Speech by Minister for Housing,
Ms. Jan O’Sullivan T.D.
Housing Practitioners Conference
Limerick, 17 May 2012
Introduction
I would like to start by welcoming you all to Limerick, the Treaty City, and of course, my own constituency. I hope you get a chance to experience some of the highlights of our city and to meet and rub shoulders with the ever friendly locals during your time here.
As practitioners, our work here at this conference takes place against the backdrop of many difficulties, for never was the task of mapping a way forward for our housing sector more onerous or daunting. The challenges facing all housing providers are immense, trying to service ever growing demand with restricted resources.
These may appear insurmountable challenges to scale but in times of adversity the Irish psyche reacts with vigour and resilience, and I have no doubt that these attributes will serve us well in addressing the tribulations which I have outlined.
Coming together like you are over the course of today and tomorrow provides critical time away from the day-to-day pressures to share valuable experiences and work together in developing best practices. I hope you get a lot out of the conference programme.
Regeneration
Limerick is a city of which I am – I think justifiably – very proud. A large urban centre by Irish standards Limerick has never lost a community feel and it has a strong sense of its own identity, a strong sense of place.
Like all large conurbations however, this city has had its problems and tribulations. Some of these still exist today and have negatively impacted on the lives of many people. There is sometimes a tendency in the media to exaggerate and sensationalise things. This does harm to everyone – to the reputation of the city, to communities, to service providers and to the efforts being put in to improve the lives of people on the ground.
The focus of the regeneration programme, both locally and nationally, must be to eradicate the blight that has threatened to poison and permanently destabilise communities. We need to focus on creating sustainable communities in which the current generation and future generations can flourish and grow, and to see an end to the poverty traps which define the ghettoisation of individuals.
I recently announced the establishment of a new dedicated Office for Regeneration to replace the structures we’ve had comprising the Regeneration Agencies and Limerick City Council. I believe this will accelerate the delivery of regeneration.
For the first time now all of the key decision makers will be working in the same office, wearing the same jersey. The new Office is an important step in the amalgamation of the Limerick Local Authorities and strengthening of local government in the area and it will give a new impetus to regeneration and build on the foundations laid so far by the Agencies.
The overall project is at a critical stage now as we move, in 2012, from demolition to construction, from relocation to rebuilding communities. I have made it an objective of my term as Minister to ensure that investment in the regeneration of Limerick continues, and that all investment delivers real and tangible outputs for the communities here. Funding will be provided this year for 100 new housing units to commence.
I am clearly focused on the future of regeneration. I am determined that the new structures, backed by significant funding this year and in the years ahead, will make a real difference on the ground in Limerick.
But let no one think that the future of regeneration is in Limerick alone. In my home city, of course it’s of interest to me, but equally I recognise that communities in Dublin, Cork, Sligo and many other places also need to see progress in regeneration projects. I am acutely conscious of the hopes and dreams that are vested in these projects. In a housing capital budget that has seen a precipitous decline since the start of the economic crisis, the government is committed to protecting funds for regeneration, homelessness, and grants for the elderly and disabled.
Mortgage Arrears
The burning issue of mortgage arrears is also to be addressed over the course of the conference. This is, quite simply, one of the most pressing economic and social challenges facing the Government and the nation. If we do not properly address it we will jeopardise progress we have made in other areas to restore some stability to our fiscal and economic position.
If I could pick one figure from mythology to encapsulate the staggering collapse of our construction sector and our economy, it would be the Greek flier Icarus.
Having had wings constructed from wax and feathers, he mastered flight and took to the skies. Many commentators in this country and beyond cautioned against overheating our economy, just as Daedalus cautioned his son not to fly too close to the sun. Both warnings went unheeded, and both ended in the crash that has proved so catastrophic.
And so we find ourselves in this morass, where borrowers, both in the commercial and Local Authority sectors, find themselves burdened with onerous debts on properties that have plummeted in value.
Given the downward pressure on wages, the rate of unemployment and shortened working hours, many are simply unable to service the loans that had driven their dreams.
As part of the report of the Inter Departmental Group on Mortgage Arrears (or the Keane Report, as it’s more commonly known), one of the key recommendations was the establishment of two mortgage-to-rent schemes, wherein distressed borrowers undertook to surrender their homes to the lending institution and thereafter lease them back from either the bank or a voluntary housing body who would purchase the property.
Officials from my Department and other actors have devised, and recently initiated, pilot projects in this regard. Once we have assessed the effectiveness and scope of these schemes we hope that they will commence on a more extensive basis.
In addition, my Department issued comprehensive guidance in 2010 to local authorities on the treatment of mortgage arrears, including loans for shared ownership transactions, closely based on the Central Bank’s first statutory Code of Conduct on Mortgage Arrears, which ensures local authority mortgage arrears are handled sympathetically, while also protecting the position of the local authority concerned.
To reflect the content of the Central Bank’s revised Code of Conduct – effective from 1st January 2011 – my Department is currently preparing updated guidance to local authorities in consultation with the City and County Managers Association, and publication of this manual is imminent.
This will be accompanied by a range of other measures to more adequately reflect the risks of mortgage default to local authorities. It is a complex area and every potential solution has a cost. What we are trying to do is finely balance the costs and the risks to borrowers, local authorities and the Exchequer. Officials will be providing more details on this over the coming weeks to housing and finance departments.
Tenure
The mortgage arrears problem is one that has been driven by a variety of interlinked factors, one of which is an ongoing attachment to home ownership. The Government’s housing policy statement is clear about the costs of an over-reliance or an over-incentivisation of home ownership.
Ladies and gentlemen, I sincerely hope that we are witnessing at the moment a seismic shift in the tenure profile of our society which will break the old mould forever.
