Wednesday, 20 June 2018

Ceisteanna (25, 26)

Eoin Ó Broin

Ceist:

25. Deputy Eoin Ó Broin asked the Minister for Housing, Planning and Local Government the status of the delivery of cost rental and affordable purchase housing schemes. [26825/18]

Amharc ar fhreagra

Darragh O'Brien

Ceist:

26. Deputy Darragh O'Brien asked the Minister for Housing, Planning and Local Government when the affordable purchase scheme will fully commence; the number of affordable purchase scheme units to be provided in 2018; and if he will make a statement on the matter. [26724/18]

Amharc ar fhreagra

Oral answers (16 contributions) (Ceist ar Housing)

This question relates to affordable housing. At budget 2018 last October, we were told that a cost rental pilot project would be delivered this year and €25 million would be made available for Ó Cualann-type affordable home schemes delivered through local authorities. We were also told that €200 million for the local infrastructure housing activation fund, LIHAF, would deliver genuinely affordable homes throughout the State. In addition, the Government made a significant announcement of €750 million funding for Home Building Finance Ireland. Will the Minister update the House on the progress of these schemes and indicate if any housing units will be delivered for affordable rent or sale through the schemes in this calendar year?

I propose to take Questions Nos. 25 and 26 together.

Under the Rebuilding Ireland Action Plan for Housing and Homelessness, the Government's commitment to an ambitious delivery agenda for social housing is clear and substantial progress continues to be made to expand the social housing programme significantly from a virtual standstill position a number of years ago.

As Minister, I have been clear that we also need to address issues of housing affordability, recognising the pressures that exist for low to middle-income households, particularly in Dublin and certain other of our main urban centres. To underpin progress in this area, I have commenced the relevant provisions of the Housing (Miscellaneous Provisions) Act 2009, the effect of which is to place the new scheme for affordable purchase on a statutory footing.  From engagements with the local authorities in Dublin, the wider greater Dublin area and Cork and Galway cities, their initial estimates suggest they have lands with the potential to deliver some 4,000 new affordable homes.  My Department is continuing to work with the key local authorities and the Housing Agency to identify sites which would see the level of ambition increase to at least 10,000 new affordable homes from local authority owned land. That analysis is progressing well.  

I am determined that cost rental housing will become a major part of our rental landscape in the future. It is clear that there is a gap between social housing and the rental market that needs to be filled, making a sustainable impact on housing affordability, national competitiveness, and the attractiveness of our main urban centres as places to live and work.

The Housing Agency, Dún Laoghaire-Rathdown County Council and a number of approved housing bodies, AHBs, have been working to get our first cost rental pilot, at Enniskerry Road, ready for tenders to issue shortly. In parallel, Dublin City Council, my Department and the National Development Finance Agency are undertaking detailed modelling and financial appraisal on a major site, at St. Michael’s Estate in Inchicore, to assess its suitability for a significant cost rental development. The work of that multidisciplinary team is progressing well and should be concluded shortly.   

To support local authorities in getting their sites ready for affordable housing, I have decided to provide additional funding for enabling infrastructure via the serviced sites fund.  Given that housing related infrastructure will now be able to avail of funding under the €2 billion urban regeneration and development fund, I am redirecting the €50 million funding for phase 2 of the local infrastructure housing activation fund to the serviced sites fund, increasing the scale of the fund from the previously announced €25 million to €75 million.  When local authority co-funding is included, an overall minimum investment of €100 million will be provided to those sites that require infrastructural investment in order for them to be brought into use for affordable housing.  To drive early activity, I will invite applications for funding under the serviced sites fund by the end of next week.

The short answer to my question is that not a single unit will be delivered this year for affordable rental or affordable purchase under any Government scheme. While I welcome the commitment with regard to St. Michael's estate, the cost rental pilot has been in the pipeline since Deputy Alan Kelly was Minister. Not only has the pilot in Dún Laoghaire-Rathdown not been delivered, but we hear the homes will not be made available at an affordable rate. The Minister referred to funding of €25 million. Surely it would have been straightforward to put the scheme in place at the start of this year. The scheme has not been established and there have been no discussions about it with the joint committee.

On the €750 million to be provided through Home Building Finance Ireland, the relevant legislation was only published this week and will take some time to get through the House. As such, the funding will not become available until next year at the earliest. Probably worst of all is the position in respect of the local infrastructure housing activation fund, for which the Minister has given us figures. The average price of a LIHAF house on private land in Dublin is €318,000 based on 2017 prices. Given that these houses will not be ready for two years, we may factor in house price inflation of between 10% and 20%. Similar, albeit slightly lower, figures apply in the rest of the country and there are no guarantees that housing built on public land will be affordable.

