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Ireland's political and cultural magazine
3 0 July 2017
O
N 20 June the consumer advocacy group
Right2Homes presented a National Co-Oper-
ative Bill to the Oireachtas Joint Committee
on Finance, Public Expenditure and Reform.
Supporting the bill was an expert panel
including Edmund Honohan, Master of the High Court,
homeless campaigner Fr Peter McVerry, academic Dr
Rory Hearne of Maynooth University and other industry
professionals. Prominent US Cornell University Law
School professor Robert Hockett submitted a separate
written submission to the Chairman.
The Bill envisages the establishment of a not-for-profit
co-operative to purchase large volumes of mortgages
currently on the books of Irish lending institutions, that
are in arrears. It is envisaged as an off-balance-sheet
self-funding initiative, a special purpose vehicle with the
intention to purchase 42,000 homes currently in arrears
of more than one year. €14bn of assets for a marked-
down value of €5bn.
The overarching intention is to “keep owners and ten
-
ants alike in their homes” out of an overheated private
rental sector and to help prevent further homelessness.
To put the initiative in context, it is useful to remind our
-
selves of the current housing status.
Mortgage Arrears - a ‘perfect storm’
A March 2017 report by the Central Bank confirmed the
scale of Ireland’s mortgage distress: one in ten mort-
gages (76,422) are in arrears over 90 days of which
33,447 were in arrears for more than two years. Out of
this 14,367 are ‘Buy-to-Let accounts. Despite this, the
current rate of repossessed properties disposed of was
relatively low at 210 in the first quarter.
Homeowners in arrears are facing a ‘perfect storm’ -
on the one hand very low levels of new home supply give
a net loss of overall housing stock and contribute
towards historically low levels of rental properties. On
the other there is a recovering economy, net inward
migration of over 34,000 people per annum and increas-
ing levels of household formation. The Housing Agency
suggests there is a demand for 81,000 additional homes
by 2021.
The Central Statistics Office confirmed that, when all
factors were taken into account, the total stock of hous
-
ing increased by just 8,800 in 5 years. Sharp sales price
and rental inflation in the past three years confirms that
demand dramatically outstrips supply, even with 32,000
vacent and so-called ‘ghost estate’ homes having been
brought back into habitable use since 2011. For owners
and tenants facing repossession, options are limited.
Co-operative Bill could solve housing and
arrears problems
All demand indicators point
towards entrenched double-digit
house price inflation in the short
term, and even with a recently
introduced cap, rent increases of
over 7% per annum
New morning for
Ireland’s housing
problems
POLITICS
by Mel Reynolds
Morning
July 2017 3 1
Social and Affordable Housing
Under-investment in State housing has left thousands
of families in social-rental ‘solutions’ - temporary tenan-
cies with little security of tenure. In the five-year period
2011-2015 there were only 807 Part V social homes deliv-
ered. Just 37 Part V social homes were delivered
nationwide last year. Ireland’s social housing is a subsi-
dised private-rental model – state-sponsored tenants
competing for living space in the private-rental sector.
The average sales price of a new three-bed home in Co
Dublin on a greenfield site is €360,000. Purchase at this
price requires a combined household income of over
€100,000. There is no official definition of ‘affordable’
housing at present, no affordable housing scheme and
no official intention of introducing one. Legislation
underpinning the previous affordable housing scheme
was revoked and any new initiative would require a legal
framework to be developed.
State infrastructure funding of €240m has been
announced and will subsidise infrastructure for a number
of housing sites (LIHAF). The intention is to aid delivery
of 23,000 new homes in a five-year period. However,
there are no legal agreements in place with developers
in receipt of LIHAF funding for affordable housing, and
given the lack of clarity on what an affordable unit is,
especially its price, it is unlikely that any family homes
below the maximum affordable price limit of €290,000
will be provided.
Officials talk of an ‘affordable dimension’ to the infra
-
structure initiative and the assumption is that additional
new homes will reduce prices to affordable levels.
Detailed analysis of Central Statistics Office (CSO) data
confirms that increased new-homes supply follows
increases in price and rent, and that over a 40-year cycle
increasing supply has not once reduced prices.
Rental Sector and Homelessness
There are 3,100 available rental properties nationwide,
just 1,300 of them in Dublin. This is the joint lowest level
on record. All demand indicators point towards
entrenched double-digit house price inflation in the
short term, and even with a recently introduced cap, rent
increases of over 7% per annum.
