Minister defends end of affordable housing scheme in favour of repayment plan

MINISTER for Housing Michael Finneran has defended the decision to scrap the affordable housing scheme in favour of a new plan which forces buyers to repay their loan from the State.

Mr Finneran has also said that any problems that have arisen in relation to affordable homes costing more than similar private houses were the responsibility of local authorities to resolve.

The current affordable housing scheme allows buyers who do not have the income to meet a standard mortgage to buy a house at a reduced price, with the local authority making up the difference in cost. The local authority retains ownership of the portion of the property they funded, usually around 30 per cent, for 20 years, after which it is transferred fully to the home owner.

Under this scheme, the buyer does not have to repay the local authority its stake, as long as they do not sell the house within 20 years. However, under the new Government Equity Scheme, announced in the Budget last week to replace the current scheme, buyers will have to repay the local authority or State stake.

Buyers can either repay the stake over the life of their mortgage or repay it all at the end of the term. If they opt to pay at the end of a typical 35-year mortgage the value of the stake, which would generally be 30 per cent, would be determined by the value of the house at this time, not the time of purchase. Mr Finneran said yesterday that there were no plans in place to deal with people who were unable to repay.

"There would be the opportunity for people to extend their credit. We're talking about a loan of 35 years, by the end of 35 years the face of Ireland, the price of housing, the status of any of those people, is impossible to predict.

"We haven't finalised it yet, I haven't written off on this scheme yet, the detail of it has to be put in place. We will look at any pitfalls that there may be in areas like that."

It has emerged that affordable houses could cost more than similar private houses due to the downturn in the housing market.

Local authorities settle the price of affordable houses with developers up to two years before the schemes go on the market, and changes in the housing market can mean these houses cost more than private houses in the same development at the time of sale.

Mr Finneran said he was not aware of any particular local authority that was in difficulty, and local authorities could solve this problem by taking a bigger equity share in the house, or using the expensive houses for their social housing stock.

"Local authorities did go into agreements with builders and developers regarding the affordable homes. They have the opportunity to subsidise further out of their own resources, or they can allocate the house under the social housing programme."

However, Mr Finneran stressed it was not his problem.

"It's not I who did the deal as Minister, or my department. Local authorities did the deal and I'm sure that they got the best deal possible, and if there are some difficulties in some of the local authorities then it's a matter for them to deal with."