusion. The Irish have paid the price for lax regulation and a dysfunctional housing system, but I would argue that those who have paid the most, apart from those in negative equity and those whose homes have been repossessed, are young people, particularly those between the ages of 30 and 40 who now face the possibility of never owning their own home and living in a rental sector that is unfit for purpose in terms of giving them security.

The answer is supply but, as I already said, excessive supply in the past did not lead to greater affordability - in fact, far from it. We need to ensure both supply and an affordable housing system which means ensuring that banking, as we have come to know it, is not the only game in town. We have a lot to learn from other jurisdictions.

I applaud the model Senator Barrett has put before us today, both in terms of its regulatory framework and its robustness. Most of all, I applaud the principle behind his model, which espouses using profits from the housing corporation, as set out in Schedule 4 of the Bill, to fund social housing and to enable low-income households into ownership. The model is simple. It uses State access to cheap money to fund not-for-profit lending for home ownership.

The Government will not accept this proposal today but I firmly expect that it will be seriously considered in the future when other solutions based on the existing market do not work. We must learn from the past and failing to accept that the housing market in Ireland is subject to failure in a cyclical way is just plain stupid. As Henry Ford famously said, "If you always do what you've always done, you'll always get what you've always got." In 2003, the economist Jerome Casey pointed out that the proportion of a house that was accounted for by the cost of land in the 1990s was 15% and this had risen to 50% by 2003. That is something we must deal with, but we can also look to the past at what the models of the mutuals and the local authorities brought to home ownership in Ireland. This Bill captures the best of both in bringing the State together with the wider society to ensure access to a home for all. I wish Senator Barrett well.

This is an important debate and I agree with everything that Senator Hayden said on this issue.

This is the cutting-edge issue of our time. The debate has been initiated here this evening by Senator Barrett's excellent work. I attended the briefing session this morning and some of the statistics which were brought forward would in themselves suggest that something needs to be done urgently in this area.

The issue extends to the homelessness crisis as well. It affects everyone in society, including those who own a home and those who wish to own a home. It is an issue about which the Government has received media attention over the past number of weeks, but it needs to be addressed.

I commend Senator Barrett on bringing forward this legislation which endeavours to bring together a model to provide finance to individuals who want to provide a home for themselves and their families because the banking system is not fit for purpose in this regard. Today, one of the retail banks, Bank of Ireland, does not even want to deal with customers anymore. It sees people as a nuisance. Ultimately, if it is left to deal with the current housing situation in terms of supplying liquidity to build or buy homes, it simply will not happen. The State needs to provide some form of assistance to ordinary people who are struggling, and to whom my colleague, Senator Darragh O'Brien, referred. Often these have been referred to by politicians as the garda and the nurse who cannot afford a mortgage. Unless the State intervenes and cuts the toxicity between the bank and the citizen, and creates somewhere in the middle to provide a safe haven through the corporation referred to by Senator Barrett, we will not deal with this issue.

As I stated, I attended the briefing and looked at the Canadian model, which is being outlined. The Canadian website is most informative. It provides up-to-date statistics, which are neither commercial statistics nor provided by any financial institution. They are provided by an independent corporation.

We need such a form of independence in this State also. With the best will in the world, economists are providing statistics on the marketplace but these are being provided through commercial operations. We need a corporation such as the one proposed in the Bill. The Canadian model looks at the issue of housing need and it is helping Canadians access quality affordable homes and helping to develop vibrant local communities. That is what we all are trying to do here - it is what every Member of the Oireachtas wants to achieve - but we need to provide a protocol in order for that to be achieved.

There is a housing crisis and there is a rental crisis in Dublin. People cannot afford rents. Young people, who once would have come to Dublin from my north-west area of Donegal to obtain work, are going abroad as an alternative now because they cannot afford to rent in the city. That is wrong and something must be done about it.

The response from the Government this evening is disappointing. It is extremely disappointing that the thrust of this Bill has not been accepted and that the House must divide on an excellent piece of work that provides a roadmap. The Bill may not address all of the issues but it provides a roadmap from the crossroads we have reached towards dealing with this issue.

There is the usual departmental response, that NAMA will solve all of the woes, that other issues are being dealt with, and that some of the proposal will be considered and it will be looked at somewhere down the road.

This is an issue that needs to be dealt with now. The thrust of the Bill should be accepted, and if there are to be changes, those changes can be brought in on Committee or Report Stage. Senator Barrett referred to Ronan Lyons. He has provided some excellent resources and data on this issue over recent years and some of the information he is providing is very stark. If one looks at a mortgage at the moment, the new lending rules are having an impact. There is no question about that. However, I would be a strong proponent of the new lending rules because of some of the dangerous situations people got themselves into, where it was 100% mortgages and sometimes 110% mortgages. There should be a savings mechanism built into home ownership and the Central Bank.

However, the Central Bank and the regulator are not doing enough to drive down the cost of mortgages. At the moment, variable rate mortgages are at around 4.5% for a new mortgage. If an individual purchases a house for €350,000 at the moment with a deposit of €70,000 and this person is getting a mortgage of €280,000 over a period of 25 years at a 4.5% annual interest rate, that will equate to a monthly payment somewhere in the region of €1,550. Over 25 years, the cost of that loan will be €465,000 on a home that is valued at €350,000 today and a mortgage of €280,000. That means the bank is making almost €187,000 in interest from that. No wonder they do not want their customers at the front door. No wonder they are looking at borrowing the money at less than 1% and selling it off at 4.5%.

