Financial Housing News

Housing Chief Warns Local Authorities Against Involvement in Affordable Housing Scheme

Speaking ahead of the launch of the Government’s affordable purchase scheme, John O’Connor, CEO of the State’s Housing Agency, said it would both a mistake and unwise for local authorities to become involved in building homes for low- and middle-income buyers as part of the Government’s proposed new affordable purchase scheme.

The new affordable purchase scheme will see opportunities for single house-buyers earning less than €50,000 or couples earning under €75,000, whereby local authority land would be used to provide homes to people to buy at a discount of up to 40 per cent on market rates.

The scheme is due to be in place within weeks. The Irish Times (February 4 th) reported that this scheme will be the first to give set discounts to owner-occupiers since the previous national affordable housing scheme – it saw Dublin buyers get new homes at 30-35 per cent below market rates – was scrapped in 2011.

The introduction of a new affordable purchase scheme was flagged three years ago as part of Budget 2016, but was only signed into law last June. Regulations to allow local authorities to operate the scheme have yet to be published, but are due to be in the coming weeks.

According to the Irish Times report, under the previous scheme local authorities both built affordable houses and bought houses from developers to sell on to qualifying house-buyers. Following the collapse of the property market in 2008, local authorities were left owing hundreds of properties they had bought from developers at the market peak which, after the crash, would cost buyers more than similar homes on the market.

Mr O’Connor said it would be “really dangerous” for councils to get involved in a scheme of this nature. “It’s a mistake for a local authority to build houses itself, to be the developer and sell affordable housing. They’re not in that business, they’re not good at doing it, and they will make mistakes,” he said. Mr O’Connor added that while local authorities do develop social housing, the standards and guarantees required for affordable housing, and the expectations of a house purchaser, were very different to council tenants. He added that it was vital, if the scheme was to go ahead, that local authorities were not exposed to risk.

“Local authorities need to organise it so someone else is taking the risk. Get the developer to build them and sell them to nominated affordable housing purchasers, but don’t as a local authority get into a situation that you are guaranteeing to buy them. The local authorities need to organise themselves so they don’t get stuck with the housing. To do the affordable right takes a certain amount of skill. The department does talk about local authorities building and selling; it’s a really dangerous position to put local authorities in. They don’t need to get stuck in that position, they don’t need to take on those risks. Local authorities are not in the position of selling houses. Let the affordable purchaser buy from the person that built the house,” he added.

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