Richard O'Donoghue: Proposes VAT-backed 95% mortgage guarantee

On the basis of construction, and I'm in construction all my life, I've over 30 years of experience and I'm still in construction on a daily basis. As I say, I start work in the morning at seven o'clock and be on site because most of the departments that I deal with don't open till nine or half past nine, so I get my day's work done in the morning before I come to work at home. But what it does for me, it keeps me in tune with inflation costs, it keeps me in tune with the labour costs, the material costs, and all different sectors of infrastructure. And the one thing that since 2021, and it's something when I'm looking at myself and trying to bring my own experience to this. A 1,700 square foot house in 2021 was costing $231,540. And you had a 13.5% VAT rate on that, which brings us up to, there's 27,540 VAT on that, which brings us to 204,000 plus VAT for the house. That same house today in 2024 costs is $350,000. So almost $119,000 for the same house. So the person is only getting the same package, but they're paying $119,000 more. And that house before VAT is €308,000 VAT. And that means that the government now have, on the same house that the person was getting in 2021, $41,630 VAT on it. On a new house. So how is anyone, the teachers, the nurses, the Gardaí, the people that are working in factories, how are they going to afford a mortgage for this house if something isn't done about the mortgage rates? At the moment the ratio is 90%. But that's fine if the market is stable and they're trying to get to it. But the people's wages won't allow them to get to that. So why not if we had a 95% loan to ratio? I'll go to the central bank. But the guarantee from the banks is 90%, but the government guarantee the extra 5%. And when I'm looking at the 5% and when I look at the maths of it, you're actually guaranteeing nothing because you're actually taking it in the VAT rate on the inflation costs. So you're actually holding the 15,000 extra that they need. So on a loan, a purchase price of a €350,000 house over 35 years, 95% ratio would be $332,000 would be the cost to the person. The 5% deposit would be $17,500. Which would be for a family to have a gross income of €67,000 of a gross income combined is 24.2% of the gross take-home pay. So if the government used the extra VAT that had taken on the inflatable costs, it would cover the 5% that we are looking for. And if you look over the ratio of mortgages in this country, there's only a 4% default. 24% of a default. But what it would mean is the person themselves, if they're renting at the moment and they want to buy a house, it gives them the opportunity that they don't have to come up with €35,000 of a deposit for a house. They can come up with €17,500. And on the purchase price of the house, you're getting the VAT rate. So you're actually getting that money up front anyway, which actually covers the 5%. And on those houses that, as I said before, were only €231,000, they're now €350,000, you look at €500,000. And that then would be a purchase price of €500,000, and 95% loan is €475,000, so they'd have to come up with €25,000. And the 5% deposit. Again, if you look at the VAT rate on that, you're actually holding that anyway. So we either come up with something to help the people at the start to qualify for a loan from the banks and cover the 5%, which allows people to get on the ladder. And again, this is people that are working. They're providing a house for themselves. They're paying taxes to the government for working. They're paying taxes for the government to buy their own property. And what they're doing is, because of the inflation costs, they're trying to get on that ladder. And I'm a father of four. And I have two of my sons at the moment are saving for a house. And I'm a building contractor. You'd imagine that they would have no problem. But every time they go to try and get to that, where they want to have the deposit for the bank, the price of the house is actually being shoved out. We then look at the concrete levy that's been put on houses. On all concrete products. Again, we're going back to the person that's working in this country. Or a person that wants to downsize in this country, that's worked all their lives, and they want to allow for the next generation. The tax regime in this country is only hurting the people that work. So why can't we work on something to help the working person? Because the worst off in this country at the moment is the middle working class. They're the worst off. They qualify for nothing across the board, but they work and pay taxes for the people that are vulnerable. They can't work. So why can't we look at something like this and use the extra money that you're taking off them on the purchase of a new house and use as a 5% guarantee along with the banking system? Does that not make sense? For a person that's in violence, does not make sense. So there is actually no risk to government because you already have the extra inflationary costs since 2021. And you'll be actually helping people get on the ladder, get on the houses and deal with the inflation costs. That's what common sense would tell me within a market of housing. And it's one way of trying to get people to loan the value that they want. And you look at all the statistics that you give us and the different things that we have, this is a way forward for people. We also have to look for building houses in this country, Minister. If you have to qualify to build for social housing, you have to have contracts of over X amount of millions to qualify to get on to build the houses. There's a lot of smaller contractors there that could go in, and I look at one place where the sites are serviced, serviceable sites, and they could actually give them to the contractor ten houses at a time, and give the smaller contractor the chance to build these houses and get these houses, rather than going to these big companies. A lot of the big companies then squeeze out the smaller contractors and make sure that they can't get on the ladder. They could probably provide these houses to you at a cheaper price than the bigger contractors, and bring a bit of competition back into the market. Another thing you should look at is the central bank to be reviewed, and competition for other banks outside of Ireland to provide mortgages. Again, if that guarantee that I was talking about, the 5% by government, would that not allow competition back into the market, where our banks are actually now thriving after the taxpayers of Ireland bailed them out? So why can't we make sure that we can actually bring competition back into this country to make sure that the