Banks are fleecing people and the Government has not intervened. Perhaps there is a vested interest since the Department of Finance recapitalised the banks and there are shareholdings within the banks. That is why the framework proposed in this Bill is so vital. It provides a hands-off approach, taking it away from the banks, away from the Department and off the balance sheet, where everyone is a winner but the most important people who win are the people who need housing at the moment. It is terrible to read stories in newspapers of people, and we all know of them as well, in their 30s who have to continue living at home because they cannot get onto the property ladder. That is the crisis of our time. It is an extension of the homeless situation and while that continues to explode, there will be a lack of supply. There must be a tapering on house prices.

Another issue is the cost of building a house, which currently is probably more than the cost of buying a house. There is an issue that needs to be addressed in that respect and regulations are being brought in by the current Administration which expand on the cost of building. I commend Senator Barrett on all his hard work on this issue. The Minister of State, Deputy Ring, is probably a supporter of this work, but the Minister for Finance should be here if possible and the Government should accept this legislation and allow it to go forward in the spirit of where it is coming from.

Many of us who have been here since the start of the debate or the start of this Seanad know the Minister, Deputy Noonan, has always attended whenever he could. I do not think Senator Ó Domhnaill's comment was intended as criticism, but I want to put that on the record.

One of the issues Senator Barrett and I know from the banking inquiry is that one cannot go chasing the flame. If house prices are €300,000 or €400,000, every sector cannot go chasing it to try to have salaries to match that in order that people can make the payments. Property is too expensive. The criticism I have is that the two pillar banks, AIB and Bank of Ireland in particular, do not have serious competition. We saw what happened when serious competition came in, going back to the 1990s, and we are writing a report on that at the moment. We should not be afraid to look at something new. There have been announcements of the €3.8 billion social fund in respect of construction of social and affordable housing, and there was the NAMA announcement in the budget. I have looked at Senator Barrett's Bill, although I did not get the opportunity to attend his briefing, and I know everything he does tends to be done well. This is something we should look at. I am questioning whether it should be voted down. I would like to see it pass Second Stage and be considered further. It would be something positive from the House and we should consider it.

There are a couple of facts we cannot ignore. I am glad we are talking about property and housing in terms of affordability. There has been a huge conversation about homelessness and social housing, but that is a portion of the market while this is the greater portion of the market. Within the sector it is not affordable. It is not affordable for a number of reasons, and Senator Barrett has not shied away from that. Regulation is too expensive, and the construction of properties is too expensive because of those regulations. I would question why regulation has to be on every single property. There can be some properties within an estate, 15% or 20%, that meet those regulations, but not every property, because it is too expensive to build a house.

The data compiled in the briefing document from Senator Barrett exclude land price. As we know, one cannot exclude land price, but one cannot factor it into a figure because it varies, and by God does it vary in Dublin. Senator O'Brien spoke about the garda and the nurse. They are not in the space where they can purchase in Dublin. Everything flows from Dublin. Whether we like it or not, it flows from Dublin to my constituency of Wexford and as far as Donegal. Everything flows from County Dublin. There is a huge displacement. The flow from Dublin has an impact throughout the country. Local authority county development plans that only allow locals to build a house in the countryside push those displaced from Dublin from the rural areas where they used to buy into the urban areas. That has a further impact on people who want to purchase in urban areas in our towns and villages.

I am not sure there is a coherent policy in the overall context. The Minister of State knows as well as anybody that it is the same in Mayo as in Donegal and Wexford. I would welcome something like Senator Barrett's Bill. I was not aware of Ginnie Mae in the US or the mortgage company in Canada, but they are areas we should not be afraid to look at. As the Minister of State, Deputy English, said, the Central Bank has made moves, but it has also made moves on the 20% deposit and the income ratios. The income ratios are having a bigger impact on the loans than the 20% deposit. To get their house and to get on the first rung of the property ladder, families will find the money somewhere. It could come from parents, family and different sources. However, there is no finding the income ratios in respect of the mortgage amount and it cannot be added in. It is not available. It is something on which this legislation have a beneficial impact.

I find the pillar banks just about impossible. I want to touch on the NAMA prospect of 20,000 units. I do not know whether it will happen, but it can happen. The Minister of State, Deputy Ring, was in the other House when the NAMA primary schedule was brought before both Houses. Unfortunately, NAMA's primary schedule is to get the money back. That is its primary purpose. I am not being political but that was the purpose of the legislation at the time and it is still the primary purpose, whereas with the Central Bank the meat and two veg of the issue is what will happen with these 20,000 units.

I think there should be an alteration in their primary purpose. As 90% of the units are in Dublin so they will have an impact in Dublin. Will the country benefit from the flow from Dublin?

I wish to refer to NAMA. It was active in my own county and has hundreds of acres in Gorey town which was one of those towns that blossomed during the boom. I would like this legislation to pass Second Stage as it would be beneficial but I cannot give any guarantee as to what will happen beyond that point.

Hear, hear. I am pleased that the Senator has adopted a decent approach.

I do not know that the legislation will pass Second Stage but it is something that we should consider with an open mind.

Like other Senators, I thank Senator Barrett for all the hard work that he and his team have put into drafting this Bill. I also thank Senators Quinn and Crown who proposed the Bill. As has been mentioned, the Bill deals with an issue of major social importance but it is also politically and economically important. The aim of the Bill is admirable. It seeks to create a system where housing is not just reliant on the private for-profit sector. The Bill should progress to the next Stage and I ask the Government to reconsider its stance.

