Affordable Housing: Interview coming up any tips?

[bearishbull]

Just heard a news story on the radio,a couple in cork bought a house under the affordable housing scheme and a few months later sold it for twice what they paid by using some loophole in the contract,is it the same contract for all affordable housing schemes? i can see a lot of people exploiting this loophole and unfairly making profits

 

[jammacjam]

Re: Affordable Housing

My understanding of it is that you have to pay a percentage of the gain you have made back, based on how long you have lived there but there is not a restriction on selling it.

 

[nicelives]

Re: Affordable Housing

I know I was surprised to hear that story as news unless there is something else that the Green Party left out of their press release, that's how the scheme has always been advertised with the proper clawback.

Was it the case that there was no clawback on behalf of the local authority, now that would be news?

Actually just read the statement and the family had never actually lived there and just bought it to flip it, kind of defeats the social nature of the affordable housing for those who are in real need when there's only so many units to be distributed.

 

[ClubMan]

Re: Affordable Housing

Here's [broken link removed]. The following would seem to be the nub of their complaint.

The house, originally sold to the successful applicant for €161,000, was recently put on the open market and sold for over €350,000 without ever having been lived in. Currently there are no regulations that specify affordable housing recipients must live in the house for a certain period of time.

...

Cllr O’Leary was alerted to the sale after he became involved with two local constituents who were struggling to buy a home under the scheme. They were upset that the house in question was lying idle, despite having contacted the social housing association on two occasions about the property.

In the absence of any information to the contrary I would assume that the applied.

Selling your house

If you sell your house within 20 years, you will have to pay the local authority a percentage of the proceeds of the sale. This percentage is expressed as the percentage difference between the sale price and the market value of the house. This amount will be reduced by 10% each year after you have owned your home for 10 years. So, if you sell your home after 20 years, you will not have to pay anything to the local authority.

Does this mean that in the case mentioned above the clawback in the first 10 years would be 54% of any gain or what (i.e. €350K - €161K = €189K / €250K * 100 = 54%?!?).

 

[intermission]

Re: Affordable Housing

It depends on what the house was valued at initially (I think that's what they are calling market value in the quote). €350K is the current value, but it doesnt say how much the market value was 8 months ago when they got it.

Say the house was valued at €250K initially and they bought it for €161K. The discount they received was (250-161)/250*100 = 35.6%

If they sell within 10 years they should pay the council 35.6% of the sale value. In this case 350 * 35.6% = 124.6K. Still leaves them with a tidy profit of 350 - 124.6 - 161 = 64.4K.

If they sell between 11 and 20 years, the % they pay back drops by 10% per year. So after year 11 it would be 32.04% (35.6 - 3.56), year 12 would be 28.48% (32.04 - 3.56) etc etc. 0% after 20 years.

As I say, you really need to know the initial market value (or % discount they got to start with) to know how much they've made out of it.

Still, sounds like it is defeating the purpose of the scheme not to move in at all... although maybe their personal circumstances changed. The article doesnt go into that kind of detail.

 

[ClubMan]

Re: Affordable Housing

Say the house was valued at €250K initially and they bought it for €161K. The discount they received was (250-161)/250*100 = 35.6%

Ah - thanks. That makes more sense alright. The OASIS wording is pretty unclear though.

If the people in question did nothing wrong then I feel that it's irresponsible of anybody (e.g. the GP) to highlight the specific case rather than the general issue. Obviously the redtops will be stalking them now.

 

[bearishbull]

Re: Affordable Housing

according to herald today they are gonna get to keep 2/3's of the profit! ridiculous!

 

[sarahj]

Re: Affordable Housing

When I was looking to buy my house, one thing that really annoyed me was the people telling me to get an affordable house - when I pointed out that I wouldn't be keeping it too long and the claw back, several people replied that I could rent it out and that they all knew people doing this. Now surely this goes completely against the idea of affordable housing? Have people really gotten that greedy. Is there no way the government can have a tighter control on misuse of social housing

 

[nt00deep]

Re: Affordable Housing

according to herald today they are gonna get to keep 2/3's of the profit! ridiculous!

