The Government's new plan for housing and homelessness, entitled Rebuilding Ireland, is an impressive and ambitious document. It is obvious the Government is serious about delivering real solutions.
The escalating social housing crisis has been the main catalyst forcing the Government to act. With 1,078 families essentially homeless and living in temporary accommodation, the current situation has become untenable.
Compounding the severe shortages in social housing is the lack of meaningful recovery in new homes construction. Whilst there were 12,666 new homes constructed in Ireland last year, DNG figures note that only 3,508 new homes were actually sold in Ireland, of which 1,213 were located in Dublin in new housing developments of three or more units.
The balance consisted of either one-off new home sales or properties that were completed in schemes which were sold as bulk sales to investors or speculators.
It is essential that in high population locations with strong employment such as Dublin, Cork and Galway that housing stock must rise and the only way of doing this is to build more homes.
The final reason why a plan is needed is that Dublin in particular has a rental crisis which is spreading.
One of the main ingredients of the five-pillar plan is to reduce the price of housing by decreasing the cost of construction and to provide an incentive package to buyers in Budget 2017. It is expected the buyer incentive package could be in the form of a tax credit or grant worth up to €10,000.
When I started in the estate agency business there were always first-time buyer’s grants. In the 1990s the grant was €3,809 until it was removed in 2002.
In April 1994 we released a new scheme of houses aimed at entry-level buyers in west Dublin. The starting price for a three-bed semi-detached house was €43,806. The grant equated to 8.5 per cent of the purchase price.
Some 22 years later and we have recently released a new scheme of houses for the same builder in a nearby development at a starting price of €280,000. To have a similar incentive scheme for first-time buyers the grant would need to be €23,800.
In meeting this goal the Minister should consider setting the first-time buyer incentive package at €20,000 and fund it from VAT charged on new houses. This package should not be exclusively for new homes.
This would reduce the amount a first-time buyer would need to borrow and assist buyers who are tied into rental accommodation who cannot afford to buy.
The new Central Bank lending restrictions have not helped as banks can only lend buyers 3.5 times their gross salaries, which leave many short. There are also restrictions on the percentage loan to value they can borrow at over €220,000.
Builders cannot drop their prices as the cost of constructing a new house plus VAT, development contributions and associated costs in many cases is higher than the price that they can sell the houses for.
While the Central Bank rules have merit they need to change to allow more buyers purchase their first home. This would also free up rental accommodation.
An interesting initiative in the Government plan is the ability to convert the upper floors of commercial buildings into residential accommodation without having to apply for planning permission. This could breathe new life into central city areas.
While some might see the plan as a bailout for builders, it is not. I see it as a plan to get Ireland back building again.
I was disappointed not to see a Help to Buy scheme like that in the UK in the Government’s plan.
The establishment of a €200 million Local Infrastructure Housing Activation Fund, new designation of strategic development zone (SDZ) sites and fast-track planning permission for 100-plus schemes will assist new homes construction. Empowering the Housing Agency to purchase 1,600 social homes by 2020 will also be a quick fix and is very welcome.
Keith Lowe is chief executive of DNG