It is important to stress at this time that home ownership is not the most important issue, which is housing. It is a common mistake to treat housing as a speculative commodity whose purpose is to create profit for developers, speculators and investors rather than treating it as structures that serve the basic human need for shelter and sanctuary. We do not have a functioning market and pretending that we do does us and the people that we represent a disservice.

The extent of the homelessness problem in Dublin and across the State has been well documented and it is a shameful situation. On a daily basis I meet families in mortgage distress, I meet individuals who have banks forcibly selling their homes and I also know families who have lost their homes. People who have applied for emergency accommodation have told me that they have been told that they must wait to join the emergency accommodation process and it is only then that they might have a chance of getting a hotel room or staying in bed and breakfast accommodation. When people ask what they should do in the meantime, they have been told to find somewhere to live because it is assumed it is easy to find accommodation. Hundreds of thousands of people are experiencing this level of damage in this State and it is happening in my own county and in everyone's county.

We have a housing crisis. That fact is undeniable and even the dogs on the street know it is true. The crisis covers all aspects whether it is mortgages, renting and homelessness. The crisis is not unique to one area or demographic, and affects the young, the old, families, single people and those with work and those without work. Surely at this stage the penny should have dropped that the banks have not looked after people and failed society in many ways. It is apparent that talking to the banks does not work. Appealing to their humanity and moral duty does not work.

Failure to deal with mortgage arrears, bankers' pay and making the banks play ball in insolvency cases has been well documented. The Government has put banks first. Senator Darragh O'Brien mentioned that the Minister for Finance has danced to the banks' tune but in return, banks have pocketed the gains and have made new demands. This vicious cycle must end. In a stable prosperous society everyone should live in functional, comfortable, warm and affordable housing. Now it is apparent to all that the bailed out banks that operated recklessly prior to the financial collapse have acted appallingly during the mortgage crisis of the past number of years and, unfortunately, such behaviour has been facilitated. It will be forever to the shame of the Dáil and Seanad that this Oireachtas removed the legal protection that would have prevented many family homes being taken by the banks. The code of conduct has been amended so that banks can put even more pressure on home owners and now the Central Bank is able to count repossessions as solutions. We are supposed to believe that things are getting back to normal but things were never normal at any stage. The system has a huge flaw where a credit bubble inflated house prices for workers, while bankers and developers profited. When the bubble burst workers had to pay and we can all see that they are still paying today.

I recognise that this Bill is an attempt to separate the interest of profit from the interest of citizens who need houses to live in. The legislation has set out to decommodify housing which is essential to avoid housing bubbles. Ireland is in the midst of another housing bubble which has been driven by the commodification of housing and the treatment of housing as an investment. Bubbles are only one part of the market failure in housing. Another major problem is the failure of supply and demand to respond smoothly, especially at the lower end of the market. I welcome that this Bill aims to solve some of these issues.

The supply side of the housing problem that is at play affects nearly everyone in Ireland. It especially affects young people and people who are average and low-income earners. Addressing the supply side of the problem can only be successful if a property bubble does not exist, especially in the main urban centres like Dublin. Rocketing house prices and countless years without a real growth in wages have resulted in home ownership being unattainable for a lot of people in Irish society. On top of this, the paucity of social housing units has caused a catastrophe in that sector and forced people who should be given social housing into the private rental market. That situation has led to the swelling of the number of people in the private rental market thus creating a rental bubble as part of the larger property bubble which has forced people out of the private rental market and into homelessness.

The goal of any legislation or regulation should be to prevent housing bubbles and create a sustainable housing sector. Progress on mortgage regulation without progress in the building of social housing, a lack of rent controls and no improvement in the rights of tenants risks creating a trap where people, particularly young people, are unable to save due to the cost of accommodation and also cannot buy due to the loan-to-value rules.

Sinn Féin wants this important legislation to pass to the next Stage. The legislation is a measured and appropriate response. It is a major step and a necessary move in these extraordinary times. The market has failed people in the provision of homes so intervention is needed to provide a functioning and fair system.

I welcome the Minister of State, Deputy Ring, to the House. I congratulate Senators Barrett and Quinn for bringing the Bill forward. I noticed that Senator Barrett said, "Solving the problem is like eating an elephant; it must be done piece by piece." The problem is that the elephant in this sense is very big. The housing policy has some very good parts but is the housing problem so big that we cannot swallow it in one go? The Minister said when he spoke that many issues can be feasibly investigated. I do not want the housing programme off the table if issues remain to be solved. There are issues that can be feasibly investigated but we need innovative thinking to resolve them.

There are merits in having a housing provision, financing it and administering it in a corporate and businesslike manner. The corporate sector must play an active role in facilitating community development through corporate community investment. However, uncertainty remains on how much the sector should invest without taking over total responsibility and totally influencing policy decisions that were heretofore made by the Minister and at local level by local councillors in relation to local issues. Nobody could be against increased professionalisation and moving towards a more businesslike approach with a larger risk awareness. There was no risk awareness in the past and people just went for it. We are all too well aware where such an approach got us. That approach was to the fore when decisions were made, particularly in the banking sector, and as a result the property bubble got totally out of hand.

The credit union movement has made a submission proposing that it form a special purpose vehicle which would invest in a State-owned financial vehicle which would put the credit union members' €8.5 billion to a more productive use by lending it to approved housing bodies. I would like this option investigated in conjunction with many of the options recommended in this Bill. The credit union has proposed that its funds be lent to housing bodies to fund the development of social housing. The proposal is not as radical as the proposals contained in this Bill and it is obvious that the credit union movement has thought outside the box.

