merrion street

Ceann Comhairle, I announced yesterday what amounts to a transformational budget for housing in Ireland. Just as the Government’s action plan on Housing and Homelessness draws together a coherent plan for all parts of the housing sector, the budget continues this holistic approach with a carefully calibrated package of measures and supports to get housing moving again and, in particular, to overcome the acute supply crisis that affects all parts of society.

Supply is the key challenge and our plan clearly identifies the need for a dramatic increase in the supply of new homes at affordable prices. We have set ambitious targets to double the annual level of residential construction to 25,000 homes and deliver 47,000 units of social housing in the period to 2021.

We have already taken early supply focused actions through, for example, the introduction of a €200m infrastructure fund to open up key sites by effectively lowering construction costs and bridging a viability gap that is holding these sites back. I will shortly be bringing legislation to the Dail to introduce temporary fast-track planning arrangements for large-scale housing developments including student accommodation. Applications will be made directly to An Bord Pleanála and will be decided within a 16 week timeframe, after a 9 week pre-application process.

The Budget continues this coordinated approach to the supply challenge and contains a comprehensive package of supports for the wider housing market. These include an extension of mortgage interest relief for existing homeowners, changes to Capital Acquisitions Tax to facilitate parents passing on property to younger households. We have introduced important supports for the rented sector also to secure current and future supply by providing a sound investment framework – something that is in the interests of both landlords and tenants. Restoration of mortgage interest relief for landlords, increase in the ceiling for the rent-a-room scheme, extension of the Living City initiative to rental properties and supports for new student accommodation are all supply based measures that we are taking now, in advance of the delivery of a comprehensive strategy for the rental sector which I will publish before the end of the year.

Much of the commentary and analysis so far on the housing aspects of Budget 2017 has failed to grasp the full range of supply side measures and had an undue focus on just one aspect – the Help-to-Buy scheme announced by Minister Noonan.

This is a carefully designed supply incentive intended to bring forward the supply of new homes. We know that of the 38,000 house purchases in 2015, just 24% were bought by first time buyers. Only 2% of homes bought by first time buyers were new houses. In a normally functioning market first time buyers would be accounting for well over half of all home purchases. These figures provide a stark illustration of the supply problem at this end of the market. Clearly builders are not building enough despite pent-up demand.

Why aren’t they building? Uncertainty over the number of first time buyers who can access a mortgage means that builders cannot secure the financial backing to build more new homes. Help-to-Buy is a direct response to that problem, intended to translate notional demand into real demand. I am confident it will help to provide the certainty that first time buyers need in order to realise their home ownership aspirations. It is a helping hand for people to comply with rather than side-step the Central Bank lending rules. In doing so, it will also help provide the certainty needed by providers and their investors to proceed with bringing forward the supply of new homes.

It is a carefully calibrated initiative specifically designed to boost supply. That is why is applies to new houses only. Having it open to second hand homes also would have had the effect of fuelling demand without stimulating supply. Those who criticise it with academic arguments that it will fuel demand and driving up prices are missing a fundamental point: as long as there are no homes for people to buy we will continue to speak only in abstract economic arguments. These won’t provide homes for our people – a comprehensive range of complementary actions will.

Help-to-buy needs to be viewed in the context of the range of supply initiatives that have already been undertaken or are in train as part of implementation of our Plan including efforts to support the building of affordable homes in the right locations.

Getting supply of new homes moving in the right direction is good news for all parts of the housing market. It will ease pressure on the rented sector, in turn helping to moderate social housing need and families presenting as homeless and ultimately helping deliver more homes for our people, the overarching aim of Rebuilding Ireland