The Minister keeps telling us about future announcements and projects but we do not have any clear sense of homes being delivered at prices of between €170,000 and €260,000, which is the level of genuine affordability.

There is no commitment in regard to delivery this year. Will the Minister commit to the delivery of genuinely affordable rental or purchase homes in 2019?

I thank the Deputy for his question. It is important to note that the problems we are facing in the housing sector were 15 years in the making and they cannot be fixed in two years. However, we are seeing some interesting developments in the housing market. For example, house prices were still falling in 2012 and while they are dramatically increasing again, they are still 21% below the peak of 2007. There are still a number of people in very difficult circumstances in terms of negative equity. In the first four months of this year, there has been a slowdown in price increases. If this trend continues this year, there will be single digit price growth this year, which is a welcome development.

We started with social housing because we have to look after our most vulnerable people. Rebuilding Ireland sets out the ambitious plan of the provision of 47,000 - now 50,000 - homes using the €6 billion funding made available. At the same time, we recommenced building in the private sector. Last year, 14,500 homes were built, which is very welcome. Many commentators and bodies had underestimated the level of building. This year, the stock of social housing will increase by approximately 7,900 new homes. I have signed the commencement order which means that in the next four weeks, working with the local authorities and the joint Oireachtas committee, work can commence on the regulations in terms of access to the affordable schemes and on designation of the lands to be used for these schemes. In light of the additional €50 million, we now have a much bigger fund for affordable purchase homes. I hope to see affordable purchase homes delivered this year. Provision of 4,000 homes is our minimum ambition from local authority land only.

If the Minister brings proposals to the committee we will work constructively with him on them. We have been told, for example, that 550 affordable homes would be delivered in the Poolbeg strategic development zone. The Department of Housing, Planning and Local Government was helpful in assisting Dublin City Council and councillors in the community in getting that target. However, I am told by the residents that there is no clarity as to whether these houses will be genuinely affordable. In other words, will they be priced at somewhere between €170,000 and €260,000? The concern is that the benchmark in Dublin of €320,000 will become the Government's definition of affordability, which even with the Rebuilding Ireland home loan scheme is not going to be accessible because, as we know from the figures we have today, people looking to buy homes through that loan scheme cannot get sufficient loans. Does the Government believe affordable rental or purchase homes will be delivered next year? If the answer is "No", the Minister needs to say that and tell us they will be delivered the following year.

A sum of €25 million has been made available for Ó Cualann-type developments. We know the specifics of the Ó Cualann scheme. We needed only to issue a direction to the local authorities in Dublin on the basis of existing legislation and that money could have been used this year. The Minister is telling us now that he intends to engage with us on the matter and that, perhaps, something will happen before the end of the year. This means the money announced for expenditure this year will not be spent until next year. When will affordable rental and purchase homes be delivered and at what price will those two forms of housing be delivered?

This is about building Ó Cualann-type housing at scale. To do this, I have increased the amount of money available from €25 million to €75 million, plus €25 million from the local authorities. Some of this money will be drawn down this year to meet the cost of site preparation works. I hope to see some affordable purchase homes accessed this year but we will certainly have affordable purchase scheme homes accessed next year.

On affordability and the Poolbeg development, taking into account the Rebuilding Ireland home loan scheme, the help-to-buy scheme and the affordable home purchase scheme, houses will be affordable. We will provide a maximum of €40,000 per home on a site and the local authority will then work out the land cost in that regard and, if determined to be €30,000, this would equate to a knock-down on the price of €70,000 which, depending on the area, would be quite significant. It could be more than that. Each local authority will have to do a study and decide what needs to be done. As a result of the knock-down price, the local authority will take an equity stake in the house with the person buying it, which will be resolved over a number of years but not in the first five years. As a result of this, we can then maintain a rolling fund to ensure we are always building affordable purchase homes to ensure that in the next economic crisis we will not have to shut down any provisions around affordability and so on. This is about Ó Cualann at scale. Cost rental is not as simple as some people try to make out. What one is trying to build into a cost rental scheme is a guarantee that the management costs, life cycle costs and build and maintenance costs will not be such that the type of cost inflation linked to rent increases will not have to be changed at any time in a future cycle.

