Labour unveils housing proposals

[Sligoboy]

Labour has proposed a €2.5 billion fund to help young people buy their first homes.

Outlining its housing policies in Dublin today, the party said it would introduce a "Begin to Buy" scheme to enable people start purchasing a home as soon as they are in full-time employment.

The system would be administered by the local authorities, which would be reformed to deal with their new function, the party pledged.

Applicants would be assessed to establish the size and location of housing required and, separately, an assessment would be made of the amount the person could afford in loan repayments.

They would then be approved to buy a home on a shared-equity basis, buying a minimum of 25 per cent, with the local authority purchasing the rest. Over time, applicants would have the chance to increase their share of the home, Labour said.

The party said it proposed to finance the measure with about €2.5 billion administered by the National Treasury Management Agency (NTMA). Assuming about 10,000 transactions each year, the scheme would cost around €100 million a year.

Mr Rabbitte said the current Government had "abandoned" couples to the mercies of the housing market. "They [the Government] have presided over a generous regime of tax breaks for investors in residential property, but they abolished the first-time buyers' grant," he said.

[irishpeoplearewhingers]

This is not a terrible idea- if people cannot afford houses, it is hard to see what stake they can have in society. Another approach would be to use the massive bargaining power of the government in ordering a large quantity of houses at a cheaper price than would be available for an individual, and then selling them on at cost price (or less) to young families.

[returning officer]

If FF proposed this it would be seen as a sop to the developers?

Can it therefore be said that it is Labour's policy is to lower the price of property (ie make it more affordable)? (if you subsidize FTB by this scheme you are taking them out of the private housing market, thereby further reducing demand there by 10,000).

And has Labour firmed up on when its stamp duty reform/reduction is to take effect? (will they backdate it, like FF, to minimise effect on the property market)?

[Libero]

If FF proposed this it would be seen as a sop to the developers?

By many people, yes. And they might even be right. On the other hand, first time buyers have become the political equivalent of the engaged couple with the ridiculous Brown Thomas wedding list. Much as everyone has good wishes for them, few have the balls to tell them they should stick to Pennys - especially when they expect those of us renting to give them a dig out.

Can it therefore be said that it is Labour's policy is to lower the price of property (ie make it more affordable)? (if you subsidize FTB by this scheme you are taking them out of the private housing market, thereby further reducing demand there by 10,000).

Applicants would be assessed to establish the size and location of housing required and, separately, an assessment would be made of the amount the person could afford in loan repayments.

They would then be approved to buy a home on a shared-equity basis, buying a minimum of 25 per cent, with the local authority purchasing the rest.

It looks pretty simple: while the FTBer is presumably restricted to a sane level of repayments, the local authority is forced through the working of the plan to fill the gap between that level of repayments and whatever the market is demanding in terms of financing the purchase price.
Unfortunately, since €2.5bn is a lot of money, I cannot see how this will have any other effect than to inflate prices further. In effect, a new purchaser is entering the market with pretty deep pockets. As with monetary inflation in a classic economic analysis, an increase in the money supply leads to higher prices. For those in the scheme, that's grand. For those who are not, well Labour will be hoping they don't notice. (In fairness, in terms of annual mortgage lending, €2.5bn over a period of time would only have a marginal effect, though that raises questions as to how many people can be helped by the scheme.)

For those of us staying out of the market altogether, Labour will also be hoping we don't notice what the €2.5 of NTMA money is currently allocated towards before being hived off for this scheme. We can be sure it isn't sitting doing nothing. It must be allocated at the moment to finance something or other, be it pensions or whatever. I can't see a mention of this in the Labour info at the moment; I think we should be told.

to enable people start purchasing a home as soon as they are in full-time employment.

The system would be administered by the local authorities,

Wonderful. Now young people who have just escaped the local authority administration of third level grants can look forward to making friends again with Pat and Mary down the Council (B.Sc. Finance, Oxon - not).

Shared ownership and joint equity is all well and good. But local authorities? Most can't reduce social housing waiting lists, and most couldn't pay simple, straightforward student grants.