Affordable housing is a distinct segment of the property market that needs to be developed further and that can provide a cushion against any downturn, writes Des Geraghty.
In his column on Saturday last, Garret FitzGerald identified the switch to social housing as a key to addressing any downturn in the economy. While I agree with Dr FitzGerald's analysis, there are a number of additional elements that need to be considered immediately.
Dr FitzGerald uses the term "social housing". Many people use this term when they also mean affordable homes, which is a different option. I am chairman of the Affordable Homes Partnership, a newish State body established in 2005 to co-ordinate and promote the delivery of affordable housing in the Greater Dublin Area. With the passage on Tuesday of the new national agreement, "Towards 2016", some aspects of our mandate are now to be extended to the full country. Affordable homes are part of the option but are distinctive in that they are homes purchased and paid for at a discount.
Most affordable homes are in private developments and have emerged since the requirement was made that usually a percentage of all houses or apartments in a private development are made available to be sold as affordable homes. These are sold at a discount to other houses and apartments in the development to people who register as qualifying for affordable home purchase.
The criteria to qualify for an affordable home are that the working person or couple must be first-time buyers, though there are some exceptions, for example divorcees. The person or couple must have enough income to meet mortgage repayments after they have paid all other costs and, as a guide, they may earn up to €55,000 a year as a single person or up to €75,000 as a couple. These are approximate limits; in some local authorities lower income limits may apply. If the house is sold within 20 years, a percentage of the sale price has to be paid to the local authority.
This increased delivery must not await a downturn in the construction sector but should be a growing and stabilising element in the housing market. Undoubtedly a strong social and affordable element would be a cushion against any downturn in the speculative housing market.
I would argue that up to now not enough of our construction has been in the affordable option. In other countries, including the United States, affordable housing represents a significant segment of the market. I think it can also become the same here. I think Irish developers will quickly identify that there is untapped demand in this first-time buyer segment of the market and we hope to work with them and local authorities to increase the supply of this kind of home, as well as the traditional social rental accommodation.
I would urge people who qualify to purchase affordable homes to register with local authorities as in that way there will be a clear indication of the demand that is in this segment (a new booklet, Your Affordable Home Handbook, is on www.affordablehome.ie and gives all the information required, including local authority contacts etc).
I believe the potential of this segment of the market is huge and that there is a desire for people not to commute and to live in the area in which they work. I believe that when developers fully understand the segment, they will give it the attention it deserves. With our remit extended from the Greater Dublin Area to the full country, we look forward to working with local authorities and developers across the country to increase the supply of affordable homes. Affordable home options are planned to deliver 17,000 units, mainly one, two and three-bed apartments and two and three-bedroomed houses by 2009.
The Affordable Homes Partnership is undertaking initiatives to increase this further. Since we were established relatively recently, we have had a call for lands from builders and developers which may not be currently zoned but which may be suitable for development. This will help to increase the supply of affordable homes.
Under our original remit for the greater Dublin area, the call for lands yielded sites which will roughly build 3,000 new affordable homes across Dublin, Kildare and Wicklow. Details of these will be announced shortly. The partnership is also swapping State lands to provide affordable housing and this will deliver another 500 homes. Affordable rental and shared equity options are also innovations that will be introduced by the partnership.
Dr FitzGerald is correct in saying that the switch to "social" housing will require both money and having housing plans ready to go. In the affordable homes segment, we intend to work with local authorities and other interested parties to ensure there is adequate serviced land available and if necessary we will look at whether additional powers are necessary to secure speedy compulsory purchase, zonings and plannings. While Dr Fitzgerald suggested this activity would need to be in place for when the downturn comes, it would be the Affordable Homes Partnership view that we shouldn't wait for the downturn, that working people want these homes sooner rather than later and we must increase the proportion of the current supply in the affordable bracket.
Des Geraghty is chairman of the Affordable Homes Partnership.