# The new Affordable Purchase Schemes Explained



## Brendan Burgess (5 May 2021)

A lot was announced yesterday, so it would be useful to have separate threads on each of the elements.

It makes sense to discuss the two Affordable Purchase schemes together.

This thread is purely for explaining it and not for analysing it.

Any posts in this thread with commentary or analysis will be deleted.

For commentary on it please go to:




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						The new Affordable Housing Schemes analysed
					

I haven't got all the information on this yet, but at first glance it looks like reckless lending and reckless borrowing.  If this had no impact on prices, then it would be a good idea.  But of course it will have an impact on prices.  So people will just end up with bigger mortgages for the...



					www.askaboutmoney.com


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## Brendan Burgess (5 May 2021)




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## Brendan Burgess (5 May 2021)

Price caps

Dublin and Dun Laoghaire: €500k for apartments; €450k for houses 
Cork, Fingal, Galway City, South Dublin and Wicklow, where the upper limit is set at €400,000.
The lowest caps are €225,000 for counties Cavan, Donegal, Leitrim, Longford, Mayo, Monaghan, Sligo and Tipperary.


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## Brendan Burgess (5 May 2021)

Has anyone a link to official information on this? 

The Bill? 
And Explanatory Memorandum? 
The justification? 

Brendan


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## Brendan Burgess (5 May 2021)

Why is it called "shared equity"?

Is it not just a loan?  

If the owner sells the house, does the government get the loan repaid or do they get a percentage of the house?

From the Irish Times 

_Mr O’Brien has maintained the State’s 20 per cent equity is not a second mortgage, or an additional debt burden to householders, as claimed by the Opposition. He said on Tuesday there would be a zero interest charge on the equity for the first five years, rising to 1.75 per cent between years six and 15, and 2.14 per cent from years 16 to 29._

Brendan


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## SPC100 (5 May 2021)

Not an insider, just searching to see if I can find the bill.



			https://assets.gov.ie/119753/2b717580-2160-41e0-bd84-5519b817217e.pdf
		

This might be it?

An earlier letter from central bank also indicated that the bill was unclear if it was equity or loan.



			https://www.centralbank.ie/docs/default-source/publications/correspondence/oireachtas-correspondence/submission-to-the-oireachtas-committee-on-housing---general-scheme-of-the-affordable-housing-bill-published-16-march-2021.pdf
		


As I read it, it is a loan.


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## SPC100 (5 May 2021)

Dáil Éireann debate - Wednesday,  3 Mar 2021
					

Housing Shared Equity Loan Scheme: Motion [Private Members] Dáil Éireann debate - Wednesday,  3 Mar 2021



					www.oireachtas.ie
				




Some background on it


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## Protocol (5 May 2021)

Brendan Burgess said:


> Why is it called "shared equity"?
> 
> Is it not just a loan?
> 
> ...




In England, it is shared equity.

The State lends up to 20% I think
charges no interest for the first five years
but makes 20% of any sale, i.e. the State captures 20% of any gain


So the %cost of the loan = house price %


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## Brendan Burgess (5 May 2021)

Hi SPC

Those links are very helpful.

this seems to be the proposal  although there seems to be very little detail.

“96A(1) The Minister may, out of moneys provided by the Oireachtas contribute funds towards a special purpose vehicle established to make funds available to purchase an equity stake in dwellings for the purpose of assisting persons to purchase such dwellings in accordance with the terms of a memorandum of agreement made by the Minister with such special purpose vehicle.

 (2) Without prejudice to the generality of subsection (1), the terms of the memorandum referred to in that subsection may provide for:

(a) the classes of applicant who will be eligible for the arrangements referred to in subsection (1), having regard to the means of such applicants and their existing ability to secure finance to purchase dwellings suitable for their needs;

(b) the classes of dwellings in relation to which the arrangements referred to in subsection (1) may be approved;

 (c) the respective contributions to be made by the Minister or any other party to the special purpose vehicle referred to in subsection (1);

(d) the forms or types of security to be required for the arrangements referred to in subsection (1) and the ranking of such security against other securities;

(e) conditions in relation to purchaser buy-out of the equity share, including the manner of, and period for, such repayment;

(f) conditions in relation to the rate of interest to be charged in relation to the arrangements referred to in subsection

(g) conditions relating to the recovery of any outstanding monies from the purchaser, including where the property is sold or transferred;

(h) conditions in relation to fees or charges that may be applied by the special purpose vehicle referred to in subsection (1);

(i) conditions in relation to developer participation in the scheme.

Notes 1. The new section 96A is intended to give a statutory basis for the Minister to contribute funds to a special purpose vehicle for the purpose of operating the national Affordable Purchase Shared Equity Scheme.

Subsection (2) sets out the matters that may be included in the memorandum of agreement to be made between the Minister and the special purpose vehicle.

In relation to classes of eligible applicant, it is intended to target the scheme at first time buyers who have demonstrated a lack of capacity to secure the required mortgage to purchase the dwelling in question at open market value.

In relation to classes of dwellings, it is intended to target the scheme at new build homes and the scheme may set other conditionality linked to price, geography and minimum/maximum levels of equity support.

Paragraph (c) refers to respective contributions by the Minister and other parties to the special purpose vehicle, making clear that parties other than the Exchequer/Minister may provide support to the scheme.

Paragraph (d) refers to conditions in relation to security: it is intended that the memorandum of understanding will provide that the equity charge will rank second to the Senior Mortgage.

Paragraph (e) refers to conditions in relation to buy out of the equity share by purchasers.

 Paragraph (f) refers to the interest rate to be charged for the equity loan: this will be agreed between the Minister and the special purpose vehicle. Similarly in relation to any fees to be charged by the special purpose vehicle, which are covered in paragraph (i).


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## Brendan Burgess (6 May 2021)

The Central Bank was not clear whether it was a loan or equity.


_The scheme is described as providing ‘equity support’ to households, but – at this stage – there is little detail around the contractual obligations on those that might receive this financing_


The original Shared Ownership scheme had absolutely no elements of shared ownership. It was a second mortgage masquerading as shared ownership.

Brendan


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## NoRegretsCoyote (6 May 2021)

Brendan Burgess said:


> (d) the forms or types of security to be required for the arrangements referred to in subsection (1) *and the ranking of such security against other securities;*


This is very important, and not at all clear.

If the government loan ranks higher than the bank's then the bank will just lend a lot less, if at all.

If the government loan ranks lower than the bank's then the government is taking on nearly all the risk and it's huge subsidy to the bank.


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