A 69-year-old man living in a poorly built, four-bed “icebox” in dire need of upgrading had an idea. Widowed on a small pension with offspring in their early to late 30s, he offered to split the house with a son currently struggling to pay rent on the other side of the county. The plan – agreed by all the siblings – was to carve out a small, ground-level flat for himself within the house and cede the rest to the son if the latter could raise the estimated €175,000 needed to create two warm, independent living spaces designed for two very different lifestyles.
In the current market, it was a no-brainer. The father could remain in the old neighbourhood with a warm, manageable space and much reduced bills. The son, currently on about €42,000 a year with no prospect of owning a house, could lower the borrowings significantly by doing some of the work himself and would end up with a secure, future-proofed home.
The siblings could relax in the knowledge that their brother was making a priceless contribution to their ageing father’s mental and physical health.
At a societal level, both father and son were happy that instead of competing with thousands of others in a desperate market, they were about to forge two comfortable households from one environmental disaster of a house.
Collateral and mortgage
The problems arose when the son applied for a mortgage. The bank reasonably enough wanted collateral so offered a couple of suggestions. The father could sign over the whole property to the son, providing gold-plated security for the bank. Alternatively, said the bank, they could split the house into two legally distinct entities, with the father retaining ownership of his flat. The first option however, came with a sting (quite apart from the father signing over his home). If the market value of the house was say, €550,000 – a conservative estimate given the going price of four-bed houses even in not particularly leafy suburbs – the son would have to find another €70,000 to pay the capital acquisitions tax incurred on a gift or inheritance worth over €335,000.
The second option would entail a duplication of all the services to each dwelling – heating, electricity, water etc – since they would have to be treated similarly to unconnected, semi-detached homes. This seemed nonsensical at several levels. The project is stalled and another miserable winter beckons.
The son’s two siblings are hunting around for loans they can’t afford (at considerably higher interest rates than a mortgage) to make up the projected €70,000-€90,000 shortfall. When the father inquired about withdrawing €20,000 from his pension fund to help with the tax bill, he was told that would cost him €15,000 in tax. But if he goes ahead with the ill-advised withdrawal as he is tempted to do, he will be “numbered among the ‘privileged’ snidely referred to as the Bank of Mum and Dad”, as he put it in a letter written last week amid the flurry about a tax commission proposal for heavier inheritance taxes.
Was there any understanding at official level, he wondered, about the often-fraught living arrangements being hammered out between parents and adult children, the tense conversations and careless remarks about “boomers” taking up space needed by families? Inheritance used to be a bonus for lucky/grieving relatives when someone had actually died, he wrote; now it’s about pressure for urgent transfers from the living.
Single households
Another unspoken subtext here is both father (retired of necessity) and son are single. As such they rarely feature in all the agitation about home ownership. But consider this: more than four in 10 people in their 30s are single; a third of today’s average first-time buyers are sole purchasers (presumably having resorted to the bank of mum and dad in many cases either by dint of a cash gift or living in their childhood bedroom or the garage while saving); another 200,000 are widowed. Tot up all those singles and ponder why calculations and budget commentary are almost invariably based on couples. Count the times fist-thumping politicians refer to “hard-working families” leading up to the budget.
A reader crystallised the point last week in The Irish Times letters page. She had applied for a fuel allowance but was turned down, she said, because the income threshold for a widow living alone is less than the threshold for two people living in the same house. How does that make sense? she asked.
The Government’s Housing for All plan acknowledges that single people need homes too and includes some useful measures such as raising the gross income threshold for local authority home loan eligibility (when the actual homes materialise, of course). It also notes plenty of interesting opportunities for keen-eyed singletons looking for smaller abodes: “Building stock can provide solutions through adaptive reuse, backfilling plots in towns, converting former retail units to full occupancy and infilling derelict sites within town, city and village settings.” Yet none of this applies to our correspondent – whose plan is to restore full occupancy to a degraded house – and as any house-hunter will tell you, the Help to Buy scheme is available only for new-builds.
Research among older Irish homeowners suggests there are 198,000-234,000 homes with two rarely used bedrooms and up to 100,000 homes with three. On the other hand, the vast majority of these owners – who probably have no more than 10 or 15 years left on Earth – want to stay where they are for as long as they can. Which distils my correspondent’s plight.
Is he missing something?