Affordable Housing Schemes

jdivision

Oh, thank you for talking down to me. my job by the way involves me talking in the tens and hundreds of millions and I need to know what I'm talking about, but thanks for the lesson anyway.
A large number of sites being developed in Dublin at the moment were bought since the introduction of the social and affordable housing scheme, so the developer built that into the price paid for the land. Therefore the only real cost to the State has been in the capital gains tax paid on the land sale. And that means private new home buyers are not paying more to subsidise the other houses, they are paying the market value of them.
Given the way house prices have surged in recent years, the increase in Vat probably offset the loss in capital gains tax. The person who lost out somewhat was the person selling the land, but given the government cut cgt on it from 40 to 20 per cent, increasing the return to the Exchequer in the process by encouraging people to sell land, I'm not going to cry for them.
In the case where the land was not sold in the last six years, the developer is making massive profits - given the way house prices have increased in the meantime - and only paying corporation tax of 12.5 per cent. So i have no sympathy for them missing out on some of their profits. As for people subsidising the housing in their schemes in those cases, the land was bought so cheaply (comparatively) he is charging them the market rate. There is a loss of profit to the developer on the social and affordable housing, but only 12.5 per cent of that profit is due to the State making it comparatively small.
The Govt claims it provided 1,400 affordable housing units last year
http://debates.oireachtas.ie/DDebate.aspx?F=SEN20060427.xml&Dail=29&Ex=All&Page=5
At an average market value of e250,000 and a discount of e80,000 (around 30 per cent) that means the loss of revenue per unit was e10,000 (based on corporation tax) and the total cost to the Exchequer was e14 million. That is comparatively small in the context of e-voting, PPARS, spending on PR consultants etc.

Sleepy

jdivision wrote:

Oh, thank you for talking down to me. my job by the way involves me talking in the tens and hundreds of millions and I need to know what I'm talking about, but thanks for the lesson anyway.

I apologise if I'm condescending but you don't seem to have any real understanding of fundemental economics so you'll have to forgive me if I think you might be working out of your league.

A large number of sites being developed in Dublin at the moment were bought since the introduction of the social and affordable housing scheme, so the developer built that into the price paid for the land.

Of course, that completely discounts the fact that many developers in Dublin have been sitting on the land they're developing for decades and that the market for land is currently (and for the last decade or so) very much a seller's market so the developers really don't have that much power in terms of persuading the landowners to accept the cost being passed on to them while a property bubble exists where first time buyers are only too happy to absorb this cost for them.

Therefore the only real cost to the State has been in the capital gains tax paid on the land sale. And that means private new home buyers are not paying more to subsidise the other houses, they are paying the market value of them. Given the way house prices have surged in recent years, the increase in Vat probably offset the loss in capital gains tax. The person who lost out somewhat was the person selling the land, but given the government cut cgt on it from 40 to 20 per cent, increasing the return to the Exchequer in the process by encouraging people to sell land, I'm not going to cry for them. In the case where the land was not sold in the last six years, the developer is making massive profits - given the way house prices have increased in the meantime - and only paying corporation tax of 12.5 per cent. So i have no sympathy for them missing out on some of their profits. As for people subsidising the housing in their schemes in those cases, the land was bought so cheaply (comparatively) he is charging them the market rate. There is a loss of profit to the developer on the social and affordable housing, but only 12.5 per cent of that profit is due to the State making it comparatively small.

Given that the developer is losing the entire difference in value between market rate and cost price in this scheme, this (less the 12.5% of that he'd owe the government in coporation tax on that profit) is in fact the true value of the tax which has been placed on him: 87.5% of the discount he's forced to sell the house for.

The Govt claims it provided 1,400 affordable housing units last year
http://debates.oireachtas.ie/DDebate.aspx?F=SEN20060427.xml&Dail=29&Ex=All&Page=5
At an average market value of e250,000 and a discount of e80,000 (around 30 per cent) that means the loss of revenue per unit was e10,000 (based on corporation tax) and the total cost to the Exchequer was e14 million. That is comparatively small in the context of e-voting, PPARS, spending on PR consultants etc.

So, using these figures with this corrected percentage rate, we're looking at a loss to the exchequer was: €80000 * 1400 units * 87.5% or €98,000,000! :eek:


Sure, PPARS, the LUAS over-spend, e-voting and all the other things Fianna Fail & the PD's have done to waste our tax euros since entering government are wrong and probably bigger issues than that of a few people getting cheap houses. But try telling someone who's child is in a huge class because our education system is underfunded, or someone whose loved one is waiting on a hospital trolley because there aren't enough doctors, or someone that was assaulted because there's not enough police on the beat, or indeed someone waiting on a council housing list that can't afford to house themselves that 98 million spent so people earning above the average industrial wage could get cheap houses isn't a waste of money.