In terms of the background to the Bill, we all know and I am sure recognise that the current mortgage market is not working in a suitable fashion at the moment. The Government has proposed a capital plan that will cost €2.9 billion which is opportune in terms of this Bill. It is great that money is now being invested.

We all know money was not given to social and affordable housing because the money was not there. The new 2020 plan and the €2.9 billion to be invested means the scene is changing. We are growing and we can invest. Housing agencies and local authorities had their hands tied behind their backs and, on the whole, cannot be blamed for not building.

There is the question of how the investment would be made and what the role of the national housing and mortgage corporation would be. Section 18 of the Bill states that all functions vested in any person acting on behalf of the Minister shall be vested in the corporation, and this is the elephant in the room. Would any Minister be brave enough to tell someone else he or she could have the job with the Minister having no input into it? That is what the Bill is saying. It is the big elephant, and the question is whether we can chew it piece by piece. We should be open to looking at parts of the Bill and chewing it piece by piece - taking the best and saying we will not go with most of it.

Much of the Bill was drawn from the Canadian model. The Housing Corporation in England was abolished in November 2008. I do not know whether it began as the same model as that in Canada. It was split between the Homes and Communities Agency and the Tenant Services Authority. We have the Housing Finance Agency and we could take some of Senator Barrett's good work and examine modelling some of the powers into this agency and devolving some of the Government's functions into such an agency without giving over total control.

I strongly believe that housing policy should be linked to other policies, including health, education and social assistance. To be successful, a social housing policy should be an integrated component of a broader social and economic policy. The economics of it would work very well, but would it transfer to a social housing policy? It probably would. I do not have the experience to say it would not. Housing policy must be designed not only to improve low income and special needs circumstances, but also to facilitate policy development in other areas.

All of my life I have spoken about the devolution of functions to local government. This strips another function from local government. True democracy is best served by local government. This is not to say a housing corporation could not work with local government and with the Minister from the top down. Local authorities do not have the powers at present.

With regard to keeping it off-balance-sheet, I do not think the EU would look at it as a non-explicit subsidy. It would be very explicitly subsidised and be on the books. Perhaps it would not. Senator Barrett knows much more about it.

The transfer of all of the lands vested in the Minister to the corporation at the stroke of a pen would totally change local and regional development plans, as they would also involve the housing corporation. It is a huge area.

The Bill is innovative, challenging and well presented. It is an example of thinking outside the box. I congratulate Senator Barrett on it. It opens up the discussion on housing. Perhaps it is too much in one go. I agree with what the Senator said about taking it piece by piece. The Minister of State said it is feasible to examine some of it, but perhaps not all of it.

I welcome the Minister of State to the House. I commend my colleagues Senator Barrett and Senator Quinn on this sensible and well-thought-through Bill, which offers a practical and easily implementable solution to many aspects of the housing crisis. It is not a panacea for all ills and all that ails us in housing, where the issues are complex and multifaceted, but it offers a reasonable alternative to the current banking and lending offering from the same banks which brought this country to its knees.

The Bill proposes the establishment of a national mortgage and housing corporation to act as a vehicle for lending to provide social cohesion mortgages and build social housing. What is wrong with this? It is a sensible, cost-effective approach which offers us a new and innovative borrowing and lending model for home purchase. I welcome the radical thinking and reimagining of the lending model, which would use monopsony power to ensure people on moderate incomes would be able to access mortgages, as at present they cannot get a foot on the property ladder. Two professionals working in the same house cannot get a foot on the property ladder in this town. They do not have a chance in hell. I am speaking about two young professionals on serious incomes.

Six-figure salaries.

The Bill is extremely innovative. Many of its key themes are based on similar legislation models in the US and Canada, where they have been highly successful. Why not learn from other countries and replicate what has worked there? I agree with my colleague Senator O'Brien that the Bill should at least go to Committee Stage. What is wrong with bringing it to Committee Stage? It can be debated and we can argue about the various points. We can bring forward amendments and make some sense of the issues people have. By cutting it off now the Government will totally avoid the issue. If we had been a little bit more imaginative before the present Government took office we might not have found ourselves in the situation we are in today. Imagination costs us nothing.

The Bill proposes to give a national housing corporation access to low-cost funds backed by a State guarantee. This is something that is not new. The previous and present Governments have used State guarantees to help us get out of the mess and the Government is to be commended on the work it has done. I believe in giving credit where it is due. It would not require a drawdown of any funds from the Exchequer, and the Bill includes failsafe systems to protect the taxpayer from ever having to bail out the corporation. This is something we did not get with the famous Bank of Ireland, AIB and Permanent TSB. It would be music to the ears of the citizens of Ireland. We are coming into an election, and I am sure that as the Minister of State wanders around the streets of west Mayo he likes to hear music in the ears of the citizens of Ireland.

I welcome the provisions of the Bill that would allow external bodies to package mortgages and sell them to corporations. The Bill would also allow other mortgage organisations to avail of low-cost financing through indirect market access, provided they operate within the regulations of the corporation. Surely this would be a great thing for us all. The Bill is mindful of the mistakes of the past. If anybody in the room is mindful of the mistakes of the past, Senator Barrett, all credit to him, is more up to date and up to speed than most in the House as to how we ran this country into the ground.

