Senior Government officials warned that a €75 million scheme to take shared equity in houses bought by new home buyers would increase the price of houses without helping supply.
One of the State’s most senior officials warned that the building industry was lobbying for a scheme “because it would increase prices”.
But the Government went ahead with the scheme, setting aside €75 million in the budget and approving plans for the scheme at the last Cabinet meeting before Christmas.
The scheme, intended to make home ownership more affordable, will see the State pay for up to 30 per cent of the cost of new houses in return for equity. Home buyers will then take out a mortgage for the remainder of the cost.
A spokeswoman for Minister for Housing Darragh O’Brien said the Government wanted “to put the dream of home ownership back in reach, and this scheme will help to bridge the gap and get thousands more on the property ladder”.
Legislation to put the scheme in place is due to go before the Oireachtas in the coming months.
But documents released under the Freedom of Information Act to Sinn Féin TD Eoin Ó Broin and seen by The Irish Times show that senior officials repeatedly advised against the scheme.
On Wednesday Mr Ó Broin said: “Shared equity loans do not make homes more affordable. They simply saddle working people with more debt. At best they prop up existing unaffordable house prices. At worst they push prices up even further. This is the old Fianna Fáil back in action, allowing developers to dictate housing policy regardless of the risks to buyers.”
Unnecessary measure
While the scheme was being discussed last September, a senior official in the Department of Public Expenditure wrote to the Department of Housing warning: “Apart from the concerns we already voiced at SOG [senior officials group] around the appropriateness of the shared equity scheme, which appears to us a demand-side measure which is unnecessary in a market like ours which is chronically undersupplied, it does not appear that the policy proposal has been sufficiently analysed. Specifically in terms of addressing need. An effective affordable housing policy would deliver the right types of units in the right location at an appropriately affordable price.”
A few days later, in an internal Department of Public Expenditure exchange, another official warned: “[The Department of Finance] and [the Department of Housing] have spoken to banks and developers who apparently suggest that it will unlock supply. We think it will push up prices in a supply-constrained environment, most likely at a time when prices are starting to rise anyway.”
Later Robert Watt, the secretary-general of the Department of Public Expenditure, wrote to his counterpart in the Department of Housing, Graham Doyle, warning: “In the context of an affordable scheme, there is little evidence to suggest an absence of mortgage finance ... The property industry want an equity scheme because it will increase prices.”
