Digital Desk Staff
The Government is under pressure to scrap its controversial housing loan scheme after the Central Bank warned it could push up house prices.
Darragh O'Brien, the housing minister, has been urged to focus on other measures instead of the shared equity scheme, which he has been strongly pushing despite widespread concerns and criticism.
As the Irish Examiner reports, in a letter to members of the Oireachtas housing committee, the Central Bank has warned that the plans, which form part of an Affordable Housing Bill, could result in an increase in house prices and will do little to deal with supply issues.
The proposal, which Mr O'Brien brought to Cabinet before Christmas, offers equity loans of up to 30 per cent on new-build homes under €400,000.
'Construction has not caught up with demand'
In his letter, Vasileios Madouros, the Central Bank's director of financial stability, said construction of new housing units has been “below its long-term average for about a decade", and has still not caught up with demand.
He said, “Overall, taking a broader housing market perspective, the proposed scheme — in isolation — is likely to have a limited impact on the ultimate supply-side problem in the Irish housing market".
Affordable Housing Bill
We would, therefore, encourage a continued effort to focus on policies on the supply side of the market — including, but not limited to, some other elements of the Affordable Housing Bill.
Mr Madouros has advised members of the housing committee who are considering the detailed parameters of the scheme "to be mindful of the potential implications of increased demand for house purchases in a supply-constrained market" if a shared equity model is introduced.
"If there are structural reasons — such as labour skill shortages in the construction sector, tighter land-use regulation, or insufficient incentives to guard against land hoarding — which impede this supply response, a scheme that results in higher levels of demand, depending on its size, could result in upward pressure on house prices."
The Central Bank warning follows criticisms from the ESRI, the Institute of Professional Auctioneers and Valuers, and senior civil servants.
Sinn Féin housing spokesperson Eoin Ó Broin has called on Mr O’Brien to remove the proposed shared equity loan scheme from his Affordable Housing Bill in the wake of the Central Bank's submission.