My question is about the commencement of an affordable home purchase scheme, to which the Minister responded, in part, in his response to Deputy Ó Broin. The Minister also mentioned that we cannot fix this problem in two years. However, this problem has been around for almost eight years. My concern is around when an affordable home purchase scheme will commence. The Minister indicated he had signed the commencement order for the affordable scheme, which I welcome. When will the regulations be introduced? On 17 May, I brought a motion to the House dealing with the commencement of an affordable housing scheme and it was voted down. We need this scheme urgently. The additional €50 million is welcome but the €25 million already in place equates to approximately 400 units. If the target is 400 affordable purchase units, the €25 million equates to about €16,000 per site. I am not sure if that would actually make a dent in affordability. How far down the line is the Minister with regard to the regulations for an affordable home scheme and setting the parameters for the scheme in terms of income thresholds and who will be eligible to apply?

This crisis is not eight years in the making. House prices were still falling in 2012. The affordability scheme was stood down because there was no affordability issue in the country at that time. We exited the bailout in 2014. In 2016, the Fine Gael-Labour Party Government put in place Rebuilding Ireland, a dedicated Ministry and, for the first time, ring-fenced funding to restore the housing sector but in such a way that we would not repeat the mistakes of the past. As part of this process, local authorities were tasked with building social housing rather than outsourcing same to the private sector and we also removed some of the obstacles to private sector building. We are now addressing the issue of affordability. I refer the Deputy to the example I gave to Deputy Ó Broin. If a €40,000 subvention is provided by the Department to a local authority for site works and the local authority then estimates the land value at €30,000 or €40,000, this means €80,000 would come off the price of a house. If the market price for that house is €320,000 or €350,000, there would be a significant drop in the price of that house and it would be affordable.

On eligibility, similar to the undertakings in the Rebuilding Ireland home loan, an individual earning a gross income of €50,000 or a couple earning a gross income of €75,000 will be eligible for the scheme. Each local authority will have to run a lottery scheme in its area as each scheme comes online.

On the regulations, next week I will put out a call to local authorities for the sites on which they want to utilise this fund. They have already identified the sites and there will now be a formal process of them identifying to me the ten key areas where affordability pressure is greatest. A great deal of work has been done on the regulations as well. The Act prescribes what can and cannot be done. I will be writing to the joint committee this week seeking its input on some of the parameters. We can do this in the next four weeks. The local authorities know this money is available and they are doing the necessary work around their sites.

I welcome the clarity. I am glad the Minister is at last moving to develop regulations to establish the scheme. However, I am still unclear about the site selection process and the income thresholds. The Minister stated the income thresholds will be similar to those that apply under the Rebuilding Ireland home loan scheme. Couples in Dublin, Galway and Cork earning €70,000 or €80,000 per annum cannot purchase houses now. They are the people who are paying €1,600, €1,800 and 2,000 per month in rent and thus unable to save for a deposit. There must be flexibility in the thresholds. There are some people in this House who believe that a couple earning €80,000 or €90,000 per annum are loaded but they are not. These are the couples who are paying rent, childcare costs and so on. We should all work together to establish a scheme that works and to do so quickly.

On the Minister's point that we had to do social housing first and he is now moving to affordable housing, we have not done social housing yet. In terms of expectation, will this scheme be up and running before the summer and is the Minister open to looking at regional affordability? As wage levels differ across the country we will need different thresholds in terms of affordability. The greater Dublin area may have a different regional affordability than the midlands or Ulster. We need to have flexibility to ensure no cohort of people is locked out of home ownership which, at 69%, is now the lowest it has been in generations. I do not want a generation of people condemned to a rip-off rental market.

Home ownership rates have decreased for a variety of reasons. For example, people are staying longer in education, households are forming later in life, smaller households are forming and people are more mobile in where they work and how they live. We need to ensure that owning a home continues to be an aspiration for many people and that we can provide for it.

In the first quarter of the year we saw a 35% increase in house sales on the figure for last year. There is activity in the market. Housing has to be affordable in order that people can access the market. The average house sale price in Dublin in the past 12 months was €360,000. The median price, when irregular sales which can be very expensive or very cheap are excluded, was €330,000. That speaks to an affordability problem. A couple, both of whom are earning over €50,000, will be able to afford these prices, but it will be difficult for those on less money. When one takes the 10% deposit requirement, the help-to-buy scheme and the Rebuilding Ireland home loan together, not even all three factored in together would enable someone to reach those prices. In Galway the average house sale price is €169,000. Therefore, there is not as much of an affordability issue.

It is a regional issue.

We are asking local authorities, apart from the ten areas in which we know there is a difficulty, to prove the case for having an affordability scheme. Each local authority will have to do this under the scheme. I think I have answered all of the Deputy's questions.

We will revert to Question No. 24.

I did not get to reply.

The Deputy asked a second supplementary question.

Time flies when one is having fun.