Affordable housing plan imposes regional price caps, with €500,000 limit on Dublin flat

The Government’s new shared equity scheme for affordable housing proposes a price cap of €500,000 on apartments, and €450,000 on houses, in Dublin City and Dún Laoghaire.

Minister for Housing Darragh O’Brien was given approval to publish the Affordable Housing Bill at a Cabinet meeting on Tuesday in the face of furious criticism from the Opposition.

The most controversial aspect of the Bill is the shared equity scheme, where the State can take a 20 per cent equity share in a family’s first home. The properties are subject to a price cap with the next-highest caps after Dublin City and Dún Laoghaire being Cork, Fingal, Galway City, South Dublin and Wicklow, where the upper limit is set at €400,000.

The lowest caps are €225,000 for counties Cavan, Donegal, Leitrim, Longford, Mayo, Monaghan, Sligo and Tipperary.

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First-time buyers can also avail of the existing Help-to-Buy Scheme which gives tax relief up to 10 per cent of the property’s value (to a maximum of €30,000). If the State were to take out a 20 per cent stake in an apartment valued at €500,000 in Dublin, the purchasers would still require a bank mortgage of €400,000 (or €370,000 if they avail of right to buy).

Mr O’Brien defended the price cap, saying they were based on the median prices in all of the regions. “They are above the [median] but that allows for different types of [design],” he said, adding, “We will keep it under review.”

He also told The Irish Times he expected most new house buyers to seek a lower equity than 20 per cent, typically between 10 and 15 per cent.

However, the caps were immediately attacked by the Opposition as making the houses anything but affordable.

“The Government is living on another planet if it thinks €450,000 for a home in Dublin – and €400,000 in Cork and Galway – is affordable. It simply is not,” said Cian O’Callaghan of the Social Democrats.

Cost-rental scheme

The Bill also includes proposals for a cost-rental scheme and a requirement that all new housing developments include 10 per cent affordable housing in addition to 10 per cent social housing.

Every provision in the Bill has been fiercely contested, particularly its provisions for shared equity. Opposition parties have claimed it will push up the prices of new houses.

Eoin Ó Broin of Sinn Féin said: “It’s not an affordable housing scheme. It’s going to increase house prices.”

This has been robustly denied by Mr O’Brien. He claims similar schemes in London resulted in only a 1 per cent rise in prices. Citing other reports, Senator Rebecca Moynihan of Labour claimed it resulted in inflation of 6 per cent. Mr Ó Broin also pointed to concerns raised by the Central Bank and the ESRI about the inflationary impact of shared equity.

The State’s Housing Agency told the Department of Housing last September that a similar scheme in the UK had resulted in a 6 per cent increase in house prices in the greater London area.

Debt burden

Mr O’Brien has maintained the State’s 20 per cent equity is not a second mortgage, or an additional debt burden to householders, as claimed by the Opposition. He said on Tuesday there would be a zero interest charge on the equity for the first five years, rising to 1.75 per cent between years six and 15, and 2.14 per cent from years 16 to 29.

It would result in 6,000 new homes being built over the next three years, he insisted. Shared equity involved a State spend of €75 million in a mortgage market worth €11 million and was only one component of many measures, he added.

It also emerged that a global investment property company, Round Hill Capital, has been involved in the acquisition of close to 250 houses in new developments in North Dublin and Maynooth, Co Kildare, which will be rented out to families. The Opposition has contended the purchase will diminish the supply of houses for first-time buyers and could also lead to inflationary pressure.

The Covid-19 lockdown on home-building has meant no more than 14,000 new homes will be built in 2021, Mr O’Brien confirmed, and the Government will now need to increase the number to 33,000 per year by the end of its term to meet its own targets.

Under the Bill’s cost-rental proposals, tenants pay rent that covers the costs of delivering, managing and maintaining the homes only. The Minister said the first homes will be delivered this year at a minimum of 25 per cent below market value.