Brian Stanley: Opposes 100% Mortgages, Flags Rent vs Deposit Fairness

If I could go back to the 100% mortgages for a moment, in relation to, you know, I think the proposal is daft, that's my own opinion about it at the outset for a number of reasons, some of which you've outlined yourselves. But there is an issue there in terms of people who are in private rented accommodation where they have rent paid over a three or five or six or maybe eight year period, and the rent that they're paying is actually in excess of what a mortgage on the same home would be. And I would just maybe like to ask DRSI, you know, I want to keep the answers to questions and answers very short because we limit the time. But just in terms of, is there a way of, do you see a way of utilising that? Because it does seem there is an unfairness there. You're paying 400 a week, you know, in rent. You can pay a mortgage on the same home for 280, 290 or 300. It does seem there's an unfairness there. And people are saying, you know, I can't say it for the deposit. Because I'm paying all this rent. You know, have you looked at a way of a model to reconcile that? Yeah, let me just, because I actually haven't commented on the 100% mortgages so far. Like you said there, Debbie, I couldn't put it better. I don't think they're a good idea to have 100% mortgages. I think that we've learned the hard way that loose credit conditions don't go well. Yeah, we're still paying the price. To extend to households. And we are, we still have scars through our system. The interest on the loans, we're still paying them. And I don't think we should bring back a product which brings in 100% LTVs. I think the market potential framework that the central bank has instituted over a number of years now protects banks and borrowers and gives more resilience in the system. And I don't think we should compromise that by extending looser credit conditions. I think it is a very, it is a really tricky issue that you mentioned there. How do young households accumulate the savings sufficiently to build up a deposit? And that is a challenge. We haven't done specific work on that, but that is a major challenge for many households. And, you know, banks trying to make a credit assessment on the lending decisions. You know, they can see those payments going out. So that can maybe be a factor there. But certainly I don't think 100% more. So are you saying in short, for a move on to the next question, that perhaps then an institution should maybe give that more attention? Well, I think that when they're making their credit assessment and they see any, you know, they still have to have the deposit in place. Of course. So I would like to be clear on that. I don't see any reason why we would loosen the cap from the 10% deposit. I don't think that's a good idea or advisable. And just to think about in terms of the 100% mortgages, we asked the central bank this question that you mentioned that we'd like to drive up prices. You don't see an increase in the supply in a contribution, Robert, in reply to one of the contributions. Does the shared equity scheme not do the same thing? You know, because prices did seem to be, the curve did seem to have gone a steep incline after that shared equity scheme and some other ones were brought in. So when we think about, when we think about any of these things which operate on what I call the demand side, so in essence, giving some type of policy treatment to a household. In essence, if you're thinking about what impact do they have on supply, they can only work one way. Now, they can have other benefits. So let's say you say, I want to target a certain cohort of households that I feel are having particularly difficult access to housing. Then you can design a scheme like this under certain incomes, in certain areas. You want to incentivise certain types of living. Let's say it's urban density. There could be a number of policy reasons you want to do this. Then this demand side can be very effective at incentivising households to do this, right? Because you're essentially creating an incentive. But if your goal is to have, you know, I'm going to do this to increase the supply of homes. The only way in which you can do it, if it's very broad, is by pushing up prices and hence making it more attractive to supply houses for development. So you're offsetting that viability by creating a higher price. Now, the first home shared scheme has elements of both, right? It does talk a little bit about incentivising supply and that's why it's on the new housing side. But it also does have income controls. It does have limits within it in terms of house prices. So, you know, it really does depend on what the policymaker is targeting, whether they are targeting some of that differential. But if it's purely to increase supply, the only challenge for which you can do it is increase prices. And can I come back and could I ask you this question about supply that, you know, it's mentioned that rent controls or RPZs, rent pressure zones, limit supply. You know, the example of my Portlaoise is in one, just seem to have limited supply in Portlaoise. Very active, loft sites are very active in the area we've been built on. Just mentioning in relation to this relationship between rents and supply, during the Celtic Tiger, you know, one year we built 96,000 houses and rents shot up significantly. I