Breda O’Brien: There are local solutions to the housing crisis

If we really saw family life as important and shelter as a human right, people would not tolerate the selling of distressed mortgages to foreign funds that are only interested in a quick return and blithely indifferent to the ensuing human misery.

To treat all distressed mortgage holders as an amorphous mass of defaulters is wrong. There are human stories behind every statistic. And yes, some of those stories will describe a tiny minority of homeowners who for cynical and dishonest motives did not engage with the banks.

But many homeowners did engage with the banks, and have been honouring the terms of restructuring agreements. These loans will also be sold and will be subject to the same treatment despite an honest attempt by the owners to do what they could.

There have been suggestions that the homes should be sold to their present occupiers at the same kind of “haircut” that foreign funds would receive. That is unrealistic. Where are people who are in arrears going to get the kind of credit they would need to do that?

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Given that Permanent TSB’s (PTSB) level of loans arrears is more than five times higher than the European average, the bank is not going to fooster with thousands of individual reduced loan agreements when one loan transfer of all the distressed loans is the other option. To do so would raise allegations of ignoring moral hazard.

Yet when people talk about moral hazard, or the dangers of being soft on those who cannot meet their financial obligations, they seem to forget about the moral hazard of rewarding financial institutions for greedy and lax lending policies by rescuing them from the consequences of their recklessness.

The Government continues to own a 75 per cent stake in PTSB, on behalf of the Irish citizens who bailed them out. In those circumstances, a helpless shrug is not an adequate response to people losing their homes.

A different approach

The Master of the High Court, Edward Honohan, has proposed the creation of a National Housing Cooperative Society to manage the distressed loans, principally by converting mortgages to rent.

In order to have public credibility, it would have to be clear that it was not rewarding those who have made little or no effort to repay loans.

It would also have to have a different approach to people who bought to let, and in some cases who have made no attempt to repay mortgages while continuing to charge rent to their tenants.

But is it necessary to create an entirely new entity? There are sources of expertise and wisdom in the community. Many of the aspects of what is needed to solve this crisis more creatively already exist.

The Housing Finance Agency (HFA) already provides funding to local authorities and voluntary housing associations. There is no reason why that expertise, and more importantly, the expertise of the voluntary housing associations, could not be harnessed.

For example, Ó Cualann Cohousing Alliance's latest project is the building of 49 beautiful, affordable, high-spec homes in Poppintree, Dublin 11. The founders, Hugh Brennan, Bill Black and John Moore were told that it could not be done.

Very happy occupants are testimony to the fact that it can be done.

Why not create partnerships with far more benign entities than so-called vulture funds?

Ó Cualann have declared an interest in being involved with distressed mortgage holders, using a mixture of HFA and private funding along with the cooperative model. It would assess each mortgage on a case-by-case basis.

Some people would have to face immediate repossession, but for many more, renting for a number of years with the option to buy if personal circumstances improved would be very viable.

Others could have their loans restructured. For example, in the case of young couples, adding a decade or 15 years to the repayment period would help.

Because Ó Cualann only aim to make a 5 per cent surplus for reinvestment, if they were sold the loans at the same discount as a vulture fund, this approach would be financially feasible.

Benign entities

Credit unions could also be part of the solution if the Central Bank could get over its horror at the idea of credit unions getting involved with distressed mortgage holders.

The kind of community-based experience that credit unions have in cooperating with agencies like the Money Advice and Budgeting Service (Mabs) to resolve indebtedness would be invaluable.

If foreign funding were required to make this work, why not create partnerships with far more benign entities than so-called vulture funds, organisations that are not looking for a quick profit, but are content with a lower return over a longer period?

Ó Cualann have been in contact with a UK organisation which could provide funding for their cooperative approach at an attractive rate, if it were matched by HFA funding and if 10 per cent of the properties were owned by the UK fund and rented over the long term, perhaps 25 years.

Political leadership is what is required now. It requires a move from seeing the market as the solution even if the collateral damage is thousands of children living in emergency accommodation, to seeing the community as a place where decent homes can be provided using local wisdom.