Affordable house sells 4 years later at 90% above original price

Sales price today €325k
Purchase price 4 years ago: €170k

Clawback: €57k
Profit for owner: €98k - a 58% return on his investment.


The council sold the land to the co-op for €1,000 per house plot. On the open market the same plots would have cost up to €30,000. The council also waived the development levies of €86.40 per square metre.

Unfortunately, it does not say what the market value of the house was at the time.

the Co-op should retain a percentage of the ownership of the house.

If they sell a €400k house for €300k i.e. a 25% discount, they should retain 25% ownership of the house.
If the house is sold for €800k, they should then get €200k back.

Alternatively, the €100k "discount" should be a non-recourse loan at 3% accumulating interest. So if the house is sold after ten years, the home owner would have to repay the loan + interest out of the proceeds, in this case €135k. This would give the home owner an incentive to pay down the discount as quickly as possible.

‘Drawbacks’​

Ó Cualann chief executive Hugh Brennan said there was nothing to prevent all of the houses in the estate being sold privately.

“It is one of the drawbacks of the scheme. Our preferred method would have been for houses to be sold directly back to the co-op, then we could sell them on to other eligible affordable housing purchasers.”

Not sure how this would work. O'Cualann could have bought it back as it was sold at auction.

Maybe they would be obliged to sell it back to the co-op at the price they paid for it if they sold it within the first 5 years.

Or just sell it to the Co-op at the market value less the original percentage discount whenever they sell it.

Brendan

This is nuts - they need to change the rules, and quickly. The idea is to help people get into a home, not enable them to profit from it.


"Maybe they would be obliged to sell it back to the co-op at the price they paid for it if they sold it within the first 5 years."

Why 5 years, and not 25 years, or better yet, leave it open ended ?

Annoying for anyone trying to buy very expensive housing but can't blame the seller for taking advantage of their good fortune & they would need full market price to buy in another part of dublin.
If affordable housing had the same rules that apply to reselling a council house, would that be fairer? Useful links on citizens information about "buying your local authority house".

The occupier is getting a benefit the day they buy - otherwise, they wouldn't get the house. That's where the assistance should start and end, IMHO.

Maybe there should be an 80%/90% Tax on investments made from Goverment incentives like this.

I can of course appreciate the personal benefits the homeowner reaps from this scheme but I can't see what benefits the state / taxpayer gets.

The taxpayer subsidies are higher than generally appreciated - the cost of a site in Ballymun is higher than 30k and 'waiving' development levies means that the costs of roads, footpaths public lighting etc which are usually funded by these levies are paid by the exchequer. I find it difficult to believe the clawbavk payment will cover these costs.

But the main problem with this scheme is the dwellings are affordable to the first purchaser only and thereafter sold on at an unaffordable price so in the medium term it does nothing to help housing affordability.

Surely the planned cost rental housing would be a better solution. This is rented at cost price so there is no opportunity for anyone to pocket any profits and it remains affordable over the long term.

Alternatively in some countrues buyers of affordable housing can only do so on a leasehold basis. The council retains ownership of the land abd the leasehold covenent which requires them to sell on for what they paid plus a nominal profit.

I find it difficult to think of a need for scheme like this if we had a fully functioning social housing policy. Even at that this seems to be a badly administered scheme.

A permanent transfer of wealth with no substantial clawback is crazy. Personal circumstances change but the State is still down a house regardless.

Looking at the criteria outlined in the article income is a crude metric. First thing that came to mind is this scheme is great if you're a young professional starting off. You may have a low income to start but it will likely rise. That is very different than someone who will likely remain on a low income. There is a world of difference between those 2 cases. Are there additional criteria for such schemes?

So I continue to get the benefits of this scheme regardless of changes in circumstances all I have to do is live there? Image if we took the same approach to unemployment benefit. I'll take my new salary and the dole please.

skrooge said:

A permanent transfer of wealth with no substantial clawback is crazy. Personal circumstances change but the State is still down a house regardless.

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The same applies if someone gets a council house. In effect it's a close to free house and you don't even have to pay for the upkeep. Okay, you can't liquidate the asset but other than that it's a massive transfer of wealth from the State with no criteria in place to reassess the needs of the tenant if their circumstances change.

skrooge said:

Looking at the criteria outlined in the article income is a crude metric. First thing that came to mind is this scheme is great if you're a young professional starting off. You may have a low income to start but it will likely rise. That is very different than someone who will likely remain on a low income. There is a world of difference between those 2 cases. Are there additional criteria for such schemes?

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You may find that there are plenty of jobs out there that will out pay most "professions". That said I agree with you but any properly structured social housing scheme would have a needs assessment every few years and where the State gave people capital assets at a discount there would be a clawback on future gains.

Am not sure the vendor is much better off after the sale.

Yes they are up €100k, but their position in the housing market is much the same as prices have risen by about as much since 2017.

For the vendor to be worse off their mortgage interest payments and transactions costs would need to be greater than the cost of renting over the past 4 years

skrooge said:

I find it difficult to think of a need for scheme like this if we had a fully functioning social housing policy. Even at that this seems to be a badly administered scheme.

A permanent transfer of wealth with no substantial clawback is crazy. Personal circumstances change but the State is still down a house regardless.

Looking at the criteria outlined in the article income is a crude metric. First thing that came to mind is this scheme is great if you're a young professional starting off. You may have a low income to start but it will likely rise. That is very different than someone who will likely remain on a low income. There is a world of difference between those 2 cases. Are there additional criteria for such schemes?

So I continue to get the benefits of this scheme regardless of changes in circumstances all I have to do is live there? Image if we took the same approach to unemployment benefit. I'll take my new salary and the dole please.

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There is a substantial clawback. 57k is a lot of money. But maybe the clawback isn't enough. It looks as if the structures are in place, but somebody needs to change the clawback regimen.

Also, if the Council waived the development levies, then this could be structured so that it becomes due + some indexing on sale by purchaser.

Brendan Burgess said:

If they sell a €400k house for €300k i.e. a 25% discount, they should retain 25% ownership of the house.
If the house is sold for €800k, they should then get €200k back.

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But then this would have to be symmetric, so if house prices fell the council would share the downside and a smaller clawback.

There were threads from people who bought affordable houses in about 2005 but were stuck in them for years due to negative equity and/or clawback making it impossible to sell.

There would be public outcry if the clawback fell due to falling house prices.

NoRegretsCoyote said:

But then this would have to be symmetric, so if house prices fell the council would share the downside and a smaller clawback.

There were threads from people who bought affordable houses in about 2005 but were stuck in them for years due to negative equity and/or clawback making it impossible to sell.

There would be public outcry if the clawback fell due to falling house prices.

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People often think there will be a public outcry, but not sure that's the case here/

time to plan said:

People often think there will be a public outcry, but not sure that's the case here/

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Do a few smoked-salmon socialists clutching their peals in the Irish Times and on RTE constitute a public outcry? The IT and RTE certainly think so.

Purple said:

Do a few smoked-salmon socialists clutching their peals in the Irish Times and on RTE constitute a public outcry? The IT and RTE certainly think so.

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They seem to have you outraged.

time to plan said:

They seem to have you outraged.

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Who?