Wednesday, 3 March 1999
Dáil Éireann Debate
10. Mr. Hayes asked the Minister for the Environment and Local Government the policy of his Department regarding the escalation in house prices; the further measures, if any, he will introduce to deal with this problem; and if he will make a statement on the matter. [6350/99]
Mr. Molloy: Provisional house price statistics for the December 1998 quarter, which will be published shortly, suggest a moderation in the rate of house price increases and this is supported by views from market sources and commentators.
The measures introduced in the Government's Action on House Prices addressed factors that  were causing overheating or distortions in the market and were designed to restore a better balance between supply and demand. Measures to assist first-time buyers formed a key element of the package, including the removal of fiscal incentives to investors, who had been pricing low-income buyers out of the housing market; an increase in the income limits for the local authority shared ownership scheme; significant reductions in stamp duty rates, particularly at lower price levels; and measures to boost housing supply, through the serviced land initiative and increased residential density. There is broad consensus that Government actions have played a key role in achieving price slowdown and will continue to have beneficial effects in stabilising house prices.
Increasing the supply of housing, particularly affordable housing, remains the key element of the Government's housing policy. The measures in Action on House Prices are designed to secure a continuation of the growth in housing output and alleviate the bottlenecks or constraints on housing supply. Housing output reached a new record in 1998 at 42,349 units, and we are actually building new houses at twice the level of 1993. Leading indicators, such as the volume of planning applications and HomeBond registrations, suggest continuation of the trend of increased housing output.
The new affordable housing scheme I announced yesterday is designed to help lower income households to purchase their own houses. It involves the provision by local authorities of additional new houses specifically for such low income purchasers, up to £20,000 in the case of single income households. Low interest mortgages and, in the case of households with income up to £16,000, a subsidy towards repayments will be provided under the scheme.
The 1999 water and sewerage investment programme, launched recently, is again at a record level. Over £275 million will be spent on water and sewerage infrastructural development this year and the potential for this investment to bring more residential land into service will be maximised. Furthermore, the serviced land initiative should yield in the region of 100,000 additional housing sites over this year and next, through the provision of £44 million of Exchequer funding for water, sewerage and roads infrastructure specifically to open up extra land for housing.
Increased residential density is a further key element in the Government's strategy to increase housing supply. Planning authorities have been advised to promote higher densities at appropriate locations and planning guidelines on residential density were published on 2 March for public consultation.
Ongoing implementation of the Government's strategy and monitoring of its effects is a priority for my Department to ensure that all of the measures produce beneficial results as soon as possible. The Government is keeping policy in this area under close review in the light of the  effects of the measures taken and developments in the housing market, with particular emphasis on ensuring continued increase in housing supply.
Mr. Hayes: I thank the Minister for that Second Stage speech. Would he recognise that since the publication of the Bacon report house prices have continued to increase? What is the current rate of house price inflation? Would he recognise that there has been a considerable increase in the price of a typical starter home from the middle of last year to the beginning of this year?
With regard to his announcement yesterday, when does he intend to publish guidelines to local authorities on the implementation of this scheme? Will they be similar to the guidelines launched some 14 weeks after the Housing (Traveller Accommodation) Act, 1998?
Does he recognise that Dublin local authorities are bemused by this local authority scheme which he has asked them to implement? Does he recognise that there is a diminishing land bank available in the city and surrounding area and many of the houses will be built at the expense of the social housing programme throughout the local authority areas in Dublin?
Mr. Molloy: House price statistics for the December quarter 1998, which I stated will be published shortly, show that, compared with the December quarter 1997, new house prices increased by 26 per cent in Dublin and 23 per cent nationally while secondhand prices increased by 27 per cent in Dublin and 29 per cent nationally in the same period.
The rate of increase for new houses in Dublin reduced significantly in the September quarter. While the rate of increase in new house prices was slightly higher in the December quarter, explained by the fact that one institution includes figures for an expensive apartment complex, the increase for the second half of 1998 was 6.9 per cent compared with an increase of 17.6 per cent in the first half of the year. This trend is also confirmed by data published recently by Irish Permanent, which indicated that price growth in the second half of 1998 was significantly lower than in the first half.