banking sector loans to the people of Ireland, to make sure the same people that dug them out, they are now looking to be dug out to make sure that they can provide homes for the future. Because if you look at all the cross-rentals across the board, and you look at any couple that are renting at the moment, they have to have outside of their rental income, they have to show disposable income at the end of the month so they can afford a mortgage. But they don't take into account their rental income, they say disposable income as they are living at the moment to afford a mortgage. So again, if they are renting, they are caught. We need to do something here to make sure we can have a generation of people that can actually get on the housing ladder, even at the inflatable costs. But the government need to put in a guarantee in place on the monies that are taken on the inflatable costs in the VAT rate. It would actually cover what we are actually looking for. So it is a cost neutral, if you look at it, based on the figures from 2021 to 2024. And you will be helping the working class people of this country that they can actually create a life for the next generations to come. Thank you. Cancola and thanks to all the deputies for the different issues they raised. So I'll just begin with Deputy Osnoddick, who raised an issue that I'm very familiar with, because he raised it with me on a number of occasions. I think it is just worth budding this issue in a bit of context here. Out of €104.3 billion that's included within this piece of legislation, we are referring to €2 million of that €104 billion. But what Deputy Osnoddick is doing is, however, raising important issues of principle, because he is saying that this is money which, in his view, is not subject to the normal form of our act of scrutiny, and he wants to know why, and he then wants to know if any scrutiny applied to it. So firstly, it is the case that this particular estimate is presented to an Oireachtas committee. It's done by me, it's part of the public expenditure vote, so it's done by the Minister for Public Expenditure. However, it is also the case, as Deputy Osnoddick has acknowledged, that when I'm asked what is this money used for, I'm not in a position to inform the Oireachtas in relation to it, and it is a long-standing precedent in relation to this particular fund that it is not subject to the normal kind of disclosure that every other euro that is spent of our country's money is. However, that is not the same as saying that it is not subject to any form of scrutiny, because it is. What happens, because of the unique nature of this particular fund, is the Minister for Justice, the Minister for Defence, provides a certificate to the Controller and the Auditor General, indicating that the money is being used in the way in which it is intended to be used. The Controller and the Auditor General considers that certificate, and then decides whether to provide a degree of authorisation to it or not. And the Controller and the Auditor General has, and has published in their normal accounts a statement to that effect. So while I'm not able to go into the kind of detail that I do about this money and its use, it is still subject to oversight in a different way, and the outcome of that oversight is published, and there is a statement from the Controller and Auditor General in relation to it. In relation to the point that was made by Deputy Boyd Barrett, firstly in relation to the housing issues that he touched on, he talked about, you know, there's no need to be flippant in relation to it. I was being anything but flippant. I was responding back to the arguments that he made, and I do stand by them. I was making the point that while he can advance the case for the State to be involved in directly building homes through a new organisation, that's an absolutely legitimate argument to make. I was simply making the point, though, that in making that case, he shouldn't suggest that the State is not involved in directly building homes, because it is. But it's just done through our local authorities. It's done through Dublin City Council, Dunleary County Council in his case. And it builds many thousands of homes every year. And the question that I would put to him, which I'm sure we're going to be able to debate at another point, is that if this organisation would be brand new, would it be taking the place of what our local authorities do? Would it be competing with the local authorities? Or would the local authority be subsumed into this new organisation? The contention I'd make here this evening is the best way of us directly building homes is indeed true, our local authorities. And if he wants the State to play a role in the management of land, and I think he's right, that's why we have the Land Development Agency to perform that role. But I know that's also an organisation that Deputy Boyd Barrett doesn't support. In relation to Deputy McGrath, he was refuting arguments, or to use his word, rebutting arguments that I wasn't making. I never for a moment said that the State hasn't played, you know, doesn't have questions to answer in relation to the use of the country's money. I said we do. I acknowledge that in my contribution back to him earlier on. I was simply making a point that I think Deputy O'Donoghue was acknowledging, and if I'm putting words in your mouth, you'll stand up and you'll correct me, about the fact that there is cost price inflation happening that is not caused by the State. Now, you'll make the point back to me in the concrete levy, and I'll come on and address that in a moment. But I think you would acknowledge, if you do intervene again, that there are things happening now in relation to prices within the economy that our government is not, this government, or indeed any government, is not in a position to be able to constrain. You know, I can't determine, and the government can determine, you know, what is the price of concrete. We have added to a bit, but there are other forces going on that are very separate to Ireland at the moment, that in turn are having a really big impact on the issue that Deputy O'Donoghue raised, that I'll come on to in a moment. But that's the only point I was making back to Deputy McGrath earlier on. And I'll make the point again, because it has to be made, that a carryover is not the same thing as the money being lost. In fact, it's the opposite. If a department has a carryover, it ensures the money is there for them in the following year, but in the absence of a carryover, they wouldn't be able to spend the money next year. And the reason why it happens is that if you have a department that, for example, is involved in building a bridge or