So where there is profit to be made, who exactly should get it.

The couple fronted approx 2/3 of the initial market value and the local authority fronted the other 1/3.

While the house was being constructed, a profit was made and the proceeds are being split according to the split of the initial investment.

Is there a 'fairer' way to split the profits?

Incidentally, I don't agree either with the principle / oversight of allowing new owners of such housing to flip, but given that it did happen, how exactly would one suggest the profit be split?

 

[annR]

Re: Affordable Housing

One of the criteria of affordable housing is that the applicant must be in need of housing. If they didn't need to live there, they either bought it under false pretences or their situation changed which can happen.

Other than that, doesn't seem like they broke any rules. Anyone can sell their affordable house anytime they like.

 

[Andy_and_lou]

Re: Affordable Housing

I'm a bit confused here, I thought the argument was that the house should have been given to the next person on the Affordable Housing list rather than been put on the open market? (which I totally agree with ie house been given to the person next on the list)

I also thought if you sell your AF house in the first 10 years you have to repay any profit made back to the council including the purchase price? Am I missing something there?

I have an AF house and I'm very glad of it and I can totally understand this couples plight as I myself was on the AF list for 4.5 years and thought I'd never get one. So I know how they feel about this situation.

 

[nt00deep]

Re: Affordable Housing

So if your circumstances changed and you had to move away from where you live now, and had to sell your property, if the property had doubled in value since you first agreed terms with the Local Authority, would you be happy to forfeit all of your profit to the L.A.?

You own the house and have funded (using earlier example) 2/3 of the cost. If your house had doubled in value, would you be happy to give the council a 6-fold increase in its investment as thanks for helping you out?

I'm not saying there should be open book when it comes to selling, but surely any rational review of this would suggest that having the L.A. and yourself splitting any profit according to your investment is fair, and the L.A. can then use its inflated investment to buy a similar share in another house for the next guy in the list.

 

[jammacjam]

Re: Affordable Housing

So if your circumstances changed and you had to move away from where you live now, and had to sell your property, if the property had doubled in value since you first agreed terms with the Local Authority, would you be happy to forfeit all of your profit to the L.A.?

You own the house and have funded (using earlier example) 2/3 of the cost. If your house had doubled in value, would you be happy to give the council a 6-fold increase in its investment as thanks for helping you out?

I'm not saying there should be open book when it comes to selling, but surely any rational review of this would suggest that having the L.A. and yourself splitting any profit according to your investment is fair, and the L.A. can then use its inflated investment to buy a similar share in another house for the next guy in the list.

How do you know that their circumstances changed and that they didn’t just flip it? I don’t think they should have got any of the profit as the idea is to help people with housing not to turn a profit.

 

[lff12]

Re: Affordable Housing

One of the criteria of affordable housing is that the applicant must be in need of housing. If they didn't need to live there, they either bought it under false pretences or their situation changed which can happen.

Other than that, doesn't seem like they broke any rules. Anyone can sell their affordable house anytime they like.

Precisely my feelings. If they had somewhere else to live, they were not in need of housing. However a lot of people, even on the housing list, are technically considered to be in need of housing just because they are renting, or if they are over a certain age and still living in the family home. There is no probing into how many people live in the family home or even if it might be better for the person to live in the family home.

For example I do know of a case where an adult was given an apartment by a HO who was renting, but in fact had an elderly parent living alone in a 3 bedroomed house less than 1 mile up the road. Likewise thousands of people get rent allowance to live in rented accomodation whilst on social welfare where there is absolutely no need whatsoever for them to move out of the family home, but nobody questions this! There is a serious flaw in ALL social/affordable housing schemes that not enough probing is done to examine the circumstances of peoples current living conditions, and so its very likely that statements are taken at face value.

For example I live and work 200 miles away from home, so I can't just move back to my parent's tomorrow without leaving my job. In fact I couldn't even do that up until a year ago as there wasn't even a bed for me! Now I would think that my needs are greater than somebody who lives two miles from mumsy and pater and simply wants to rent "just for the craic of it." But technically I might actually be lower down the housing list because I've lived in the area for a shorter lenth of time.

