Affordable Housing - waste of taxpayers money.

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Howitzer

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It would appear that many people who bought under the Affordable Housing scheme in the last few years may soon be able to buy out the Councils share for a trivial amount of money due to a combiniation of falling house prices and inflated initial valuations.

http://www.askaboutmoney.com/showthread.php?t=82122

Firstly, is this correct?

Secondly, where does this leave the financial status of our County Councils? Whilst this clawback amount does reduce over time it would have been likely that most councils would have booked some value to these assets that they had a share in, in some cases running to 10s of millions of euros.

A report in the Sunday Times from 2 weeks ago showed that the income for councils depended to a large extent on developer levies. In the case of Fingal Co Co 2/3s of their income for 2006 came from these fees. With reduced income and the potential for their assets to be, legitimately, stripped by a loophole in the Affordable Housing scheme, where does this leave their finances now?

And thirdly, this money is effectively our tax money, either directly or indirectly, which the councils administer. Have the councils just blown 100's of millions of euros of our tax money in property speculation?
 
Howitzer said:
It would appear that many people who bought under the Affordable Housing scheme in the last few years may soon be able to buy out the Councils share for a trivial amount of money due to a combiniation of falling house prices and inflated initial valuations.

http://www.askaboutmoney.com/showthread.php?t=82122

Firstly, is this correct?
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I don't think this is correct. The clawback can be calculated in different ways depending on whether it's for a sale/remortgage and/or if negative equity is involved. I've responded with more details in the original thread, since the OP is more likely to find it there.
 
Given the fact that the Council will shoulder the loss no matter what there seems to be plenty of scope for abuse/exploitation. 2 parties could arrange to sell at a very significent loss to the original valuation so that the Coucil losses all their share.

That isn't the case in this thread but is the obvious end point.

Im selling Affordable home - Lower than the Valuation

In fact once the seller is making zero profit they have absolutely no incentive to accept any price above their mortgage. If it was me I'd sell at the cost of my mortgage just to reduce my selling fees (estate agents still charge a % of sales price).
 
On a broader level - do you think it is the job of state to give people houses? I mean, I am all for the state providing a roof over peoples heads. But cheaply rented accommodation can achieve this. Should the state be in the business of cheap mortgages?
 
The state aren't giving people houses, they are enabling people to buy who couldn't afford to otherwise. People buying under affordable housing are tax payers so to say that it's a waste of tax payers money is daft. Should our tax stop funding the arts because not everyone has an interest in the arts? Should it stop funding roads because not everyone drives? Should I not have to pay prsi because I never make a social insurance claim? Stupid question. Housing is essential and the government is responsible for hiking up property prices in Dublin and other hubs by not providing nationwide infrastructure to support local development.

When people apply for affordable housing they pay an administrative fee of over €2,000. The council get the properties at cost from developers in return for planning permission for wider developments. The majority of people selling an affordable property will pay clawback and the council will make a profit. Where market values fall the council does not make a loss, it simply doesn't make a profit. The council don't buy the houses and sell them at a loss to begin with. I think the exception to this might be the affordable housing initiative only.

Current valuations on affordable properties are highly inflated. The council are selling substandard properties for substantially more than real market values. I am not speculating, I've been monitoring it very carefully. It is therefore essential that where people find themselves in a situtation of immediate negative equity that they are protected. Private buyers have more control over values because a private seller simply cannot inflate the price of their property.

Ultimately councils will still make a profit with affordable housing. A reduction in clawback to protect a buyer from negative equity does not amount to loss for the council, or a waste of tax payers money - it simply reduces the council's profit.
 
Cheeus said:
Should our tax stop funding the arts because not everyone has an interest in the arts? Should it stop funding roads because not everyone drives? Should I not have to pay prsi because I never make a social insurance claim? Stupid question.
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Stupid question indeed, as preserving our cultural heritage (the arts), providing infrastructure (roads) and providing for old age or illness causing inabilty to work (prsi) are all functions of government. Thus they have their own ministers and departments. Giving someone a cheap house, one could argue, is not a function of government. This is why there is no minister for housing, or department of housing. The government could provide houses on a cheap rental basis, thus taking care of their social obligation.
 