Jackie laughlin

Sleepy,
FF and the PDs didn't simply waste all that money. Business people profitted from it. You might be interested in a book looking at the same situation in Britain: Craig, D. and R. Brooks (2006) Plundering the Public Sector (Constable and Robinson) ISBN 1845293746

I've been contributing to the thread on the sale of Aer Lingus. You should have a look at it. It's quite good. You'll find it under Politics.

There's a fair bit above about the feeling of injustice that someone who has come up in the world should have to put up with people on a lower income as next door neighbours. This isn't a new sentiment. We've all had to listen to the moans from, say, the accountant who doesn't understand how, say, the busdriver can afford a house on the same estate. The answer may be that he/she inherited some money or won the lottery or the Prize Bonds or works crazy hours. We don't live in a meritocracy.

Sleepy

Jackie laughlin wrote:

Sleepy,
FF and the PDs didn't simply waste all that money. Business people profitted from it. You might be interested in a book looking at the same situation in Britain: Craig, D. and R. Brooks (2006) Plundering the Public Sector (Constable and Robinson) ISBN 1845293746

I've been contributing to the thread on the sale of Aer Lingus. You should have a look at it. It's quite good. You'll find it under Politics.

There's a fair bit above about the feeling of injustice that someone who has come up in the world should have to put up with people on a lower income as next door neighbours. This isn't a new sentiment. We've all had to listen to the moans from, say, the accountant who doesn't understand how, say, the busdriver can afford a house on the same estate. The answer may be that he/she inherited some money or won the lottery or the Prize Bonds or works crazy hours. We don't live in a meritocracy.

Jackie, Business People can't plunder the national exchequer without either corrupt or incompetent government so I still believe the blame for wasting that money lies with them. Think about it: if a publican allows me to drink every penny I have in his pub, he's profitting from my poor decisions, not robbing me. Not all government departments are completely incompetent, I deal with them on a daily basis in the course of my work.

More's the pity we don't live in a meritocracy, now there's a concept I believe in! However, I think the resentment comes when someone knows their next door neighbour has bought the house for less than they have and that discount has effectively come from their pocket. There's no justice of any kind in that.

dbnavan

Fact is if Affordable housing wasnt available there would be far more homeless people on the streets, lets think about this for a second.....A disabled man and his wife living off his Social Welfare. Total income 250 a week give or take, now she begins working. Earn anything over 100 euro it comes out of his cheque, so in theory, she must earn about 350 euro a week to make it worth her while working. Same for unmarried mothers, so 1 person(wife or mother in this case) must support there child or spouse, inc Carerrs expenditure on one income. Take away affordable housing you will have many more homeless, familes on the street.

Sleepy

Sorry dbnavan, you're comparing apples with oranges.

In the example you give, that married couple would be entitled to social housing. They're living on the breadline and probably couldn't afford to buy their own home even under the Affordable Housing Scheme. There's a huge difference between the taxpayer paying to put a roof over these people's heads (as in social housing where they're rented a house/apartment for a nominal fee) and the taxpayer paying for someone like myself who earns a reasonable salary to get a cheap house.

daveirl

This post has been deleted.

jdivision

Sleepy you're saying the developer lost out on e98 million in pure profit for them and then claiming that that's the loss to the exchequer. Stop trolling. At the end of the day it's a tax foregone rather than stealing as you put it.

dbnavan

daveirl wrote:

This post has been deleted.

So disabled people should live in a bed or a flat if there lucky while living on state benefit throw what little money the receive on benefit, into the hand of a wealthy landlord, or back to the state, and live their life in a place that's cheap(usually meaning dull a dingy) and never be able to choose the color of there walls, because its not their's to paint, or if it is, its the rich landlord benefiting and not them?

Sleepy

I'm not trolling, merely trying to explain the concept of an opportunity cost to you.

The developer has been taxed to the tune of €98million in terms of their profits foregone. I'm not arguing that this is a bad thing, they can clearly afford it and taxes should be progressive. Were this tax levied in the form of income tax or duties for property development (i.e. allowing the developers to develop their full allotment and sell it at market rate - something which would probably lower house prices throught increased supply given klaz's example of these affordable houses sitting empty - and taxing them in another way) the value to the exchequer would be €98 million (perhaps slightly less if there was an impact on house prices but cooling the housing market would be a sensible economic move anyway so no loss in real terms to the exchequer).

This tax is not being foregone as it is currently being collected in terms of discounts on the houses the government are taking from these developers and distributing, unfairly imho, to people who really don't need it. Sure it's a progressive tax, but it's a regressive use of government spending.

