Rabitte promises massive transfer of funds to property developers

[madisona]

Pat Rabbitt has promised that hundreds of millions will be paid to hard up property developers in order to ensure that property prices continue to rise if Labour is elected. Amid fears that buyers are having increasing difficulty meeting their prices and concerns by developers that they might therefore have to reduce selling prices, the Labour Leader assured them that he would do everything he could to ensure that this would not happen. Under Labours plans any gap between affordability and prices wanted by developers will be funded by the taxpayer.


[broken link removed]

 

[gearoidmm]

And we thought that the tent at the Galway Races was bad..

 

[RainyDay]

I attended an interesting workshop on this (and the rest of [broken link removed]) as part of the Labour annual conference yesterday. This proposal is really about fixing the current 'shared ownership' scheme, which just doesn't work. The current scheme doesn't take account of the different levels of house prices across the country, and the means testing excludes the 'working poor', e.g. young people in the early part of their career or the classic public servant (nurse/garda/teacher) who really should be living as part of their community, not part of some dormitory town 60 miles away. The approvals process for the 'begin to buy' scheme will be a needs assessment, not a means test. It will be based on prices in the area in question, so a couple with 2 kids will be approved for shared-purchase of a 3-bed house, 3-5 kids will be approved for shared purchase of a 4-bed house etc.

The cost to the state is minimal - just the interest cost of the borrowed funds. The initial plan is for a fund of €2.5 billion, which will have an interest cost of about €100 million per annum. The proposal may well be self-funding on a rolling basis - as purchasers buy out the state share in their property over time, this will free up funds for a new round of purchasers. The scheme will be structured to incentivise purchasers to buy out the state, and to penalise those who avoid buying out the state share. More details can be found in [broken link removed].

The risk of fuelling house price inflation was discussed. The view from the economists was as follows;

- Many of those purchasing through this scheme will be coming from private rented accomodation, so will be freeing up properties in this sector. This will result in reduced demand in that sector to balance any increased demand in purchases.
- Last year, about 90k properties were built in Ireland, and this year, it looks like it will come out at something around 70k. So there is additional capacity available in our construction sector to provide additional supply into the system.

 

[Slash]

Pat Rabbitt has promised that hundreds of millions will be paid to hard up property developers in order to ensure that property prices continue to rise if Labour is elected.

It's funny, but I didn't read that into it at all. Maybe madisona was reading a different article.

(Unlike Madisona, I am going to declare my interest, and say that I am not a Labour Party supporter. Perhaps, Madisona, you should declare your allegiance, which is clearly anti-Labour Party).

 

[madisona]

I would disagree with your points. I am always a bit suspicious when money is given to one group of people ostensibley for the benefit of another group of people. The fact is all of this €2.5 billion of taxpayers money will be given directly to property developers. This dwarfs the few hundred million that Fianna Fail has paid to developers for properties on the open market in recent months. I am not disputing that developers are necessary, merely that they are doing well enough already without this level of subsidy. I also question the wisdom of using taxpayer money to keep house prices rising.

Measures that could be taken to help first time buyers.
Reduce the €480,000,000 a year paid to landlords and speculators through the rent allowance scheme. This will dramatically reduce rental levels thus making speculation less attractive and thereby reducing house prices
Stop subsidys in general to speculators.

The shared ownership scheme is not working and has even been abolished completely by some Councils. However capping it was essential to prevent people buying very expensive properties. The first time buyers grant was rightly abolished on the basis that it was merely being passed on to builders.

The market works by supply and demand. If prices stagnate speculators will leave and first time buyers will form an increasing part of the market.
Buiders will have no choice but to accept what they can pay. say a first time buyer can afford €200,000 (40 year IO mortgage)that is what a developer will have to accept. However under Labours proposals the govt would add maybe another €100,000 to this, the FTB will still be paying the same amount for his 40 yr mortgage , only now he will only own a portion of the house and the developer will have made a much increased profit.


There are measures that could be taken to ensure that there is an adequate supply of social and affordable housing for those that can't afford market levels, measures which would reduce house prices for everyone else rather than increasing them.

Why is Labour not promising that it will enforce Part V. Under this provision developers are supposed to give 20% of housing in new developments. The actual figure at the moment is around 1% due to council officials having the power to give exemptions to their favourite developers.

Why does Labour not advocate to building of social housing by the govt which was done years ago.

Why is Labour opposed to allowing prices to fall to a level that FTBs can afford?

As for party affiliation, I have none and have been equally critical of Fianna Fail and Fianna Gael proposals to help the rich at the expense of the poor.

 

[RainyDay]

Why is Labour not promising that it will enforce Part V. Under this provision developers are supposed to give 20% of housing in new developments. The actual figure at the moment is around 1% due to council officials having the power to give exemptions to their favourite developers.

How about something like;

At current rates of housing construction, Part V should be
delivering 6,000 Affordable Homes each year. Labour will
ensure that this target is met, by requiring developers to
commit to their Part V obligations, before planning
permission is granted and not after, as is the case at present.
In addition, we will streamline the procedures for Part V
agreements, abolish the escape clauses in the existing
scheme and apply Part V to all residential developments of
five units or more.​

Why does Labour not advocate to building of social housing by the govt which was done years ago.

How about something like;

The NESC has recommended that Social Housing output
should be increased to approximately 10,000 per annum, for
the next seven years. The Labour Party is the only party to
commit itself to this target.​

Why is Labour opposed to allowing prices to fall to a level that FTBs can afford?

Possibly because it would be political suicide to propose an approach that might just be a tad unpopular with anyone who has already purchased, particularly those with high LTV ratios.

You really should familiarise yourself with [broken link removed] before you cast nastursiums.