Cheeus said:
The council get the properties at cost from developers in return for planning permission for wider developments. The majority of people selling an affordable property will pay clawback and the council will make a profit. Where market values fall the council does not make a loss, it simply doesn't make a profit. The council don't buy the houses and sell them at a loss to begin with. I think the exception to this might be the affordable housing initiative only.
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I don't believe this is correct

State loses cash windfall in swap for affordable homes
 
Housing is a function of government and is looked after by the department of environment along with our cultural heritage. Get the chip off your shoulder, taxation serves a variety of purposes. To rent out cheap houses the council would have to purchase them, furnish them, upkeep them,administer them. With affordable housing the purchaser puts up the cash, maintains the property,pays the administration fee and pays the clawback when they move on - and everyone will move on because the properties are mainly smaller than average one or two bed apts.

Ultimately as house prices even off or rise the council will make a profit. A tiny minority of people could buy the council out now because the market values of their properties were totally inflated by the council a year ago - these same properties were for sale privately almost immediately for a lower price. Back to my point on protecting buyers from negativity equity where the control of values is strictly with the council.

The council went against the spirit of affordable housing in accepting some 'swaps'. These were opposed by advocates of affordable housing at the time and were welcomed by the normal begrudgers who didn't want affordable housing in their areas. Perhaps now those begrudgers are bemoaning the change of tide... delighted to be able to keep the begrudgers unhappy, they have to have something to moan about.
 
Cheeus said:
Housing is a function of government and is looked after by the department of environment along with our cultural heritage. Get the chip off your shoulder, taxation serves a variety of purposes.
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There is no chip on my shoulder my friend. I am simply engaging in a debate. You will notice I offered no personal opinions, I just thought that it would make an interesting topic for debate. That is, after all, what this particular forum is concerned with.

Cheeus said:
To rent out cheap houses the council would have to purchase them, furnish them, upkeep them,administer them. With affordable housing the purchaser puts up the cash, maintains the property,pays the administration fee and pays the clawback when they move on - and everyone will move on because the properties are mainly smaller than average one or two bed apts.
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A reasonable point.

Cheeus said:
The council went against the spirit of affordable housing in accepting some 'swaps'.
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I agree.
 
The affordable housing scheme needs to be reformed on a number of levels - some to give the purchaser more protection, some to ensure the cost effectiveness of the scheme for the council. Submissions on reform of the process are currently being sought from interested parties. You do have an opportunity to offer feedback.

The OP mentioned that purchasers could now buy the council out for trivial amounts. These purchasers really are in a tiny minority and are in a handful of developments where prices were ridiculous to begin with. More importantly the council are probably now reaping the rewards of increases in values on properties that were sold 5 years ago - people are paying their clawback and the council is getting their cash.

Perhaps they could use some of that cash to monitor current affordable properties and prevent people abusing the scheme by renting them out - now that is a clear waste of tax payers money and should be stopped.
 
Cheeus said:
More importantly the council are probably now reaping the rewards of increases in values on properties that were sold 5 years ago - people are paying their clawback and the council is getting their cash.
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Again I'm not sure where you're gettng your facts from. Here is a blog post by Joan Burton from September 2005. Now I'm not saying this is the most accurate peice of information but I gave google 30 seconds and this is the what I found.

[broken link removed]

This government committed itself to delivering 10,000 affordable houses under the terms of the Sustaining Progress national pay deal. Instead it has delivered only 374!
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September 2005 was close to the peak of the market and only 374 units had been delivered by then. I'm pretty sure the bulk of AH units have appeared over the last couple of years.

Virtually every Affordable Housing unit is technically in negative equity compared to the initial valuations.

Please, if you have figures to indicate otherwise I'd be genuinely interested in seeing them.
 
