Thank you for the invitation to speak here this morning. I’m delighted to have the opportunity to delve into one of the pressing policy issues facing our country today. That the Ó Cualann Co-op has become a by-word for affordable housing is a testament to the work and innovation of the organisation. I hope seminars like today help to advance that reputation and our capacity to deliver affordable homes throughout the country.
I want to spend my few minutes this morning going into some of the detail of the new affordable housing scheme that emerged from the budget. We were focused on delivering genuinely affordable units in our budget talks because of our concerns that home ownership was slipping away from a generation. The statistics are stark.
Rents have soared to over 26% above the previous 2008 peak. Dublin city dwellers are now spending as much as 55 per cent of their take-home pay on rent. House prices are 90% higher than they were in 2012 while since then Central bank rules require a 10% deposit and a 3.5 time income limit.
This cocktail of House prices, spiralling rent combined with strict Central Bank rules have meant that home ownership levels have slipped to record lows of 67.6% across the country the lowest since 1971, down from a high of 82% in 2004.
The age at which home ownership became the majority tenure category was 35 years in 2016. Prior to that age, more householders were renting rather than owning their home. In comparison to previous censuses dating back to 1991, the ages which marked the changeover between renting and home ownership were 32 years (2011), 28 years (2006), 27 years (2002) and 26 years (1991). Clearly home ownership is moving further and further away for young people.
Reflecting the CSO data in Ireland the Resolution Foundation in the UK has found that homeownership rates have slipped most dramatically amongst millennials. It has also had broader repercussions on the quality of life people enjoy with younger people enjoying less space and commuting longer than their parents did.
This all underlines the pressing need to provide affordable homes particularly in our cities and drove on our commitment to securing a revamped Affordable Housing scheme in the budget.
Fine Gael abolished the Affordable Housing scheme in 2012. It was theoretically re-established it this year but allocated just €20m to the scheme in 2018 and delivered none to date. No regulations or criteria have been signed on the scheme. €25m was due to be spent on the scheme in 2019. Revamping this became a key focus for Fianna Fail in Budget talks. Affordable Housing had to be an integral part of the budget.
The main outcome from budget talks was quadrupling that money to the Serviced Sites Fund and securing a new focus on delivery.
This is an important point. Back in the summer the government claimed it was allocated €75m to a new affordable housing scheme. However that was spread out over a series of years, not €75m every year. This new scheme quadruples the amount of money every year for the next three years from €25m to €100m per annum. It sets out new criteria and timelines for delivery.
The O’Cualann example shows that it is possible to deliver genuinely affordable homes with this money. According to Department PQ data it costs €210,000 to build a standard three bedroom home on state owned lands. In areas where affordability is an issue the average cost is €240,000 to build. That’s much cheaper than the €330,000 or more it costs a private developer because there is no profit margin or land costs.
This price will be further reduced by a direct state subsidy through the Serviced Sites Fund of €50,000 per unit. This will bring the cost down to €190,000 on average. This is an affordable unit to a household on €57,000 a year which is the average household income in the state according to the CSO.
It takes 59 weeks for a project to go from planning to completion. If the financing is put in place and spending started in 2019, 2,500 new units should be place by 2020 and every year after. This should be the start of a new state led commitment in co-operation with AHBs to deliver affordable homes on the required scale.
Local Authorities, Approved Housing Bodies and Co-operatives will be tasked with building the units. This is similar to how social housing units are delivered with a mixture of AHBs, Co-ops and the Local Authorities in charge of construction. They can sub-contract out the work or undertake using their own personnel. Local Authorities must be fully equipped with sufficient skills and expertise to carry out their core duties of delivering housing.
Households on between €30,000- €75,000 per annum will be eligible. Based on the Re-Building Ireland Home Loan criteria this will cover Single income earners above €30,000 but below €50,000 and joint income earners above €30, 000 but below €75,000. These are households above social housing thresholds but unable to reasonably afford buying a new home. These income thresholds will be subject to on-going review.
The new scheme falls under Part V of the 2009 Affordable Housing Act. Under that act the home owners were expected to gradually pay down the market reduction they received. For example if a house was worth €350,000 on the market but sold for €260,000 the home owner would be expected to pay back the €90,000 difference over time to the Local Authority. I think this is a complicated and cumbersome model. I am interested in hearing the views of people today on what is the fairest and most effective clawback mechanism. It must ensure that people are still enabled to access affordable homes without undue complication.
These few thoughts briefly sketch out the basis of the new affordable housing scheme. It’s clear that we need a new ambition in affordable housing. A whole generation demand it. I look forward to discussing these issues and how we can scale up this model and deliver units quicker and more effectively.