 

[z107]

Possibly because it would be political suicide to propose an approach that might just be a tad unpopular with anyone who has already purchased, particularly those with high LTV ratios.

I already purchased and have been paying my mortgage off for the last 10 or 15 years. I don't want to have to start paying someone else's mortgage off. This scheme would be unpopular with me.

 

[RainyDay]

I already purchased and have been paying my mortgage off for the last 10 or 15 years. I don't want to have to start paying someone else's mortgage off. This scheme would be unpopular with me.

Fair enough. I don't think any party is going to please all of the people, all of the time. You may well be paying the same amounts out via the rent allowance scheme (a good old-fashioned poverty trap if ever there was one) at the moment, so your choice may be paying the investors mortgage or the residents mortgage. You might think differently if you have a few thirty-something kids hanging round the house unable to get their own place, or kids stuck in poor quality rental accomodation for years. You might be paying the costs via anti-social behaviour arising from an absence of community spirit, given that many parents are stuck in long commutes morning and evening.

 

[Purple]

I don't think anyone could seriously accuse Pat Rabitt or the Labour Party of being pro property developer. (I do find it strange that they are opposed to the sections of society that provide the most jobs for their traditional supporters and support and draw members from the groups in society that are traditionally the wealthiest and most exclusive, but that's a different matter).
Labour's proposals are made with the best of intentions and are aimed at helping those who are, as Rainyday accurately describes them, the working poor. In the short to medium term I think that their policies will help those whom they are targeting. The questions that have to be asked though are;

Is this the best was to achieve their goals?
Is this going to be good value for money in the medium to long term?
Will this just keep prices high for longer and therefore increase the chance of a bigger crash in the long term?
While those targeted may benefit will this have a detrimental effect on the rest of the housing market?

I don't know if Labour has addressed the impact of high property prices, and therefore rent, on the overall economy. From how it sucks up investment that could go into exporting industries to how it increases costs for everything from a cup of coffee to a medical procedure. If it has how have these factors informed and influenced their housing policy?

I am not a labour party supporter or a property developer or a member of any political party. While I intensely dislike Pat Rabitt's policy of attacking the person and not the policy and the Stalinist way he runs his party I do have quite a lot of respect for many of the Labour party's members and how they were a very positive force for social change the last time they were in power (but not nearly as much as they claim they were). The reason I don't vote for them is policies like this; it shows me very clearly that they do not know, or worse; choose to ignore, how economics works, how attempts to tinker with the market like this don't work. They should have learned from Bertie's attempts to prop up the Irish pound when he was minister for finance. I think he did and it only cost us a few hundred million (and those were the days when a few hundred million was a lot of money ) or the numerous Bacon reports that we all remember.

 

[madisona]

How about something like;

abolish the escape clauses in the existing scheme and apply Part V to all residential developments of five units or more.​

How about something like;

The NESC has recommended that Social Housing output
should be increased to approximately 10,000 per annum, for
the next seven years. The Labour Party is the only party to
commit itself to this target.​

sorry for casting nastursiums. perhaps discussion should be confined to the proposed "Begin to Buy" scheme. However in answer to your points.

1 My criticism of Labour regarding Part V is perhaps unjustified. Labour politicians like Eamon Gilmore TD and Cllr Catherine Clancy in Cork have been at the forefront of calls to have it enforced in recent years. Labours promise to take away the power to grant exemptions from local council officials is very significant and would imo (if implemented) lead to a dramatic increase in the delivery of social and affordable housing units under the scheme.

2 re NESC Social housing point, this is the sort of meaningless airey fairey promise that gives politicians a bad name. Fianna Fail have been making similar promises for years e.g. this piece of nonsense from 2003

THE Government is determined to deliver the 10,000 affordable houses promised to low-income workers under the new Sustaining Progress deal, the Department of the Environment insisted last night

[broken link removed]

and while Labour may be the only party to promise 10,000, Fianna Fail has promised much more i.e.

“It is hoped that some 60,000 new units of social housing will be provided, and it is estimated that some 40,000 affordable homes will also be provided

[broken link removed]

I have also yet to hear anything concrete from Labour re the rent allowance scheme which while enriching landlords keeps so many in a poverty trap and also negatively impacts many more low income workers who have to pay higher rents because of it. Is Labour afraid to take on the Landlords?



In relation to "Begin to Buy" I still fail to see how paying an additional €2,500,000,000 of taxpayer money to developers on top of what people can already afford to pay will not lead to property price inflation. I think that this is, whether intentionally or not a scheme that will benefit developers and make things worse for those strugging to afford a home. It may of course benefit those who already own homes and want to see their value increased, but that is not the way it is being sold.

 

[ashambles]

Working poor - interesting examples, nurses(55k avg salary 2006), gardai (56k avg salary 2005), teachers (44k avg salary 2005), if they're poor what will we call the 800,000 who work and earn so little they pay no tax - "working destitute" maybe.

Anyway so they can't buy a house in the first couple years of employment. To get around this there's a financial scheme called saving up and waiting.

The labour leaflet is short of details. What are the income thresholds, will it prevent Pat+Mary earning 1k over the limit having half the purchasing power of Bertie+Liz who earn 14 euro less a week after tax.

Will it exclude people whose income in the normal course of their career will be expected to rise well beyond the limit despite a small starting salary e.g a solicitor or accountant.

2.5B would fund 16660 houses using the 150k/house example in the leaflet, doesn't go as far as it might sound.

Can/Should the fund also cover stamp duty, once you allow a first time buyer to move from the 250k to 400k zone you're also introducing them to 24k in stamp duty.

I don't agree with the current affordable scheme either, but suspect fiddling with an open market is going to just going to make things worse for the people who don't fit into the scheme.