MEASURES INTRODUCED as part of last week's budget will mean affordable home-owners may owe the Government up to 30 per cent of the value of their homes when the end of their mortgages are reached.
Under the Government Equity Scheme, which will begin on January 1st, the Government will take "equity" in each affordable home and this will have to be repaid either over the life of the mortgage, or in a lump when the mortgage ends.
Under the current affordable housing scheme, when a purchaser buys an affordable home from a local authority they usually get it for less than the market rate.
The difference can be up to 30 per cent, depending on where the home is purchased. If the home-owner sells the property within 20 years, they are subject to a "claw back" and the local authority must be paid a percentage of the sale price. However, if the purchaser chooses to stay in his or her home longer than 20 years there is no claw back, and the local authority is owed nothing when the mortgage is fully paid.
Under the new scheme the Government will take "equity" in each affordable home, equivalent to the difference between the open market value of a property and the affordable price paid - roughly 25 to 30 per cent.
This equity will have to be paid back by the purchaser, regardless of whether or not he or she sells the property. It can either be repaid incrementally, at intervals yet to be decided, or it will be due at the end of the life of the mortgage in a lump sum.
It will be based on the market value of the property when the mortgage is finished, not when it was purchased.
For example, if an affordable property is bought for €210,000 in 2009 and it is worth €300,000 on the open market, the Government is deemed to hold equity of €90,000 or 30 per cent in that property.
If the purchaser does not pay that equity back over the lifetime of the mortgage it will be owed at the end of perhaps a 35-year mortgage. However, the home-owner will not owe €90,000; he or she will owe 30 per cent of the value of that house in 2044.
A spokesman for the Department of the Environment said while the new arrangements do not alter the position for purchasers in relation to the initial purchase, it is less favourable in the longer-term.
However, he said the scheme would ultimately provide a more equitable and cost-effective approach to the provision of affordable housing as the State's investment would be maintained and funds would be recycled into assisting further households with affordable housing.
