Radical Thinking needed on delivering homes for all

Posted on April 18, 2007 at 01:21 AM

It's hard to argue against a housing sector that is characterised as a tradable commodity by everybody from the ordinary worker, he who takes a punt on a second home to pay the pension, or the institutional investor who seeks a return on a managed fund.

However, it is not hard to argue against the fact that there are literally thousands of people throughout this island who will never own their own home because the housing market has become too restrictive.

The article proposes a solution to the housing crisis for those people within our society that have not managed to get a foothold in the market.

Housing has become the second most talked about topic of conversation in this country after the weather and it's not hard to see why. Everybody has been affected by its grip. It has taken a hold on our collective consciousness and it's not likely to end any time soon.

If you are lucky enough to own your own home then read no further. This article espouses the need for a radical change in policy by Government to achieve a higher degree of home ownership, particularly amongst low-income earners.

It is my firm view that Local Authority Building schemes have been seriously deficient in delivering on demand for those on the social housing list and also for those on the affordable housing list.

The Social Housing list can be tackled through simple government investment in Local Authority Housing Programmes.

On the other hand, the Affordable Housing Programme, which allows people to purchase homes through a mortgage provider sponsored by the Local Authority, is out of sync and needs to be overhauled.

The current Affordable Housing Scheme is administered through Part V of the Planning and Development Act 2000 and provides for a situation whereby an applicant is given a discount on the market price on the basis that they cannot afford to buy a home on the open market.

According to Cork County Council, to scheme allows for a house to be purchased by way of a mortgage provided by the local authority of up to 97% of the sale price of the house. The maximum loan is €185,000.

Therein lies the nub. For any couple starting off in this day and age, a loan of €185,000 wouldn't buy an outhouse on the side of a mountain.

The Council will say that a person can buy through the shared ownership scheme. This allows a person to buy a minimum of 40% of the house and allows them to pay a rental subsidy on the balance to the Council on the basis that they will increase their stake.

This is fine in theory. However, a low income earner will end up paying a mortgage and a rental subsidy. There is a double whammy.

This system would work well if the Council was the sole provider of houses. The evidence suggests however that more and more local authorities are dependent on Developers for the provision of Affordable Houses through the Part V provision of the Act.

The reality is that if a young couple is only eligible for a loan up to €185,000, then, to borrow John Hume's phrase, "they haven't got a snowballs chance in hell" of getting a house from the Council through this scheme. No developer is giving houses to Local Authorities for €185,000 in the current climate.

The income thresholds for a single earner must be under €40,000 in the preceding tax year. For two earners, the formula is based on a premise that it is 2.5 times the principal earners salary. These are realistic income thresholds. But they are not yielding results.

The solution to this problem rests with getting more people on the housing ladder. If Part 5 of the Planning Act was working in the way it should, it would have delivered between 30 and 40,000 homes by now. But because of the myriad of loopholes that are there at the moment that let developers off the hook, it has only delivered about 3,000.

My argument is based on a premise that if the threshold is based on a maximum upper limit of 185,000 euro then no person in this day and age is going to get on the housing ladder for that amount and the scheme needs to be radically overhauled to reflect current housing trends.

Our proposal, called the "Begin to Buy" Scheme, is aimed primarily at people who, in present conditions, would have little hope of getting a mortgage and buying a home of their own.

The scheme is based on a premise that a couple starting out, who only get mortgage approval for, say, €150,000 could take that mortgage approval back to the Local Authority and go to the market and purchase the house at market value, with the Local Authority purchasing the balance. The Local Authority stake is funded through the National Treasury Management Agency. The applicant would pay the mortgage in the normal way and would increase their stake over time.

The net result would ensure that there isn't an overdependence on local authorities to deliver more affordable houses in particular areas. The scheme would ensure that applicants could purchase within their communities and there would be greater choice.

Under the new National Development Plan, the Government has committed itself to delivering 17000 units between 2007- 2009 and spending €4 billion. This "Begin-to-buy" scheme would cost the exchequer €100 million per annum and would be self-financing over time as applicants would increase their stake in the house.

We need to think more radically and laterally about how we deliver housing for all. This could represent a first step.

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