Sleepy

dbnavan wrote:

So disabled people should live in a bed or a flat if there lucky while living on state benefit throw what little money the receive on benefit, into the hand of a wealthy landlord, or back to the state, and live their life in a place that's cheap(usually meaning dull a dingy) and never be able to choose the color of there walls, because its not their's to paint, or if it is, its the rich landlord benefiting and not them?

Who says disabled people can't work? One of the best paid developers I know is in a wheelchair.

No one's entitled to more than the bare minimum to survive dbnavan. After that, I'm afraid it's time to stand on your own two feet. Besides, if this tax revenue wasn't being wasted helping people who can afford to house themselves, it could be give the government the ability to provide a better standard of social housing. I have to say though, my Aunt lives on disability in state-provided accomodation and she got to choose which paint colour she wanted on her walls there last year (and a guy in to do the painting) so I think you're being a little over-dramatic.

dbnavan

Sleepy wrote:

Who says disabled people can't work? One of the best paid developers I know is in a wheelchair.

No one's entitled to more than the bare minimum to survive dbnavan. After that, I'm afraid it's time to stand on your own two feet. Besides, if this tax revenue wasn't being wasted helping people who can afford to house themselves, it could be give the government the ability to provide a better standard of social housing. I have to say though, my Aunt lives on disability in state-provided accomodation and she got to choose which paint colour she wanted on her walls there last year (and a guy in to do the painting) so I think you're being a little over-dramatic.

I never said disabled people cant work, some can some cant. Your aunt choose the color and had someone paint it as she is in state-provided accomodation. So you of all people know not all disabled people are able to work. Or else go and tell her to get a Job and stop taking government hand outs if your so against it.

Sleepy

Read my post again dbnavan. Did I say I was against the state provision of accomodation? No. I'm all for it and can suggest numerous ways of improving how we provide it and how to pay for it (a personal theory being that the re-development of inner-city dublin social housing as commercial / private residential property could pay for top class social housing in the suburbs)

I don't however believe that when one is being supported by the state, one should be in a position to buy property. It's simply unfair to the tax-paying public. Social Welfare is a safety net and imho, a vital part of any society wishing to call itself civilized. Property ownership is a privilege one earns, not a fundamental right.

Jackie laughlin

Sleepy,
I didn't mean to suggest that government was incompetent or corrupt. The transfer of public money is motivated by a crude almost childlike belief in private business and the efficiency of the profit motive.

The people who meet with FF in the tent at the Galway races really do believe that they are serving the national interest.

I'm surprised that you believe in meritocracy. It seems to contradict what I took to be your views. My position would be more egalitarian but a meritocracy would fundamentally alter power structures and change the membership of elites.

Sleepy

Jackie laughlin wrote:

The people who meet with FF in the tent at the Galway races really do believe that they are serving the national interest.

Trust me, I know people who have worked as bartenders in that tent. There's nothing but self-interest motivating those people.

I'm surprised that you believe in meritocracy. It seems to contradict what I took to be your views. My position would be more egalitarian but a meritocracy would fundamentally alter power structures and change the membership of elites.

Well, at the risk of derailing this thread entirely off-topic. I believe in meritocracy in terms of rule by those most suited to do so i.e. the brightest and best run the country, not the local publican who happens to be very popular. To a lesser extent, I'd believe in only those fit to do so being allowed vote (though how to judge this is certainly a bed of thorns). I believe that those who work hard deserve success and those that don't work deserve only the bare minimum. Of course for any of this to work, you need a level playing field in terms of education, access to healthcare and effective law-enforcement.

Jackie laughlin

Sleepy,
Yes, we're veering way off topic into more general areas.

Any rich people of my acquaintance think that their success has been good for the country generally.

I would prefer a socialist (social democratic) government of normal intelligence to a spectacularly bright neo-liberal or cynical one.

If success were ever linked to hard work, ability, effort, education or innovation an awful lot of the rich and "successful" would take a dramatic tumble.

What about unearned income? Windfall profits?

Cantab.

AFAIK, affordable housing = by-product of planning corruption.

I know someone who bought a flat in the Belfry, Citywest and realises now that the place is full of people on the affordable housing scheme. He's running a mile and has his flat up for sale. I think he's very wise.

The housing market is completely skewed and the illogicy out there (such as the affordable housing scheme) is unbelieveable. If you don't believe me, take a look at some of the polls over on Soc>Accomodation/Property and you'll get a feeling for the bearish sentiment that is emerging in the Irish property market.

I rent in a 3-bed townhouse in Darty (valued at €1m) and I'm currently paying €400 rent. There is absolutely no reason on earth why I would want to fork out x5 times this amount on a mortgage in somewhere like the Belfry, Tallaght, spend hours commuting and have a 35 year mortgage hanging over my head.

jdivision

Aren't you on the affordable housing list?