We still have issues to address regarding the hangover from the property bubble. The hangover is in one part of the country and the bubble has already restarted in another part. In particular, I welcome the provision in the Bill to allow the corporation to outline explicit rules on what can and cannot be done with respect to loans.

I cannot get on my feet without addressing something said by my colleague Senator Keane, because I always like to refer to her. She spoke about the elephant in the room. She is dead right that there is an elephant in the room, and I cannot for the life of me understand it. It is not just the present Government; going back to the foundation of the State, Governments have steadfastly refused to take legislation from anybody but themselves, believing they are in some way enlightened and everybody else is that little bit different. This is a brilliant piece of legislation. It is complex but brilliant. I will not take up too much more of the Minister of State's time, because it has been a long day and he has worked hard.

However, his own people have stood up in the Chamber today. Forget about this side of the House. I have a difficulty about Government versus Opposition. I am in the Seanad and there is no Government or Opposition. We are all on vocational panels. People on vocational panels from all sides of the House have stated that the Bill should progress to Committee Stage. I ask the Minister of State to take a chance. He is a brave man.

He is a betting man.

He should take a chance, allow the Bill to progress to Committee Stage and tell the Minister for Finance that he took an executive decision on the Minister's behalf because, had he been here, he would have allowed it to progress as well. The Minister of State would be hailed all over Mayo. He would probably get a seat in Galway as well.

It would not go down well with the Department of Finance.

I welcome the Minister of State and compliment him on his efforts, unsuccessful as it turned out, to keep the world's best boxing coach, Mr. Billy Walsh.

What happened was a national scandal. The Minister of State is still involved in discussions on the future. Like us, he hopes that what happened will never recur.

As my colleagues did, I compliment Senator Barrett on this timely legislation. I am disappointed that the Government is not inclined to accept it. I appreciate that getting Private Members' Bills through is always difficult, but the general sentiment on all sides of the House suggests that it should be agreed on Second Stage at a minimum. As is often done, the Government could then examine it and determine whether there was any merit in its proposals.

Last Monday, Davy Stockbrokers stated the likelihood that there had been close to €3.2 billion of new mortgage loans in the first three quarters of 2015. However, it also stated that the Central Bank's recent bank lending survey had indicated that financial institutions expected to tighten credit availability in the final quarter. This is consistent with anecdotal evidence that banks have largely used up their 15% allocation of new mortgage loans that are allowed to breach the 80% loan-to-value limit set by the Central Bank. In previous years, mortgage lending in the fourth quarter was distorted upwards by the end of capital gains tax exemptions or mortgage interest reliefs. As such, lending may fall further than anticipated. If so, the final outturn for mortgage lending this year may, according to Davy Stockbrokers, "still fall short of our €4.2bn forecast". Here in black and white is an indication of what it refers to as the dysfunctional nature of the mortgage market.

There seems to be a general perception abroad that the Government has been given the two fingers whenever it has tried to rein in the banks. It is somewhat ironic that banks that relied on taxpayers' money to bail them out seem to be holding on to their power now that they are in profit. The impression given is that any attempt to broaden access to the mortgage market is being shot down in flames "because, because, because".

The banks are back in profit. AIB is discussing repaying some of the €21 billion that was given to it by the taxpayer through the Government. It asserts that it will repay all of that amount eventually and will start with €2 billion in the next six months. It has also mentioned floating some of its shares on the stock market. Bank of Ireland intends to repay more money to the Government in the coming months. As such, it is not as if the two pillar banks are in any way cash starved, yet their response to the demand for rate reductions, which is what I am alluding to, has been inadequate. Despite the fact that variable rates in Ireland are more than 2% higher than the EU average, the only bank to offer a straight cut is AIB, including its EBS and Haven Mortgages subsidiaries, whereas Bank of Ireland still has a standard variable rate of 4.5%. The issue has not been resolved. In effect, banks have openly defied the Government.

I imagine that the way banks are dealing with potential mortgage applicants and current mortgage holders partly influenced Senator Barrett's motives in tabling the Bill. The rates charged are not justified based on the banks' cost of funds. Recently, AIB announced that it had raised €750 million at a cost of 0.66% per annum. This five-year bond deal highlights the extraordinarily low cost of debt for banks on the market. It is driven down by a number of factors, including indirect financial support from the ECB. It shows the extent to which mortgage customers are being ripped off. Keep this in mind. AIB is borrowing money at 0.66%, yet it is charging 4.5% on variable rate mortgages. That is a scandal, a scam and a rip-off. If one saw a story like this on the Internet, one would get on to the local Deputy or Minister to have something done about it.

The reduced fixed rates are not adequate for customers. Bank of Ireland and KBC have left their variable rates unchanged and only offer reductions in fixed rates for a period of two to five years. This may not be suitable for a large number of customers, as they would not be able to benefit from future rate reductions or lower rates offered by new market entrants. Fixed-rate mortgage holders who want to sell their homes would have to pay a penalty for breaking the fixed terms early.

AIB and Bank of Ireland have returned to profitability and PTSB is set to do so next year. There has been an extraordinary turnaround in the banking system. These banks were bust. They helped to bring down our economy. Not only are they back in profit, but they are thumbing their noses at any attempt to bring fairness and equity to the market, in particular where mortgages are concerned. We would argue that the need for profitability is not a justification for ripping off mortgage customers. I am sure that the Minister of Sate agrees. Global ratings agency Fitch stated that, if banks reduced the cost of home loans, it would make debt more affordable for the borrowers to service, reduce stress levels on home owners and increase the chance that lenders would get their money back.