There is an unprecedented level of homeless families
in Ireland at present . Typically these are households left
behind by the country’s recovery that, for various rea-
sons, simply cannot afford higher rents. Officials are
quick to point out that over 3,000 people exited home-
less temporary accommodation last year. However
Father Peter McVerry has confirmed that in 2016 there
3 2 July 2017
POLITICS
was a net increase in homelessness of 1,000 people,
confirming that the rate of people entering the homeless
system is currently at 4,000 per annum.
To improve balance sheets, lending institutions may
accelerate the sale of large tranches of distressed home
loans to investment funds - so-called ‘vulture funds’ - as
there is good demand and sale-price inflation approach-
ing 10% . As many vendors require ‘vacant possession’
for sales, sales of 20% of the mortgages in arrears for
two years or longer may result in a significant distortion
of the rental sector. Owners and tenants-in-arrears will
enter a volatile rental sector while their original proper
-
ties become temporarily vacant during the sales period.
Given the current historically low level of available rental
properties this has the potential to drive up rents into
double-digit figures and to increase the net numbers of
families entering homelessness by up to 5,000 persons
per year.
National Housing Co-Op Bill
It is against this bleak backdrop that The National Hous-
ing Co-Operative Bill 2017 has been proposed. By
purchasing existing arrears properties for an average of
€120,000, owners and tenants could be kept in place for
less than €600 per month. This figure is less than half
the current Housing Assistance Payment (HAP) level for
a two-bed property in County Dublin. Off-balance-sheet
bond-funding-mechanisms have been in place, agreed
by Government, for a similar if more modest initiative,
since 2013.
The five-year target for ‘Rebuilding Ireland’ is 47,000
homes in five years. Of this 32,000 are to be rental or
long-lease properties. This ambitious housing target
could be achieved in a short time with the National Hous-
ing Co-Op proposed in the Bill.
A gulf exists between the official ‘affordable dimen
-
sion’ concept, official housing data and the reality of a
massive mortgage-arrears problem paired with a pri-
vate-rental sector spinning further out of control. This
Co-Operative proposal will close this gap. Management
of large-scale affordable housing is the norm in Euro-
pean countries: legislation regulating co-ops has been
in force since 1893 and 1800 Co-Ops manage 6 million
homes in Germany (30% of all rental housing).
The housing crisis is a stark reminder that the private-
housing sector cannot be left to regulate and manage
itself. Official inertia towards looming mortgage arrears
could lead to further distortion of our already distressed
rental sector and a massive increase in our current high
level of families descending into homelessness for the
first time.
Peter McVerry has
confirmed that in 2016
there was a net increase
in homelessness of
1,000 people, confirming
that the rate of people
entering the homeless
system is currently at
4,000 per annum
Residential Mortgages on Principal Dwelling Houses
Figure 1: PDH Mortgage Accounts in Arrears over 90 Days
Note: The breakdown of arrears greater than 90 days is not available pre-September 2012.
3.3
3.6
4.1
4.6
5.1
5.7
6.3
7.2
8.1
9.0
9.9
10.6
11.5
11.9
12.3
12.7
12.9
12.6
12.2
11.8
11.2
10.4
9.8
9.3
8.8
8.3
8.0
7.8
7.6
7.4
7.2
0
2
4
6
8
10
12
14
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17
%
€m
In arrears over 90 days In arrears 91-180 days
In arrears 181-360 days In arrears 360-720 days
In arrears over 720 days % of loan accoun ts in arrears for more than 90 days (RHS)
7
Figure 3: BTL Mortgage Accounts by Arrears Category, end-March 2017
Not in arrears
80.8%
In arrears up to 90 days
3.5%
In arrears 91 to 180 days
1.2%
In arrears 181 to 360 days
1.3%
In arrears 361 to 720 days
1.9%
In arrears
over 720 days
11.2%
GRAPH : PDH MORTGAGE ACCOUNTS IN ARREARS OVER DAYS
GRAPH : BTL MORTGAGE ACCOUNTS BY ARREARS CATEGORY, END-MARCH
Source: Cenrl Bnk of Irelnd
Sisicl Repor
July 2017 3 3
KEEPING PEOPLE IN THEIR HOMES
AVOIDS SOCIAL & ECONOMIC DISASTER
“How could anyone not support this?” – Fr Peter McVerry
Supported by Senator David Norris, TD John McGuinness (FF), TD Mattie McGrath, Sinn Féin, Labour,
Rural Alliance, Solidarity-People Before Prot, Senator Gerard Craughwell, Senator Brian O’Domhnaill,
TD Mick Wallace, Senator Victor Boyhan, Marc MacSharry (FF), Peter McVerry Trust, Focus Ireland & UpLift.ie
Ask your TD to support ‘The National Housing Co-Op Bill 2017’
R2H A4 Vulture Funds Ad.indd 1 03/07/2017 12:57