Sleepy

Who are you asking jdivision?

jdivision

Sleepy wrote:

Who are you asking jdivision?

cantab

dalk

Cantab. wrote:

I know someone who bought a flat in the Belfry, Citywest and realises now that the place is full of people on the affordable housing scheme. He's running a mile and has his flat up for sale.

Had to laugh at that. Ahh... they bought their apartment at a discount! Run away. What's so scary about owner occupiers, who won the affordable housing lottery? I would have thought having more owner occupiers would be preferable to living in a typical apartment block where half the units are investment properties, rented to whoever...

Or maybe your friend is thinking of Social Housing?

As regards Affordable Housing, the ideal of selling accommodation at cost, in order to benefit people who would be unable to buy at market value, is a sound one. I dont have a problem with that...

But the implementation of that ideal could have been better.

I would still gladly accept one... Why wouldn't I?

Sleepy

dalk wrote:

As regards Affordable Housing, the ideal of selling accommodation at cost, in order to benefit people who would be unable to buy at market value, is a sound one. I dont have a problem with that...

What's okay with the ideal? Surely tax revenue could be spent better than helping people support an already over-inflated housing market?

Jackie laughlin

Sleepy,
You are back to being selective, objecting to just one tiny transfer of public money into private hands and those hands are not rich.

OK, let's accept that the big issue for you is the nutty price of houses today which forces young Dubs to live as far away as Longford. Now, I realise that a constitutional amendment would be required but would you be in favour of land prices being pegged at farm-use value?

Nevyn

The affordible housing scheme is for those who earn to much to be given priority on the housing list but not enough to get a private mortguage.

Sleepy

Jackie laughlin wrote:

Sleepy,
You are back to being selective, objecting to just one tiny transfer of public money into private hands and those hands are not rich.

OK, let's accept that the big issue for you is the nutty price of houses today which forces young Dubs to live as far away as Longford. Now, I realise that a constitutional amendment would be required but would you be in favour of land prices being pegged at farm-use value?

I don't consider €98million to be a 'tiny transfer' of public money into private hands and disagreeing with an entire government scheme being all that 'selective'. I'm sure you were jumping up and down over the 50m thrown away on the e-voting fiasco so I can't see why you don't have a problem with 98m tbh.

And no, I wouldn't agree with such intervention in the market on first glance. That said, our government is intervening in the market in the opposite direction and I don't agree with that either.

Thaedydal wrote:

The affordible housing scheme is for those who earn to much to be given priority on the housing list but not enough to get a private mortguage.

I'm quite aware of that. Fact is, those people can afford to rent their own accomodation in the private sector. If they can't, they should be on the housing list, not being given houses at knockdown prices. And, as I already pointed out: €98 million would provide a *hell* of a lot of social housing.

Jackie laughlin

Sleepy,
As you know, I'm generally opposed to the unproductive transfer of public money into private hands. Yes, I think e-voting turned from a fruitcake idea with no possible benefit into a money-making scam.

Perhaps I'm wrong in thinking that you emphasise such gains when they involve the less well off. If so, I apologise.

However, your views may be better explained by a belief in the efficacy of markets in all situations?

Sleepy

I disaprove of the unproductive use of any public money. Whether it goes on a grant to a giant corporation or to someone who's poverty stricken. A waste of money is a waste of money imho. My views on the e-voting, luas, PPARS etc. are equally as scathing, the affordable housing scheme is just the latest waste of public money I've noticed.

I believe in the power of the free market and the efficiency of the profit motive, though not in all situations.

Nevyn

Sleepy wrote:

I'm quite aware of that. Fact is, those people can afford to rent their own accomodation in the private sector. If they can't, they should be on the housing list, not being given houses at knockdown prices. And, as I already pointed out: €98 million would provide a *hell* of a lot of social housing.

In most cases they are on the houseing list but the list are so long and there is such a lack of houses and investment they will be on it for years to come.

There are many houses that are boarded up in certain estates that their council owners are tied to refurbishing as they don't have enough funds.

Private renting has many disadvantages even with rent alloance which is a mass of red tape it is the lack of security and the lack of long term leases which are a problem and with rent rising there are people who end up homeless as they can not make the differences as the rent allowances are capped.

Sleepy

All those points are very valid Thaed, and I agree that these are all issues to be tackled but not one of them supports the use of taxpayers money in this fashion. I'm sure most of these problems could be dealt with using a tiny fraction of the €98 million we're currently wasting in this scheme.

Nevyn

The county councils simply do not want to be landlords and be troubled with the
upkeep on the properties and being resposible for thier tenants which is why the buying of such houses was encouraged in the first place.