The Bill deals comprehensively with these issues. What Senator Barrett has proposed is balanced between the obvious need for banks to be profitable and the rights of customers to be treated fairly. The Central Bank would be given responsibility for monitoring the level of competition in the mortgage market and the fairness of rates charged. This would act as a strong deterrent to banks from charging excessive rates and would only necessitate Central Bank action where the evidence pointed to a clear market failure.

Reduced rate offers must be made available to current clients. Banks are engaged in a policy of making certain offers available to new customers only. For example, some current KBC customers with loan-to-value levels of less than 60% are paying 4.3% for their mortgages compared with the 3.4% that is available to new customers. For someone with a €250,000 and 25-year mortgage, this means a difference of €118 per month or more than €35,000 over the loan's lifetime. My friend and colleague, Senator Ó Domhnaill, showed me the figures. They make for extraordinary reading. At a purchase price of €350,000 with a down payment of €70,000, a mortgage of €280,000 on an annual interest rate of 4.5% over 25 years results in a monthly payment of €1,500 plus and an overall repayment of €465,343. Surely this scandal must stop.

The Minister of State is welcome. I hope that he has an open mind on this Bill. It is special and good. Senator Barrett has got to the nub of the greatest crisis facing our society, namely, enabling-----

(Interruptions).

I thank the Minister of State and the Senator, but if they would not mind, I would like the former's attention.

He asked a question and I was answering it, but Senator Healy Eames does not mind.

I do mind, actually, as I have the floor.

Senator Healy Eames, without interruption.

This Bill is about enabling the right to housing, particularly at the average price in Dublin. That would be the maximum loan amount, with people being helped into the market at no higher than that level. At the root of the Bill is a social good and fairness and we need to consider it seriously.

I was disappointed by the response of the Minister of State, Deputy English. He stated that he was unclear on what added value would be provided by the Bill. It gives the impression that the Government is not at the races on this issue.

I do not believe that is the case. Rather, I believe the Bill has not been scrutinised adequately to ascertain what it can provide. Everyone is speaking of rent certainty but housing certainty is what is required.

Every week, one or two families in Galway present to me as homeless. I attended a meeting in Galway City Council last Friday where I learned that between 12 and 20 families present as homeless every week in the city council area. These figures do not include the county council area. Approximately 40% of the population of Galway relies on the rental sector for a home, which is the highest proportion in the country. The Government's proposals to provide new homes and increase housing supply are welcome. However, 90% of the new housing is to be located in Dublin, whereas Galway city has the highest proportion of population reliant on the rental sector of any city. The Government's approach to housing provision is not correct.

The other day, I knocked on a man's door and asked him how things were and what issues were important to him. He told me he was fine because he had at last become a home owner, whereas none of his peers owned a home. I would guess he was 39 or 40 years old. For a society that has valued home ownership for so long, it is now beyond people's reach. The Minister of State will know that.

Mortgage distress has been an issue since the bust. As everyone accepts, the downturn was caused by the previous Government. We have a major crisis and Senator Barrett has providing us with a vehicle for addressing it. His Bill provides for greater competition in the market and would put it up to the banks that are disrespecting us. Many speakers noted the new requirement that withdrawals at Bank of Ireland branches must be at least €700. The other day, I was informed by a person in Oranmore that Bank of Ireland would not allow withdrawals of more than €1,300 in one day. That is the other side of the equation. The person in question wondered why Bank of Ireland was imposing controls on money that did not belong to it. These developments make one think about what may be coming down the line.

The Bill provides for a new vehicle that would be allowed to borrow at interbank rates, would carry the status of the sovereign and would benefit end users. This tool would enable people to access mortgages for properties that are at or below the average price of a home. It would help address the problem of homelessness. The reason people are becoming homeless is that they are being given notice from landlords who want to raise rents or put their properties on the market. I do not know where I will be able to find housing for people. When I contact the council I find it does not have houses to allocate. Officials from Galway City Council, at the meeting I attended last Friday, expressed concern about the health of staff in its housing section, such is the stress they are experiencing.

Developers will not build housing because of the current high levels of charges. Many of them are still angry because they believe they lost heavily. They have decided to sit this out because the average increase for a semi-detached house is working out at €25,000.

As Senator Michael D'Arcy stated, the smart move would be to accept the Bill in principle. None of us is arguing that it is the finished product. The Government should allow it to proceed to Committee Stage, at which point it can be tweaked and improved to ensure it is robust and sound. The questions that arise with regard to EU regulations can be worked out at that stage. The Government had decided instead to shoot the messenger by opposing a Bill that seeks to address the core problem in society. It fails to see the bigger picture. This is not what the Government is about.

I welcome the Minister of State, Deputy Tom Hayes, to the House. My simple political philosophy is that people are entitled to live without interference. That is the reason I believe abortion is such an evil. Between 20% and 25% of unborn babies are killed in their mothers' wombs before they get the chance to see the light of day. I also believe youngsters have a right to an education that gears them for life and gives them an opportunity in life. By and large, the State has a good record in that area.

I also believe people are entitled to employment. By and large, the State has done reasonably well in that regard also, although I am aware that the recent hiatus has caused problems in that area. People are also entitled to housing. Unfortunately, however, we have lost this as a major objective. During the decades I served on local authorities, I used to take great pride in the ingenuity and innovative measures that were introduced to assist people who were struggling to buy a house. Systems were introduced to enable such people to buy a home and we also provided for people who were not in a position to purchase. Unfortunately, this approach is no longer taken.

