SF accuses Government of kowtowing to banks in State-backed housing schemes

Sinn Féin has accused the Government of failing to protect taxpayers’ money and of kowtowing to banks in allowing them be preferential creditors in two State-backed housing schemes that aim to make the purchasing of homes more affordable.

The party’s housing spokesman Eoin Ó Broin said that in the event of another housing crash, the recovery of bank debt in both the shared-equity and local authority affordable purchase schemes will be prioritised over State debt.

This means banks will be paid first in the event of a repossession and sell-off of properties purchased under the schemes.

Under the proposed shared-equity scheme, which is due to open later this year, the State will pay up to 30 per cent of the cost of the new home in return for an equivalent stake in the property, with the intention that this be paid down at some future date.

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Under the affordable purchase scheme, homes will be made available at a reduced rates with the relevant local authority taking an equity stake equivalent to the reduction from the prevailing market value.

In response to a parliamentary question from Mr Ó Broin, the Department of Finance and the Department of Housing confirmed that, in both cases, it is envisaged that purchasers will use bank mortgages or local authority home loans to buy the properties.

“Just as in any home purchase, the equity stake (held by the State) will therefore rank behind whatever loan is secured on the property,”the departments said.

Equity support

“The equity support is not a loan, a second mortgage, or any form of State debt and does not take precedence over the debt on the property,” they said.

In the face of rising housing costs, the Government has introduced several initiatives to make housing more affordable and to boost home ownership rates.

It expects the shared-equity and affordable purchase schemes to support the purchase of 36,000 homes during the Government’s Housing for All strategy.

Mr Ó Broin claimed, by providing equity support, the State is opening up a new tier of potential mortgage customers for banks but that the risk inherent in these schemes was not being shared equally.

“Technically, in a crash scenario, the banks would have first call on their loans and the State could be left with nothing,” he said. “These are 20-,30-, 40-year considerations and we don’t know what’s going to happen to the property market over that sort of period,” he said.

“Is is right that the State should allow the interest of the taxpayer play second fiddle to the interests of the banks? Surely an equal risk sharing would have been the minimum position the Government should have requested?” Mr Ó Broin said.

Unsold

More than 2,000 unsold affordable housing units remain on the books of local authorities more than a decade after the 2008 property crash and have cost the State between €80 million and €90 million in debt-servicing costs.

The homes were delivered during the boom under the part V planning rules, which obliged developers to set aside a proportion of their developments for social and affordable housing.

The affordable units were intended for homebuyers on lower incomes but when the property market crashed demand dried up, in many instances, the affordable prices were higher than open-market prices, which had plummeted. After a period of limbo, the properties were acquired by local authorities and used to house social tenants.