Labour's Plan for Distressed Mortgages and Household Debt
Issued : Sunday 20 February, 2011
Fianna Fáil's policy of putting the interests of big developers and the banks ahead of people looking to purchase a modest home was a direct cause of Ireland's disastrous property boom and bust. The collapse in the economy has left thousands of people facing unemployment and loss of income, who in turn are facing difficulties with their mortgages. This has also resulted in huge additional expenditure for the State in a range of housing supports. Labour is committed to helping homeowners in distress to weather this recession, and achieving better use for scarce public resources.
The burst in Fianna Fáil's property bubble has left thousands of families in distress with their mortgages, and many are facing the nightmare of losing their home. The mortgage crisis is having a devastating impact both on the lives of those people affected by it, as well as on the wider economy. It is well-established that individuals affected by negative equity or experiencing mortgage arrears are less likely to spend, with consequences for domestic demand. People in arrears on their mortgages are also likely to be experiencing other forms of personal debt, including car loans, credit card debt and other forms of unsecured lending. Such individuals are highly vulnerable to a sudden change in circumstances, such as the loss of employment or additional caring responsibilities. The key focus of Labour's policy is to assist home-owners currently in mortgage distress, and who make an honest effort to pay what they can, to keep their homes.
There is no one-size fits all solution to this problem. Every case comes with its own story and its own particular circumstances. What is required is an approach that is capable of dealing with what is a complex and difficult problem, at a time when the State's resources are heavily constrained.
Already, as a result of the recession, the State has incurred huge additional costs in housing supports. The cost of rent supplement has increased to over €500m per year (see appendix). As rent supplement is a demand-led scheme, this cost will continue to be high, unless action is taken to reduce the numbers forced to claim for rental support, and to reform how the State provides that support.
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Summary
Labour is proposing a comprehensive package of short and medium term supports to minimise repossessions of principal primary residences, including:
- A two year moratorium on repossessions. This will give people time to sort out their financial position, and remain in their home.
- Converting the Money Advice and Budgeting Service into a strengthened Personal Debt Management Agency to provide stronger support and impartial, professional advice for people in financial difficulties.
- Giving families who make an honest effort to repay their loans protection from their creditors so that they have time to sort outtheir affairs, by putting the Personal Debt Management Agency on a quasi-judicial footing.
- Reforming the bankruptcy laws for those who have to take that route.
- Making greater use of Mortgage Interest Supplement to support home owners who cannot meet their mortgage payments, which is a cheaper and better value option than paying rent supplement when a person loses their home.
- The Central Bank Commission will be tasked with introducing a licensing system to regulate debt collection agencies and increasing the level of regulation of 'payday' loan providers.
Labour is also proposing changes to public policy to ensure a more sustainable approach to housing into the future, such as:
- More comprehensive and intensive scrutiny of credit institutions' mortgage lending practices by the Central Bank and Financial Regulator.
- Providing for a national, publicly-available housing price database.
- Taking remedial action to deal with the legacy of bad planning and ghost estates in the context of a new National Development Plan
- Requiring local authorities to carry out an 'Educational Impact
- Assessment' for all new zonings for residential development to ensure an adequate supply of school places.
- Working within existing resources, introducing a staged purchase scheme to increase the stock of social housing, while achieving the best possible value for public investment.
- When market conditions normalise, enabling large housing associations and local authorities to access private sector funding to build or acquire social housing by issuing 'social housing bonds', secured on the value of their existing housing stock.
- Addressing the issue of anti-social behaviour by introducing a twelve month probationary tenancy for all new tenants in social housing estates.
- Introducing a 'housing first' approach to accommodating homeless people that will radically reduce the use of hostel accommodation and the associated costs for the Exchequer.
