Government policy and legislation

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1.0 Government Policy and Legislation

1.1 Introduction

According to the Department of the Environment, Heritage and Local Government (2009), the aim of the Irish Housing Policy is to "enable every household to have available an affordable dwelling of good quality, suited to its needs, in a good environment and as far as possible at the tenure of its choice".

The following review provides information on the legislative background of the social and affordable housing in Ireland. It examines the acts, initiatives and reports in relation to social and affordable housing and details the circumstances that gave rise to the implementation of Part V of the Planning and Development Act 2000. It also examines the government policies that affect housing affordability and analyses Part V of the Planning and Development Act 2000 and the amendments made in 2002.

1.2 Government Policies that Influence Home Ownership and Prices

1.4 Circumstances That Gave Rise to Part V of the Planning and Development Act 2000

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The following sections of this dissertation are a review of the contributing factors that gave rise to Part V of the Planning and Development Act 2000. The following sections include a review of the Bacon Reports and other important factors.

1.4.1 Bacon Report 1: An Economic Assessment of Recent House Price Developments

During the lead up to the publishing of the first Bacon report, Ireland was experiencing rapid increase in house prices. During this period investors began to flex their muscles in the property market. As a result the first time buyer's suffered and began to find it increasingly difficult to enter the housing market. Traditionally first time buyers bought properties towards the lower end of the property ladder. It was these properties that the investors were driven to secure with the aim to rent. The demand for these rental properties was fuelled by the increase in numbers of immigrants entering the country that were not looking to buy properties but to rent properties. This increase in demand for property led to a number of housing agencies to issue warnings that demand for housing would continue to increase and continue to inflate housing prices in the market in Ireland.

The first Bacon report proposed interventions by the government to help first time buyers who were at this stage, struggling to get into the inflated property market. The report recommended that the government should strive for a more acceptable rate of house price development and suggested four main areas to focus on for a policy response. These areas are as follows; "Achieve better balance between demand and supply in the short term, improve the potential supply of the housing, engage in infrastructure developments and to improve medium and long term planning of the development of the east region".

The Bacon report goes on to suggest a rebalancing of existing incentives in favour of the provision of housing at the lower end of the property market. The report highlights that the revenue has overlooked the provision of incentives for providing affordable housing. The report suggests revenue incentives, as a method to increase availability and choice to first time buyers who were struggling to enter the property market.

The removal of what was defined as Section 23 incentives for investors and the removal of mortgage interest relief against properties were suggested. A reduction of stamp duty on second hand homes was proposed to increase the scope of available affordable homes in the second hand market.

The report suggested a review of residential densities and investment in infrastructure as necessary to help maximise housing supply.

The report went on to suggest the idea of introducing an administrative control on housing prices. This idea was later discarded as it was thought that the control of house prices would have the potential to distort the property market.

1.4.2 Government Response to Bacon 1

The government responded to Bacon 1 by decreasing stamp duty rates on second hand houses and also by investing in the improvement of the infrastructure to help realise the potential of development land. The government imposed stamp duty on new houses bought by non owner occupiers. Tax relief for property investors on Section 23 properties was reviewed and the suitability of each property for relief is to be individually assessed subject to the Local Area Plan. Deductibility of interest on borrowings undertaken for investment in property was removed after April 23rd 1998. Action was also taken in the effort to bring down income limits for the shared ownership scheme to a level that was more relevant to the incomes at the time.

1.4.3 Bacon Report 2: The Housing Market, an Economic Review and Assessment

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The Bacon Report 2 was published after the Government responded to the first Bacon report. This report centres largely on the period directly after the first Bacon Report and observes the impact of the report by assessing the property market during this time.

The Report finds that house inflation had slowed since the Governments actions following the first Bacon Report. This slow down was particularly apparent in the market for new housing.

Following the first report, the Government removed the deductibility of interest on borrowings for investors while promoting liquidity in the second hand market by changing the structure of the stamp duty system. This Report found that the reduction in interest rates at the time and the easing house price inflation should have made housing more affordable, but in fact affordability remained a serious problem. The Report did warn that a reduction in housing prices may solve the issue of affordability but negative equity would be serious bye-product. The Report made it clear to the Government that they had to centre on filling the void between the price of new houses and the price that was affordable for those who could not afford to buy a new house at the normal asking price.

The Report suggested again as it did in the first Bacon Report, that the issue of housing densities should be reviewed, with the possible integration of terraced housing in new developments as a method of providing housing at a lower cost to the developer. The Report did raise the issue of social isolation due to this form of housing.

The Bacon Report 2 introduced a concept to develop a scheme for the provision of affordable housing by local authorities and developers. This was the first instance that laid the foundations of the affordable homes scheme.

The need to strengthen the existing Planning Acts was highlighted with the objective of modernising the Governments housing policy.

The concept of making housing more affordable and improving accessibility to mortgage funding would further increase demand for housing and therefore increase housing prices. As a result the Report suggested to the Minister for the Environment and Local Government to invite proposals from agencies within the voluntary sector as how they could be helped to develop and also how their resources could be applied in a more effective manner with the aim of providing extra housing for the sectors of the community most in need.

1.4.4 Government Response to Bacon 2

On the 9th of March 1999 issued a report titled, "Action on the Housing Market". This report contained the Governments response to the 2nd Bacon Report. This report contained initiatives which aimed to "maximise and expedite housing supply, secure house price stabilisation, address affordability issues and ensure balanced growth of the property market in the future", (Action on the Housing Market, 1999). Their actions included placing temporary sewerage facilities on land in Dublin to enable the early release of 16000 housing sites. Arrangements were made to identify infrastructural constraints in areas of growth which would reduce delay in housing provision. Draft guidelines for new housing densities were published. These included action on increasing the mix of affordable housing in new developments. An affordable housing scheme was launched shortly before the release of the government response. Through this scheme Local Authorities would provide additional new houses on land available to them which would help lower income households to purchase their own homes. It was stated that the Department of the Environment and Local Government would invite proposals from the voluntary housing sector as to how to expand on the voluntary housing programme.

