New government programs don’t offer potential home buyers a quick fix

The Affordable Purchase Scheme supported by local authorities should initially be followed by the Shared Equity Scheme in “early 2022”.

Under the first program, local authorities are making homes available at a reduced price to first-time buyers whose mortgage and security deposit do not cover the price of a new home. Through the program, the municipality will take a percentage equity interest in the property.

Over a month ago, Housing Secretary Darragh O’Brien tweeted about a project in Fingal: “New affordable housing at Dun Emer in #Lusk will be between €166k and €258k. There will be a huge demand for this program which is the first affordable program in #Fingal in 11 years. This is just a start, @DeptHousingIRL is working hard to support LAs [local authorities] with many further developments.”

But the Sunday independent is aware that people are trying to buy a house in this very pattern, the application of which has stalled.

The bank in question (PTSB) wants assurances that the council’s charge on the property will be less than the bank’s charge. Nothing has moved for several weeks, according to broker Michael Dowling of Dowling Financial.

When asked about this example, the department said, “We are aware that Fingal County Council has had affordable homes available for sale and is working with buyers and mortgage lenders to manage these sales.”

The principles of the share equity program are similar. According to an overview of the scheme released by the government in September, the support provided will take the form of a percentage equity (ownership) interest in the home, equal to the difference between the property’s open market value and the price paid by the buyer.

An official blurb on the program last September said: “Work is underway to finalize the programme, including working with key stakeholders. Full details of the program, including terms and conditions, will be announced prior to commencement in early 2022.”

As reported in this paper two weeks ago, the banks (through the Banking and Payments Federation of Ireland), the government and local authorities are still working on the legislation in this regard.

The department confirmed to me last week that the introduction is still a long way off.

A spokesman said: “First activities, including public communications, are expected to be conducted in early May this year, ahead of the initial receipt of applications and the deployment of equity support, which are planned for the end of the second quarter.”

So in reality, it will take the second half of 2022 for this program to really get going.

Another problem that has arisen is the fact that currently only the major banks are lending under the Local Authority Affordable Purchase Scheme. New lenders on the market are not participating. There is concern among brokers that this will also apply to the Shared Equity Scheme, where only Bank of Ireland, AIB and PTSB lend.

When asked, Avant Money said: “Avant Money does not currently offer mortgages under the Affordable Housing Program. As we continue to grow our business, we will consider options around the Shared Equity First Home program should that program be opened to non-bank lenders in the future.”

ICS said the systems are “currently limited to banks under applicable government regulation. As a non-bank lender, ICS Mortgages is therefore unable to lend to either scheme.”

This seems somewhat at odds with the Department’s view of the Shared Equity Scheme. “The First Home Affordable Purchase Shared Equity program is jointly funded and operated by the state and participating banks. The program is open to all regulated financial institutions authorized to offer mortgage products in the Irish market.”

Dowling, a veteran broker, is frustrated on behalf of buyers, who naturally get hopeful when new plans are announced. A few months later, her excitement wanes.

“The issues are still not clearly resolved,” Dowling said. “It takes an inordinate amount of time to solve the problems.

“We are now almost into the second quarter of the year and there is still no sign of mortgages being made available on either of these products. They are targeting those on lower incomes to give them an opportunity to buy new homes, but there are clearly obstacles that are not as easy to overcome as the ministry
supposed.”

Maybe everything is being ironed out and in a few months everything will be up and running. But it’s these people who save like crazy and still can’t get their own home that you have to feel pity.

The BPFI is negotiating on behalf of lenders. But for homebuyers, everything is as clear as mud at the moment.

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