Surely there is a fairer way of assessing housing need!?

 

[Andy_and_lou]

Re: Affordable Housing

So basically I bought my house of 150,000 and when I signed the contracts market value they gave was around €185,000. Now I know my house is worth at least €300,000, so if I sold in the morning and took away the 150,000 and the percentage back to the council, I have nearly €100,000 profit, that doesn't make any sense, now I'm saying that I wouldn't be delighted if that was the story, even though I have no intention of selling my house but if I ever had to sell up it would ease my mind iykwim. But to honest it seems to good to me true.

 

[nt00deep]

Re: Affordable Housing

jammacjam :

How do you know that their circumstances changed and that they didn’t just flip it

Answer is I don't, but my point is that it is possible. I just wouldn't be too quick to judgement without knowing the facts, particularly when the case was highlighted by a politician.

 

[liteweight]

Re: Affordable Housing

So if your circumstances changed and you had to move away from where you live now, and had to sell your property, if the property had doubled in value since you first agreed terms with the Local Authority, would you be happy to forfeit all of your profit to the L.A.?

You own the house and have funded (using earlier example) 2/3 of the cost. If your house had doubled in value, would you be happy to give the council a 6-fold increase in its investment as thanks for helping you out?

I'm not saying there should be open book when it comes to selling, but surely any rational review of this would suggest that having the L.A. and yourself splitting any profit according to your investment is fair, and the L.A. can then use its inflated investment to buy a similar share in another house for the next guy in the list.

Circumstances do change, not only having to move away but maybe better job, salary increase etc. I completely agree with the points raised above. The alternative is that people stay in a home no longer suitable for them. Why? Because they got a helping hand to get on the ladder. If everybody stayed put then the LA would get very little return on their money and therefore have less to invest in affordable housing in the future.

 

[Andy_and_lou]

Re: Affordable Housing

It's just the fact that they didn't even live in the house. I think everyone would look at it differently if they bought the house and were actually living there and then decided to sell iykwim.

I know in my own case I got the keys about 6 months before signing the contracts, in that time, I was allowed live into the house and I paid rent to the council, presuming they were in the same position as I was, why did they sign the contracts having never lived in the house, if they did go through the same process as I did, after 6 months they must have known at that stage they weren't keeping it, especially since they didn't live in it??? Maybe I'm totally off the mark here. But I just think, particularly as it hadn't been lived in, that it should have went back to the next person the list.

 

[coinfused]

Re: Affordable Housing

I think its outrageous IF they haven't even lived in the house (its possible that they have a genuine reason for selling and if so good luck to them). Social housing is subsidised by our taxes as are the local authority budgets, houses are allocated according to genuine need and if they haven't lived there they didn't genuinely need it!
Affordable/social housing exists because applicants have identified themselves as needing state assistance in some shape or else they could not afford to house themselves. Why should my taxes be used to allow somebody to make a large profit like this when there are hundreds more deserving behind them on the waiting list? The shocking avarice and cynicism of some Irish people never seeks to amaze me, I wouldn't dream of exploiting a scheme like this.

 

[nt00deep]

Re: Affordable Housing

I wouldn't dream of exploiting the scheme either, but still, consider this.

You don't want your taxes being used to allow somebody to make a large profit.

The couple invested in 2/3 of a property. Your taxes invested in the other 1/3 of the property. The property was flipped, and I do have a big problem with flipping in this kind of circumstance. I would have pulled out if my circumstances had changed positively. But anyway, lets see how much of our taxes have been wasted ...

The house increased in value and we (taxpayers) get our 1/3 back and 1/3 of the profit. The home 'owner' got none of our money and none of our profits. Our profit can be used to buy 1/3 of a property next door for the next deserving candidate. Surely a loss to the taxpayer would only arise after year 10, when the re-pay value of the investment by the L.A. begins to diminish.