1.4.5 Bacon Report 3: The Housing Market in Ireland: An Economic Evaluation of Trends & Prospects

The third Bacon Report was released on the 6th of June 2000. The first point of Bacon 3's executive summary stated that "the rate of increase in housing prices, since the release of the first Bacon Report in 1998 had slowed down significantly". The strengthening economy at the time was blamed for the increased difficulty in securing stability in the housing market. House price completions had increased in each successive quarter in 1999. The average price of new houses was still beyond the reach of many average workers. The rate of economic growth at the time meant potential demand for additional 8.000 to 10,000 residential units per annum. The requirement for increased supply in Dublin and the Middle East regions was stressed as increasingly important to control house prices due to the predicted increase in demand in that area.

1.4.6 Government Response to Bacon3

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The Government released a report detailing measures which it would take to address housing needs and requirements, as outlined in the third Bacon Report. With regard to Social and Affordable housing, the Government stated that they would increase output of local authority housing that would start at 1,000 units per annum between 2001 and 2006. The Government also proposed measures that would aim to facilitate Local Authorities and Voluntary Bodies to acquire sufficient land that they could provide social and affordable housing.

1.5 Demands for Irish Housing

According to Norris and Redmond (2005), there have been significant increases in the demand for housing in Ireland during the economic boom, caused by a combination of economic, demographic and social factors. As mentioned in 2.4.1, the Governments taxation policy was favourable to property investors, particularly during the period following the 1986 Urban Renewal Act which initiated Section 23 Tax Relief. The annual housing inflation rate in 1998 was at 22.5%. At the time this rate of inflation showed no signs of slowing down. The First Bacon Report summarised in 2.4.1, estimated high levels of future demand for Irish housing. The Second Bacon Report pointed to rising rents in the private rented sector. Social rented housing output was not increasing and in 1999 the local authority assessment of housing need showed that 39,716 households were registered on local authority waiting lists, this was an increase of 43% on the previous assessment of housing need which was complied in 1996, (Brooke 2006). The first affordable housing scheme was introduced in March 1999. This scheme provided only 40 affordable houses that year.

Part V of the Planning and Development Bill 1999 was structured to address these issues. The Minister for the Environment, Mr Noel Dempsey stated that Part V addressed two major issues in the Irish Housing Policy that allowed people to purchase their own homes and also of the provision of social rented housing. According Mr Noel Dempsey (2000), Part V of the Bill, "introduces a major new dimension to planning legislation and contains the most radical and probably the most contentious provisions of the Bill".

1.6 Most Notable Legislation in Relation to Irish Housing Provision

The following is an account of some of the Legislation that is considered most important in relation to Social and Affordable Housing.

1.6.1 Housing Act 1966

This Act modernised the legal framework for social housing in Ireland. Is also included the provision for the tenant purchase scheme which allowed local authority tenants to purchase their houses form the local authority. Section 55 of this act relates to a house building programme which each local authority must adhere to in relation to the provision of housing.

1.6.2 Housing Act 1988

This act defined how homelessness would be interpreted in relation to the provision of housing. It allowed the provision of a subsidy to eligible persons against the loans which they had obtained for the purchase or construction of their house. It required local authorities to make an estimation of housing requirements within their functional area both at the present time and over a designated period of time.

1.6.3 Housing Act 1992

This act introduced the Shared Ownership Scheme which allowed a housing authority to grant a shared ownership lease for a term of more than 20 years but not less than 100 years.

1.7 Conclusion

Author(s) name(s), Initial(s). (Year of publication) Title and subtitle (if any). Research report number (if there is one). Place of publication (if known), Publisher and body for whom research was carried out (if known). Ferguson, H. and Hogan, F. (2004) Strengthening families through fathers: developing policy and practice in relation to vulnerable fathers and their families. Waterford, Centre for Social and Family Research, Waterford Institute of Technology for Department of Social and Family Affairs.

References

Dempsey, N. (2000) Planning and Development Bill 2000, second stage, 2nd February, Dáil Éireann, available: http://historical-debates.oireachtas.ie/D/0513/D.0513.200002020018.html [accessed 23 February 2010].

Brooke, S. (2006) Building for inclusion? : Housing output and part V of the Irish Planning and Development system. Dublin. Focus Ireland.

Bacon, P and Mac Cabe, F. (1998) Bacon Report 1: An Economic Assessment of Recent House Price Developments. Dublin, Stationary Office, Minister for Housing and Urban Renewal.

Bacon, P and Mac Cabe, F. (1999) Bacon Report 2: The Housing Market an Economic Review and Assessment. Dublin, Stationary Office, Minister for Housing and Urban Renewal.

Bacon, P and Mac Cabe, F. (2000) Bacon Report 3: An Economic Evaluation of Trends & Prospects. Dublin, Stationary Office, Minister for Housing and Urban Renewal.

Molloy, R, Dempsey, N and Ahern, B. (1999) Action on the Housing Market. Dublin, Stationary Office, Department of the Environment, Heritage and Local Government.

Redmond, D. and Norris, M.(2005)Setting the Scene: Recent transformations in Irish housing'inHousing Contemporary Ireland: policy, society and shelter, Dublin,Institute of Public Administration.