Not so affordable housing

Housing, and specifically measures to boost the provision of social housing, has been a key factor in the final stages of putting a new national partnership agreement together. The spiralling cost of housing has put house ownership out of the reach of thousands of people on average wages, leaving such people at the mercy of greed-inspired private landlord renters or waiting hopelessly on a growing local authority housing list.

While a massive increase of direct housing provision by local authorities is the best solution to the housing problem, and one that would crucially depress the growth of house prices, our free-market economy is unwilling to devote resources to such social needs.

The next best solution, then, has been social and affordable housing schemes, such as those pioneered by Noel Dempsey when he was Minister for the Environment.

Dempsey initially required builders to allocate 20 per cent of all housing developments for such housing. However, he got no support for his proposals which had to be forced through against strong Fianna Fáil builder opposition, and even the Labour Party, which has been extremely vocal and positive on the housing crisis, stood aside and let Dempsey's policy be shafted.

But even though Dempsey's original proposals were considerably watered down by his successor, Martin Cullen, and not restored by the present incumbent, Dick Roche, the affordable housing scheme, at least, offers some prospect of decent housing for the average citizen outside the control of private renters.

Basically, the scheme works like this: A qualifying person in south Dublin , on, for example, a single wage of between €30,000 and €56,000, buys a property at a discounted price. This discount can vary between 25 per cent, up to 60 per cent in some south Dublin schemes.

The state is protected against profiteering by a claw-back provision. This typically entails the buyer paying back the total discount percentage of selling the house or apartment to the local authority if they sell in the first five years or half after ten years. Nothing is owed after 20.

A single person on €30,000 can therefore buy an apartment under this scheme, whereas on the open market such a person would – theoretically anyway – be limited to two-and-half times their salary, that is €75,000. Of course, you couldn't buy a shed in south Dublin for that.

It's a great scheme, and the Government has in the last few weeks announced extensions to the scheme in what are called desirable parts of Dublin, where up to 70 per cent of developments will be earmarked for the affordable initiative.

But – and it's a big but – the county council decides the market value against which the discount is given.

Here's an example: a two-bedroom apartment in south Lucan was sold under the scheme at €425,000 with a discount of 60 per cent, leaving the buyer to pay €170,000. Not bad, except that the estate agents confirmed that the last such property they sold by private treaty went for €285,000, and that if they were offering these apartments now that they would look for €340,000 to €350,000 for them. In other words, the real current market value is, at best, €350,000, which is €75,000 less than the council's estimate.

This means that if a person had to sell the apartment because, for example, their civil-service job was decentralised – they would have to give 60 per cent of the market price to the council under the claw-back scheme (€210,000) which would leave them only €140,000 to pay off their €170,000 mortgage.

In this particular case a number of affordable housing purchasers complained to South Dublin County Council about the valuation, which was then reduced to €370,000 – still at least €20,000 above real market value, but better than the original rip-off. The purchase price of €170,000 stands, though now representing 46 per cent of the market value and not 60 per cent.

The whole sordid affair raises some serious questions though. Why was the original valuation so far above real market prices? How much did the council pay for the properties, and who sanctioned the valuation? Has the readjustment been made to all those who purchased under the recent scheme, or only to those who complained?

What about other schemes, and other authorities? What role does the Department of the Environment see for itself in making sure that fairness and honesty prevail in valuations under this scheme? And is anyone making a few bob on the side by inflating the price of such apartments?

The department maintains that responsibility for these schemes lies with the local authorities, and the local authorities will not discuss matters confidential to the purchasers.

But it's hard to believe that the south Lucan scheme is the only example of this. Perhaps the affordable housing scheme is not so affordable after all.

Eoin Ó Murchú is the Eagraí Polaitíochta of RTÉ Raidió na Gaeltachta. He is writing here in a personal capacity