I don't have official facts and figures either.
I do know 2 people selling their affordable properties from 5 years ago. They made good profit on them themselves and have also paid substantial clawback to the council.

Take another example of the Belfry where affordable properties were sold 3 years ago - prices have fallen below the original market value, but they have not fallen below the cost price. The council are not making a loss. If people sell now they will pay clawback (granted it's a reduced rate), but the council are not actually losing. How many are selling anyway? I suspect that most people are happy with their homes for now and will pay higher clawback down the road.

The only real examples of people being able to buy out the council seem to be where the developers perhaps advertised apts at close to cost to get rid of them - I'm thinking of Erris Square last year. This was one or two duplexes that were well overvalued to begin with.

I am interested to see real cases where people have remortgaged to the detriment of the council. I suspect it will even out and with the current review underway hopefully the scheme will be closed to any potential abuse.
 
Howitzer said:
Given the fact that the Council will shoulder the loss no matter what there seems to be plenty of scope for abuse/exploitation. 2 parties could arrange to sell at a very significent loss to the original valuation so that the Coucil losses all their share.

That isn't the case in this thread but is the obvious end point.

Im selling Affordable home - Lower than the Valuation

In fact once the seller is making zero profit they have absolutely no incentive to accept any price above their mortgage. If it was me I'd sell at the cost of my mortgage just to reduce my selling fees (estate agents still charge a % of sales price).
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I think the council send someone out to agree with the valuation when someone agree's to buy the property. I would imagine the council have thought this thru'.
 
phil1147 said:
I think the council send someone out to agree with the valuation when someone agree's to buy the property. .
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Which is a scary thought given that the council's initial valuations are often far too high. There certainly needs to be some control of resales but I can see this scenario trapping an affordable purchaser in a substandard apt while the council insist that they hold out for what the private, bigger, higher spec apts are fetching.
 
Cheeus said:
I do know 2 people selling their affordable properties from 5 years ago. They made good profit on them themselves and have also paid substantial clawback to the council.
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This can hardly be condoned either, can it? If the state is providing housing that's one thing, but for the state to be providing windfalls to people - that surely is wrong. If the state gives somebody a house, is it legitimate that those people can sell the house for a profit?
 
shnaek said:
This can hardly be condoned either, can it? If the state is providing housing that's one thing, but for the state to be providing windfalls to people - that surely is wrong. If the state gives somebody a house, is it legitimate that those people can sell the house for a profit?
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Yes it is legitimate. If I buy an affordable property for 300k I am entitled to make a profit on that 300k investment. You do not profit on what the council put in - that is the clawback that you pay back to the council.

The situation now is very different to 5 years ago anyway. Because the market values are so inflated it will be difficult for affordable purchasers to even maintain their investment inline with inflation. Inflated clawback means that the purchaser loses out. People purchashing now are doing so because they need a home. People purchasing 5 years ago were lucky that they yielded a profit - a very legitimate profit, the council did fine too.
 
You are clearly incapable of a reasonable discussion and are just someone who chooses to bash the process without the remotest desire to understand it. Unfortunately it's people like you who spread public misconceptions about worthwhile council initiatives. You have no real interest other than to bash it. Waste of time.
 
Cheeus said:
You are clearly incapable of a reasonable discussion
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On what basis to you make this allegation?

Cheeus said:
and are just someone who chooses to bash the process without the remotest desire to understand it.
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On the contrary, I am attempting to understand it by taking the position of devils advocate. I have many friends who have benefited from the scheme and I am delighted for them. However I always find a worthwhile position can withstand honest argument, and if it cannot then we must re-examine it.

Cheeus said:
Unfortunately it's people like you who spread public misconceptions about worthwhile council initiatives. You have no real interest other than to bash it. Waste of time.
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Frankly that is offensive, and I would suggest that perhaps getting hot under the collar is not the way to counter my arguments above. Hysteria has no place in lively debate. Concentrate on attacking the argument, not the person making it.

So I ask once again, is it a worthwhile council initiative to help people with 'investments', or would that money be better spent on education or health for example?
 
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