Some of the steps taken in the boom years added to the cost of building. These included decisions by the Department of the Environment, Community and Local Government to strengthen building regulations and the introduction of development levies. Levies may have been fine when substantial profits were being made on property but they are having counter-cyclical effects. I could never understand the logic of removing mortgage interest relief. I have argued, even in my party, that people who speculatively bought a property to rent out were allowed to claim mortgage interest relief, whereas those who bought a house to provide for their families were denied this option. I was fortunate to benefit from mortgage interest relief in the past. Denying this option to others defies logic.

Affordability is the key to the Bill. Having listened to the Minister of State, Deputy English, I wonder about the soundness of the advice he has received from his officials. People believe politics has failed but, unfortunately, the public service has failed miserably over the past 15 or 20 years. A dumbing down has fed into the political system which no longer displays the type of ingenuity and innovation it showed previously. In 2001 or 2002, I argued the case with the Minister for the Environment, Heritage and Local Government for re-introducing certificates of reasonable value, which were the order of the day in the 1970s and early 1980s. These certificates prescribed the value of homes in individual areas and anyone selling a house had to have one. The then Minister told me that the appetite for housing was such that a certificate of reasonable value would not be effective. I told him they were a simple remedy as opposed to the approach of commissioning a report from Peter Bacon who adopted an economic line that homes were economic units and the principle of supply and demand, to which I subscribe, should apply. This principle would not and did not work in housing. Certificates of reasonable value could have been linked to lending. Regulations or laws could have been introduced prohibiting the banks from lending in excess of the value provided for on the certificate of reasonable value or, where they chose to do so, the excess would not be recoverable or an actionable debt due by the bank's clients.

We had low rise mortgage schemes in the 1970s when the economy was in a much worse state than it is today. These helped many people I know, particular in local authority housing, who were able to access mortgages from the county council and buy their homes. They were given a ten-year, low rise mortgage, which provided for a graduated increase in repayments. I believe they paid 10% in the first year. It is regrettable that public officials and the political system are not making any similar proposals today.

The National Building Agency was in place at that time and built houses competitively. This Bill provides an opportunity to re-examine that type of system. The first house I bought was from the National Building Agency because it made homes available to people in certain categories of employment. I also obtained a mortgage from the agency. We could learn much from or past experience, without looking at other countries. The model provided for in the Bill looks at Canada, Denmark and, in particular, the Ginnie Mae model in the United States. The Government's failure to see merit in the proposal is indicative of the laissez-faire or lazy approach to tackling the current crisis. As a previous speaker noted, people on very good incomes, including married couples in which both partners are working and earning five or six figure salaries, are finding it difficult, if not impossible, to borrow and purchase homes in Dublin. That issue must be addressed as it cannot be allowed to continue.

The shared responsibility mortgage, SRM, is part of this Bill, and may or may not have been looked at by the officials. It works in exactly the same way as the fixed-rate mortgage with a couple of important differences. First there is a downside protection for the home owner based on his or her local price index. A number of market participants produce local house price indices and the Government can monitor and certify the production of such a house price index on which the downside protection of an SRM can be contracted. SRMs have more to do with insuring the value of the house rather than its affordability and help avoid negative equity. I will give an example; a house worth €100,000 is purchased for €80,000 over a 30-year mortgage with a loan of 5%. The home owner would put down the current requirement of 20% - a percentage I believe should be looked at as it is creating a problem for many people - and the annual mortgage would amount to €5,204. So if that index was to fall by 10% it would mean that the repayment for that year would fall by 10% of the €5,204, which is a reduction of €520 in the year. This could be made up at the end by either paying it back through the capital gain one might make on selling the house, or by extending the mortgage term. These are the types of innovative initiatives we need if we are to really tackle this issue.

I appeal to the Minister, to the other side of the House and in particular to my Seanad colleague from Wexford, that if this is rejected by the House it can only lead to the conclusion that the Government is simply not interested in housing or that it is just taking advice from its officials, which is wrong. Allowing this Bill to go to Committee Stage is a litmus test. Even it the Bill is not accepted on Committee Stage, by working through it on that Stage good suggestions and ideas will come from that. We need debate on the area of housing. It is a fundamental flaw and a legacy of this era will be that we failed to address the real issues affecting people with regard to the fundamental issue of housing. We have been seen to take the side of bankers and banks. The Personal Insolvency (Amendment) Bill 2015 was totally deficient-----

The Senator is over his time.

-----by a Minister who was concentrating on something else other than what he should have been concentrating on, and he was told that in this House. It will have to be addressed. By allowing this Bill to be debated further there will hopefully be some suggestions which come forward which would be taken on board.

I will conclude. I respect the Minister of State, but I think the line Ministers from the Department of Finance or from the Department of the Environment, Community and Local Government should be in the House if only to show an interest in the topic being debated.

I welcome Minister of State, Deputy Tom Hayes. I thank all the Senators who spoke. It is a pity that the Minister for Finance, Deputy Noonan, was detained elsewhere because he would have found much of interest but I am sure the Ministers of State, Deputies Ring and English, will inform him of what happened here today.

All the speakers on every side of the House spoke in favour of what we are trying to do in this Bill. I come from the economics department in Trinity College Dublin which has provided the last two governors of the Central Bank, Governor Honohan and Governor Lane, both decisions which I welcomed. The inspiration for this Bill comes from Princeton and Harvard. I recall Anthony Downs of the Brookings Institution saying that the problem was too much capital in housing. If one puts too much capital into an item with such an inelastic supply then the result would be the appalling kind of price performance we have had from the sector.