Our recent fall from grace can be attributed to low interest rates, easy access to money, lax regulation and a housing sector which failed to gauge the capacity for demand.
Irish people have long aspired to own their own homes, but this developed into an unhealthy mindset that was irresponsibly sponsored by successive governments who recklessly incentivised acquisition. A glance at our European neighbours reveals a more blended residential sector, balanced by a vibrant and adequately regulated private rental sector, to be a more realistic and sustainable model.
The differential between rental and mortgage costs was artificially lowered by tax breaks and other devices, which lead to the ‘dead money syndrome’. Many homeowners who now face punitive crippling debt burdens have fallen out of love with ownership, and a new generation is emerging who see leasing or renting of property not only as necessary but also desirable.
I welcome this sea change and envisage a more varied and well functioning property market as a result. The recent product launched by NAMA and other similar products may have a role in facilitating people who want and can afford to buy to realise their home ownership aspirations. But there’s a fine line between facilitating and enticing. I have no issue with the former but will be resolutely on guard against the latter. We simply cannot afford to repeat the mistakes of the recent past so shortly after learning them.
Social Housing
Economic adversity has also severely amplified the challenge of delivering social housing supports. We now face many tests – some, new.
We find ourselves with escalating housing lists as
more people find themselves in financial distress. The difficulties facing us are immense. The urgent need to curb State spending has confronted us with an enormous task. Basically, need is up, resources are down. Flexibility will be key to maintaining services for the coming years.
I know you know this better than anyone, but it bears repeating:
Local authorities have traditionally provided the bulk of social housing by means of capital spending, be it by build or acquisition. Our financial parameters dictate that such capital intensive programmes will not be possible on the same scale in the future and the shift to more flexible and immediate solutions will play an increasingly important role.
Leasing and rental accommodation schemes have contributed considerably to servicing an ever demanding sector in recent years. Housing provision will have to come from more intensive use of these schemes in the coming year.
Voluntary and Cooperative Sector
This has implications too for the overall institutional framework for the housing sector. For some time now a strong voluntary and co-operative sector has provided a crucial supplement to the work of local authorities.
The sector now stands at a critical juncture as the traditional models of direct Government funding have, almost overnight, become obsolete. The Government’s Housing Policy Statement very clearly places voluntary and cooperative housing associations at the heart of social housing provision in the years ahead and this will call for creative and imaginative measures in terms of both financing solutions and housing measures. However, if the sector is to deal with the new reality, including the shift from 100% Exchequer funding to a more diversified investment model, it is necessary that we have in place a fit-for-purpose regulatory framework.
Accordingly, my Department and I are working closely with the sector on the development of a regulatory approach that will support the sector to develop but will also provide independent scrutiny and validation, plus ‘step-in’ mechanisms, in a new and challenging environment.
Such a regulatory framework will provide assurance to everybody, both within and outside the sector, as to the long-term stability of the sector. It will provide a structure within which the sector can expand and that will make it easier to access private financing. The framework will set down basic standards of corporate governance and financial management, and embed sustainable housing management policies at the heart of a coordinated approach to the development of the sector. If it is to be meaningful it must provide independent assessment of housing bodies’ competence to deliver on their stated aims and objectives, and scope to intervene where risks and underperformance are identified.
However, as I have made clear elsewhere, I have no intention of simply imposing a regulatory structure from on high. Such an approach, while superficially attractive, would not lead to the best long-term solution and would be a disservice to the sector’s long years of achievement. Instead, I am fully committed to developing a regulatory framework in collaboration with the sector and other parties. I also recognise that one size does not fit all, and that there will be a need for housing bodies at various scales in the future. In other words, it needs to be about the larger housing associations, but it can’t just be about the larger housing bodies, and the role and potential of smaller actors will have to be recognised.
The production of a framework will not – indeed cannot – happen overnight. The precise content of the framework, and the institutional arrangements necessary to deliver it, must be identified and refined. I hope to launch a Voluntary Code for the sector in a few months’ time which will serve as a learning opportunity for the sector and for my Department as we work on a longer term regulatory framework that will best serve our mutual needs.
Rent Supplement
An equally daunting challenge is the transferring of responsibility for long term rent supplement recipients to local government. This should be seen as one of the most significant and radical of the reforms contained in our policy statement.
The Programme for Government commits us to review the operation of the Rent Supplement Scheme, and better align rent supplement and social housing support, via an inter-agency working group.
Originally intended as a short-term income support for households, rent supplement became a long-term housing mechanism. This resulted in employment traps, weak regulation of the supported private rented market and a fragmentation of social housing services. The new policy direction will see the transfer of responsibility for rent supplement households with a long term housing need to local authorities.
The objectives of the new scheme will be to encourage recipients to take up full time work, facilitate better regulation of the private rented sector, and provide a more integrated service for households seeking State support to meet housing costs
Rent supplement will revert to being a short-term income support, as originally intended. The detail of the proposed transfer and any standards or criteria to be introduced are in the process of being developed and agreed through an established Steering Group, chaired by my Department, and a number of specific working groups. Progress has been good and I expect to be in a position to report details of the new arrangements later this year.
Conclusion
This administration has been but a short time in power and I have been an even shorter period as Minister for Housing and Planning.
When we came to office, our economy was teetering on the edge of a cliff. We have since steadied ourselves. We have taken a step back, but we are still close to the edge. We should not underestimate the task before us. The work of rebuilding our economy has begun, but it will be a long, hard road back, and we cannot pretend it is otherwise.
I am proud of our achievements so far, and of the pragmatism of the Irish people in facing up to the hubris of our recent past. As housing practitioners we must apply ourselves to devising imaginative and restorative solutions to the challenges which confront us and we must endure in our task together over the coming years.
I wish you a successful and productive conference.
Thank you.