building a road, sometimes the costs fall in a different way during the year to how they would have been planned. And that is why it's at the heart of this. And, you know, Deputy McGrath, you know, continues to suggest that if a project overruns in any way, that that is due to incompetence or inefficiency. At times, there are issues there that, you know, I'm accountable to the House for. But at the vast majority of the case times, I'll still argue to the Eroctis that our country's money is used in the way in which the Eroctis does intend it to be used. And you can see that in the quality of new school buildings that are being delivered. You can see this in the quality of the public and social housing that our local authorities are building. You can see this in the impact now of the national broadband plan and the impact that is having on towns and villages. And then finally, Deputy O'Donoghue raised a really important issue that is actually a really big part in the housing difficulties that we face at the moment, which is, as you said, that over the space of a short number of years, the cost of building a house, the cost of building an apartment has gone up by so much. Now, you're a builder. You're actively involved in this in the way that I'm not. So I suspect I'm going to tell you a few things you already know and know well. But I do want to put them on the record of the house because you've raised important issues. Part of that is the issues I've already talked about, what is happening in raw materials. Part of it is that we do have certain standards that we want to be met that I think are worth meeting, for example, in relation to energy efficiency, but it then has an impact on the cost of the home. And to pretend otherwise would just be to deny that there are trade-offs. If we want homes to be built that have a higher energy rating, and I believe it's worth doing that because over time it will be good for the cost of heating your home. It will go down. I believe it will be good for your health. I believe it will be good for our efforts to get climbing emissions down. But there is still a cost for us. The state absorbs some of us, but the person who's buying the home also has to face some of that cost as well. But then what you went on to do then is to say, well, should the state play a role then in lending that money to deal with the cost of the additional credit that is needed to deal with the cost of building the home having gone up. What I would say to you, Deputy O'Donoghue, is that is the reason why we have help to buy. And that's why we increased the value of help to buy, which we did early in the term of this government. Recognising that help to buy gives back to a taxpayer some of the taxes they've already paid. We link it to only new homes, and we include within that self-builds, because if you're a son or somebody else is building that home directly for themselves, it's still adding the housing supply and it's the home they're going to live in. But the very reason we have helped to buy and then increased the value of it is to respond back to the issue that you are raising. And we also have in the first home scheme that was set up between the Department of Finance, the Department of Housing and our banks, a way in which for home purchasers of certain levels of income trying to buy certain homes, the state actually does play a role in trying to bridge the gap between what they can afford and the impact of the macroprudential rules. And that's a way of doing it. But as I said, Deputy, you have called out a big issue, which is affecting the supply and the affordability of homes. But we do have schemes in place to try to respond back to us. And I'm sure you'll have views in relation to their adequacy. You may well argue they should be bigger in value, or so on. But we are trying to deal with the issue in a way that I've just described. So, Cahir, look, there's been plenty of issues that have been raised here that are not about the spending of money, but are really important to the wellbeing of those that we are trying to serve. And I've done my best to respond back to all of them. The final point I just want to make is Deputy Boyd Barrett talks about the need to support sporting and voluntary organisations. I mean, the sports capital funding that we are making available at the moment, in very large amounts of money, is a huge effort to do that. And far from the computer saying no, I think in many cases, the computer is saying yes, because of the quality of the applications that are coming in. Really amazing applications being made by nearly entirely voluntary organisations all over the country. And then earlier on in the week, the government made available large-scale infrastructure funding, a lot of which will be going to organisations that are a lot more than voluntary, that are running really big sporting activity, which is either about sporting excellence, or also trying to continue to support voluntary organisations. So, a lot of issues raised, Count Corda, but this is an awful lot of money. Again, I want to thank the House for the cooperation in passing it. And to go back to a point I made earlier on, even though the amount of debate here today may be relatively small, these figures have been debated elsewhere in the Oireachtas at some lengths during the year. Thank you. Thank you again, Count Corda. I also would like to thank you, personally, because I suppose I have probably given you a couple of hairy moments throughout the five years of my first term, and please God I will be returned again. And as the Minister said, it will be up to the electorate. We are all here to represent the people that we are elected to represent. And all I can do is wish everyone the help going forward, that the people that are to return and the people that are actually retiring from here, that they get help in their retirement. But also to thank everyone in all the offices and the staff across the whole of Leinster House and all the different houses, that I wish them all the very, very help. Because health is wealth. We often come here and we are at loggerheads and we don't agree. But we are here doing it for the right reasons, for the interest of our communities and our counties, and here to represent the people of Ireland. So again, Count Corda, and also your last Count Corda, Catherine Crowley, for all the work that she has done, and all the other chairs that stepped in to help out along. I have the utmost respect for all of you, and as I say, I wish you all well in the upcoming elections, and I thank you very much for your patience. Thank you. Thank you very much, Deputy. Thanks to everyone for the kind remarks. Now, know who wants to thank you.