Affordable Housing, a practical alternative…

Affordable housing is a term commonly thought to have been synonymous with ‘social housing’. It is possible that this common misconception is partially responsible for many people not availing of the scheme. Affordable housing, a scheme first introduced in 1999, was designed to help first time buyers (FTBs) buy into private developments at less than the full market value of the property. Initially, land owned by local authorities was developed and the housing then sold on under the scheme. In 2000 and 2002, reforms were introduced under Part V of the Planning and Development Acts, which required that up to 20% of each new residential development must be set aside for social and affordable housing. However, developers often offer money in lieu or sites elsewhere instead of 20% of every development. This situation is less than ideal since building the houses themselves is costly and time consuming for local authorities and results in a backlog of people waiting for housing units to become available. There is also a lack of consistency between the various local authorities involved, with criteria regarding income thresholds varying in the different regions.

Applicants to the affordable housing scheme must meet criteria set out by their respective local authority in order to qualify. Potential applicants should check out exact figures and criteria required with the individual authority to which they are applying. Generally speaking, an applicant must have the right to live and work in Ireland, whilst currently resident here. They must also be an FTB, working in full time employment and must prove that mortgage repayments on the property at full market value would equate to more than 35% of their net monthly income. General guidelines state that single applicants must earn between €25,000 and €40,000 per annum. Double income applicants must take 2.5 times the primary income and add that to the lesser income. These combined values must not exceed the €100,000 p.a. threshold.

The application itself costs €50 and this fee need not be paid more than once if you are applying to more than one authority, provided you have proof of receipt of payment from the local authority. No fee or penalty is charged for refusing a property that the local authority offers. Application requirements usually include a P60, three recent payslips, copies of recent bank statements and statements of loan and savings accounts. With Bank of Ireland, IIB and the EBS involved , borrowers can borrow up to 97% of the non market purchase price whilst still qualifying for mortgage interest relief.

Disadvantages of the scheme include long waiting lists and with the list of applicants to Dublin City Council currently at 7,000, this has resulted in housing being awarded on a lottery basis. If a name has been on the list for eighteen months or under, it is entered into the lottery once. If a name has been there for longer than eighteen months, it will be entered into the draw twice, thus increasing the applicant’s chance of being allocated a unit. Fingal County Council has a relatively short list by contrast with only 600 names currently.

Another disadvantage of the affordable housing scheme is that of the clawback. This clawback means that unless you wish to pay a percentage of the sale price of your property to the local authority, you must not sell that property for 20 years. If the property is sold in the period up to 10 years, you are required to pay the full clawback amount to the local authority. After that 10 year period, the clawback amount is reduced by 10% per annum and after 20 years no clawback amount is required.

Due to the recent rulings in the Glenkerrin and Murphy Construction cases, in which the judges have ruled that more social and affordable housing must be provided to local authorities by developers, we would hope to see an increase in the number of affordable housing units coming onstream in the next few months. Given this and the attractiveness of the scheme, it is highly likely that we will also see an increase in the number of first time buyers availing of it.

For more information on the affordable housing scheme, see http://www.affordablehome.ie/

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