As the Minister of State, Deputy Hayes, has responsibility for agriculture he will understand the UK housing charity Shelter when it says that if a four pint carton of milk was indexed to house prices it would cost £10.48. Using the same index link, a chicken would cost £51.00. Ireland has a sector which is seriously dysfunctional. We are trying to bring to the House measures from Harvard and Princeton, from the two learned gentlemen who are the successive Governors of the Central Bank, and from people in the Brookings Institution in order to tackle the problem.

Senator Michael D'Arcy and I know from listening to over 100 hours of evidence at the banking inquiry, that we still have a seriously dysfunctional banking system. I disagree with the following sentence in the Minister of State's reply, "More generally, Ireland has now a well-developed legislative and regulatory framework governing the provision of financial services, including the provision of mortgage credit." The banking inquiry has not yet finalised its summary, conclusions and measures to prevent a recurrence of the crisis but what I saw at the banking inquiry was about 50 people destroying a banking system, destroying a country and putting it into a rescue situation. Those people were in the construction sector. I asked Mr. Michael O'Flynn, one of the construction sector witnesses, how he managed to get houses from two and a half times income up to 12 times income. He told the inquiry that yes they had priced themselves out of the market. I listened to his follow up and if he had any proposals on what to do about it. This Bill is proposing to leverage to mortgage aggregation the ability of the Government to borrow at wholesale rates and to give this, as you will see in section 7 of the Bill, to people buying below average priced houses. That is what we are trying to do in the Bill. I appreciate that the Minister has said that it is a very complex Bill and that there was only a short time available for consideration. I disagree that we have this sorted out as we have a lot to say yet. The Minister of State will be aware of comments made by Mr. Frank Browne in his recent witness statement to the banking inquiry.

There was some praise for the Bill in the Minister of State's speech when he said, "Nevertheless, we can take much from both the proposal and the debate and will consider in the ongoing evaluation of housing and mortgage policy issues." What is lacking from the Minister of State's response is any measure to reform the finance of housing. The Minister of State is sticking with the same banks that Senator D'Arcy and I, along with our colleagues, have been trying to unravel. There is also nothing in the Minister of State's response to deal with how house prices went from two and half times income to 12 times income. If all the other sectors had performed like that, I do not know what condition the economy would have been in. There is no pressure being put on the construction sector which has a huge amount to answer for, as we found. That was what I was trying to deal with in the Bill.

The Bill annoyed some civil servants. Maybe they should look at what has happened to this country while they have been asleep or fiddling during the crucial period leading into the financial crisis; people cannot afford houses. That is why we need to have open minds over there to look at what other people are doing and not to come into the House and be so dismissive. I do not claim wisdom for everything but a lot of effort by my research team and by economists went into this Bill and I am disappointed that the Minister for Finance, Deputy Noonan, is allowing people to come into the House to say that the Bill should be thrown out. I want to keep the debate going and it would be very silly to have it thrown out by people who will be whipped up from wherever they are attending party meetings, when every side of the House has spoken in favour of a measure.

We have to address this issue or we are all going to end up working for financial institutions. One of the figures quoted by Professor Ronan Lyons is that 90% of us will need a subsidy to afford a two-bedroom apartment in Dublin. I know the Government has done great work putting the national finances in order but these are the two sectors that caused the crisis and we have to address it. The ability is there. Just because somebody else thought of it first does not matter, I do not mind and do not have a personal sense of pride like that. However, I would be worried that officials in the Department of Finance have closed minds to anything that they did not think up themselves given that as we found at the inquiry, and it is in the Wright report, 93% of those officials were not qualified at master's level or above in economics. The Bill comes from the same people that gave us two Governors of the Central Bank and from economists at Harvard and Princeton and should not be so casually dismissed as has happened.

I thank Senator Darragh O'Brien for his remarks and Senator Quinn for being my seconder. There ought to be the attractions of lower interest rates. They are available. Senator Mooney gave figures on how our present system translates into massive excess payments for housing. We want to channel our measures into average and below-average house prices and not give money to about 50 people to go off and buy Aristotle Onassis's yacht and so on, and all the things that happened.

The current mortgage system is not working. I have no problem if the Minister takes the best from this Bill and leaves the rest. Maybe the Housing Finance Agency can do more. We have heard Senator Craughwell say that we should not rely on those who brought us to this state. We need low cost funds. Senator Craughwell said to the Minister of State, Deputy Ring, that this Bill, "would be music to the ears of the citizens of Ireland". We have a hangover from this.

I welcome Senator Reilly's support. It is probable that not more than 50 people borrowed this country into bankruptcy. The Bill is a measure to prevent them ever doing that again. I welcome also the support for the Bill from Senators D'Arcy and Hayden, two important Members on the Government benches in this House. They should not be whipped under any threats into voting the Bill down.

They are both valuable Members of the Oireachtas and have much to contribute.

We ought to look at the income ratios and all that has been going wrong in this sector. Senator Ó Domhnaill spoke about a garda and a nurse not being able to afford a house. We also need to examine the independence of the proposed corporation.

We like home ownership in this country. Sweden is moving towards it. Let us keep the measure alive. It is designed with the best will in the world towards every Member of this House. I would like to report progress, if that is possible.

Debate adjourned.

When is it proposed to sit again?

At 10.30 a.m. tomorrow.

The Seanad adjourned at 7 p.m. until 10.30 a.m. on Thursday, 5 November 2015.