In reply to the second part of the Deputy's question, the local authority house building programme will be proceeded with and the affordable housing scheme announced yesterday will provide additional houses—
Mr. Hayes: Will the Minister recognise that house prices are getting out of the reach of the first-time buyer, and that the Bacon report and the Government's implementation of Action on House Prices have done precious little to resolve the crisis in the housing market?
Will the Minister confirm that he has received a proposal from the Bank of Ireland to allow shared ownership, a concept which it has mooted for some time? What is his position on this proposal? Will he be announcing further measures in light of the proposal received from the Bank of Ireland or, indeed, other organisations? He did not answer the question on the guidelines.
It was deemed that the Bank of Ireland proposal would not necessarily provide additional housing but that it would provide additional funding for a system where money was not a problem. The problem is that more people are looking for houses than there are houses being provided. The criterion must be whether this will achieve an increase in the level of housing output rather than add new purchasers to the list of existing purchasers seeking a limited number of houses. Any action that will inflate the demand side will only make the price situation worse.
Mr. Gilmore: The Minister expressed some satisfaction that the December figures are showing what he calls moderation in house price increases. I took note of the December 1998 figures as against those for December 1997 – 26 per cent, 23 per cent, 27 per cent and 29 per cent respectively for the different categories. Is the Minister seriously telling the House that he is satisfied with house price rises which are ten times the rate of inflation? Is it his view, as is the view of many commentators, that notwithstanding the parts of the Bacon report selectively implemented by the Government, investors are now back in the market due to low interest rates and so on? Will the Minister answer the part of the question I asked earlier to which he did not reply? Will a couple earning £15,000 each qualify for the initiative he announced yesterday?
Mr. Molloy: The income limit is £20,000 and the method of assessing the income of a couple earning two incomes is the same as that applied in the shared ownership scheme which was operated by the Deputy's party when in Government.
Mr. Molloy: It is quite simple. Perhaps the Deputy does not understand how the shared ownership scheme operates, but £20,000 and below is the income level of those we are anxious to help under the scheme.
Mr. Molloy: The immediate priority in the action on house prices taken by the Government was to curb overheating in the housing market and the measures taken are having a positive effect. Investors are no longer squeezing first-time buyers out of the market. More secondhand houses are coming on the market following significant reductions in stamp duty rates and a calming of price expectations.
Mr. Molloy: The effects of the measures we took will be reinforced by measures to increase the supply of housing. There is widespread consensus that Government actions have played a key role in achieving a price slow-down and that this represents only a portion of their full effects. The IAVA annual property survey for 1998 confirms outside opinion on this.
 Progress to date is particularly encouraging in view of continued strong economic growth and reduced interest rates. An increased supply of housing is the only way to meet the unprecedented increase in demand, bringing the market into balance and stabilising house prices. The main emphasis in the period ahead must be on measures to continue the trend of increased housing output and alleviate bottlenecks or constraints on supply. The Government is delivering on action to achieve this.
Mr. Molloy: The service land initiative should yield approximately 100,000 additional housing sites by the end of 2000. Local authorities have been asked to expedite delivery of the schemes and procedures have been streamlined to minimise delays. The main water and sewerage investment programme is at its highest level ever – almost £185 million in 1998 and a record £275 million in 1999. Planning authorities were advised last year to promote higher residential densities at appropriate locations. Draft planning guidelines on housing density were published yesterday for full public consultation.
The positive effects of the Government's action to increase supply are emerging: growth in housing output to a new record level of 42,349; planning permissions for housing in 1998 are at the highest ever level – up by over one-third in 1997; Homebond registrations were up 7.3 per cent in 1998 and 12.7 per cent in January of this year and indicate increased output for this year—
Mr. Molloy: —additional lands have been zoned or are proposed to be zoned for housing in recent development plans in the Dublin area; higher densities in recent development plans nationwide; latest estimates suggest that total supply of housing land serviced and unserviced in the Dublin area would yield approximately 90,000 housing units by the year 2003, that is 10,000 more than the Bacon estimate; a reduction in capital gains tax from 40 per cent to 20 per cent on the sale of land for housing appears to have encouraged increased sales. I could go on—
Mr. Hayes: Will the Minister of State confirm that the proposal sent to him by the Society of St. Vincent de Paul, Threshold and the Simon Community concerning the establishment of a national housing commission, which is directly part of this question, has now been debunked by the Government and that it has no intention of establishing such a commission?
