Opposition claims that a State scheme to assist home ownership will result in a price spiral are false, completely exaggerated and ill founded, the Fine Gael Parliamentary Party Chairman has said.
Deputy Richard Bruton said the shared equity scheme, which involves the State investing in the cost of new houses, will move demand in the housing market and will bring a welcome shift in the supply mix to starter homes.
The Dublin TD also said it was strangely ironic that Sinn Fein are expressing concern about supply when they have consistently blocked mixed development on council lands and rezonings – intended to release new supply.
Deputy Bruton said what is certain is the scheme will be a great help to people who are now locked out of the housing market and paying 35% more in rent than they would buying a home of their own.
“This is a very targeted scheme, focusing on those with incomes that are over the limit of €42,000 for social housing, but who cannot possibly purchase on the 3.5 times income loan rule. This group should be a priority group for assistance. It is not like the mortgage relief schemes which raised demand universally, nor indeed like the tax relief for renting favoured by Sinn Fein.
“It is of course true that if families locked out of the market are let in, you do increase the demand for new homes. However, in helping this priority group, you reduce demand for rental property, so do not increase the overall pressure in the market,” Deputy Bruton said.
“What happens to price, of course, depends also on what happens to supply. The evidence of the past few years is that supply is responsive.
“The supply of new homes has grown three fold in the past five years, and can be expected to continue to grow rapidly as the Land Development Agency brings new stocks of public land to housing( at least 50% Affordable).
“Indeed billions are now being spent by the state to boost supply: social house building, serviced site supports, local infrastructure support, reconstruction grants, to mention just a few.
“It is a strange irony that Sinn Fein should now be expressing concern about supply when they have consistently blocked mixed development on council lands and rezonings to release new supply.
“It is also the case that extra demand for starter homes is welcome as developers have been catering to higher priced trading up homes. A change in the housing mix is overdue. This scheme will be complemented by a new Part 5 obligation requiring private developers to deliver at least 20% affordable or social. The scheme complements the many other measures designed to increase supply in the affordable category.
“I read the evidence of my former colleagues in the ESRI, suggesting upward pressure on prices, but I have to point out that they admitted that they assumed no change in supply, a very questionable assumption in the evaluation of this issue.
“Indeed in a recent paper, the ESRI judged the Rebuilding Ireland loan as a good example of a targeted measure with limited risk of impacting on house prices. The Shared Equity scheme is equally targeted but on an even smaller scale. The scheme will allow young families to take up the supply of affordable homes which is one of the central pillars of government plans.”