don't have the figures. You probably have them somewhere, right? But during that period, you know, we built houses that we didn't even need. You know, we're building houses for hoping somebody would move into the country and fill them. You know, that's literally what was happening in Australia, the states were just happening then. But, you know, rents shot up, right? So we had loads of supply. In fact, we had too much because when the economy crashed, we had rows of empty houses. We had too many houses, right? So why did that happen? I mean, surely that doesn't, you know, that shows that, you know, that that correlation isn't necessarily as solid as it's yourselves explained it, politicians explained it the whole time. I'm not convinced that that is, there's a direct correlation between those two things because of the evidence during the Celtic Tiger. Would you not agree that during the Celtic Tiger there was a four or five year period there where we built a huge amount of houses, but, you know, rents escalated at an enormous rate? So rents certainly did grow through the Celtic Tiger, but one very interesting, and I only did it recently and I was kind of surprised with it. If you chart out how rents and prices evolved, right, house prices grew far quicker than rents even through the Celtic Tiger years. Because during the Celtic Tiger years, the reality was housing became more and more of a speculative asset, just as you pointed out. People bought housing as second homes, people bought housing, reviewed rent it out. So, look at it more recently, rents and house prices have almost gone in parallel. I think that is much more clear sign of an imbalance between housing demand and supply. We had less of that imbalance back in 2006 and 2007. As you say, we've got up close to 90,000 units at one stage. Back then, it was a credit-driven speculative housing boom is what we're in the middle of. And just finally, could I ask in relation to, as part of it is, in relation to land, the Kenney Report, which was done under a Fingale government in 1974, as I recall, if I'm correct on that, that advocated, you know, putting structures in place to deal with this issue. It was never implemented, it was put on a shelf and it's there since. You know, the issue of land, how do you see this being dealt with, you know, because it's obviously driven up prices, particularly in large urban areas, what's the short answer to dealing with that? Is the Kenney Report or something similar to that the answer? So, I'm not aware of the exact detail in the Kenney Report, to be honest, which is I won't comment on that directly. But the reality is, having land, and not just land, but serviced, zoned land available, and also, the issues may be potentially around planning. So, what we want to do is minimise the time it takes from someone to start the process of developing to a final unit. And there's a number of factors which can create a friction there. One of them is, when you get to planning stage, you realise water's not available, or it needs infrastructural development, which delays it. Another one might be, there's some other reason. So, the reality with land is, we need to make available land, that it doesn't become a friction in how we supply units. Like, it shouldn't be a consideration when you're entering in, oh, potentially here, I'll have to think about, when I get to planning, the infrastructure won't be available, it's a delay of two years, or it's this. So, I don't know exactly what was in the Kenney Report, but for me, the way... You always need to cap the price of land to, you know, to a small multiple of the pre-zoning period, right? So, it's like agricultural land, unzoned land, you know, it would only go so much beyond that. So, it removes the speculative development from pricing in land. Yes. Yeah, look, I think, one of the things I think is really important with the land market, you look at some of the other countries which have very, kind of, managed land systems, like in Austria, they have much more active land management. What they basically do is, they're getting parcels of land, they're servicing that land, they're getting it ready for production and bringing it into the system at a much greater speed... At market price. Pardon? At market price. And then they'll put it out for, they will, depending on the system and the structure, they will either put it out for tender at market prices or the alternative, they make it available for social housing or affordable housing. You know, you can build that into your structures and your systems as to what you feel is the right use of that piece of land or that parcel of land. But the aim really is to be much more, rather than just have a passive view on land as a market that you're selling the prices and coming through it, that you're actively using that input into the factors of production to be able to say, we need to target that piece of land, we need to get it ready, we need to get it serviced, we need this type of housing on it, and we'll put it into the system in that shape and form so it can be developed. I think that's a, you know, obviously the Land Development Agency playing a greater role in trying to get the state lands working more productively, but I think we can think more broadly about trying to get land much more actively serviced and into the system in Ireland. Thank you. Thanks very much.