Mr. Molloy: —on the question of rented accommodation, which is its particular concern. Threshold is anxious that a commission be set up. I have not rejected totally the idea of a housing commission. To achieve certain policy objectives it might be a good idea to have a commission examine certain aspects of the housing market. That is still under consideration.
Mr. Dukes: There is an air of fantasy about what the Minister is saying. To borrow an image from “Star Wars”, does the Minister not agree it is entirely irrelevant to people who want to buy a house to find that instead of increasing at warp speed, house prices are now merely increasing at supersonic speed? Will he not agree there is a total failure in housing policy when he has to admit that at a time when people earning £30,000 per year cannot afford a house, they find house prices increasing at a rate of over 26 per cent? Will he agree that his talk of moderation in the rate of increase in house prices is utterly irrelevant to those people?
Mr. Molloy: The Deputy should realise that I was one of the first to identify the rapid increase in house prices and included action proposals on this matter in the programme for Government between Fianna Fáil and the Progressive Democrats.
Mr. Molloy: We inherited this problem. I will not be satisfied as long as supply and demand in the housing market are out of balance. We have set out to tackle the increase in house prices. The  measures we have introduced and the recommendations in the Bacon report which we have implemented are aimed at bringing balance back into the market. There is no point in introducing a restriction on house prices. Today I heard someone recommend a return of the certificate of reasonable value. I introduced the certificate of reasonable value in the 1970s. I know its benefits and its shortcomings. I will not reintroduce it because, on balance, it would not achieve the results we want.
Mr. Molloy: The measures taken by the Government are helping to increase supply which is up 9 per cent on last year. I pay tribute to the construction industry which has achieved phenomenal output in the last number of years. The Government is calling on that industry to increase output even further to meet the strong demand we have in our growing economy. Our problems are growing ones.
Mr. Molloy: I would not like to see such a situation. We are in a delicate position and we must maintain a balance. We do not want a rapid escalation of house prices. We want people on reasonable incomes to be able to own their own homes. That is the objective of the Government's policies. We will continue to keep the matter under review and introduce new measures to accelerate the achievement of that objective.
Mr. Gilmore: Will he afford the House an opportunity to debate this matter? Judging from his replies to supplementary questions, the Minister of State is anxious to say a great deal about housing. Does he agree a better way to deal with this issue would be for the Minister of State to  make a comprehensive statement on Government housing policy, if there is one, and allow the House to debate it?
Mr. Molloy: Can I be assured that when I elaborate on the extensive action taken by the Government, the Opposition will allow me to speak or will I be barracked and shouted down as I have been on previous occasions?
Mr. Hayes: As we are dealing with the question of house prices, may I ask the Minister of State about the planning process? A recent report by IBEC showed that there is now an average wait of two years for planning permission on all major housing estate developments. Does the Minister of State agree this is not good enough and that we have to work to reduce that timescale? What measures does the Government intend to introduce to ensure a more streamlined planning process? I accept what the Minister of State says about the supply of housing, but an increase in the housing supply will be achieved only if we have a more streamlined planning process. We have not had that to date.
Mr. Molloy: The Minister for the Environment and Local Government has responsibility for planning. He has already issued a statement in response to that report denying its accuracy. Recent statistics show that planning permission have increased enormously in the last 12 months. This is a good indication of housing output in 1999 and 2000.
The planning process, at local authority and An Bord Pleanála level, is critical to ensuring the smooth operation of the house building industry and the achievement of output objectives. Steps have been taken with regard to staffing at local authority level. Staff numbers have been increased in An Bord Pleanála and the number of board members has been increased. Discussions are under way with regard to further strengthening staffing levels in local authorities and in An Bord Pleanála to remove constraints and clear bottlenecks in the system. These, of course, delay output and add to costs.
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