THE Government should launch a new housing scheme that would see low and middle-income workers buying a home in conjunction with their local authority. The shared ownership scheme would help those earning too much to qualify for social housing, but too little to get a big enough mortgage to buy their own home, the largest lender in the State, AIB, has suggested.
Such a scheme would tackle affordability, which is the main stumbling block in the market for new buyers, AIB said in a research paper.
The proposed scheme would see a household buy a portion of a property with a traditional mortgage. The buyers would need to meet Central Bank lending limits.
The other portion of the home would be owned by a local authority or a housing association, with the household paying rent on this portion of the property.
No more than 40pc of the property’s value would be owned by the local authority or housing association.
The rent would be charged at a discounted rate.
Households would be given flexible payment options to gradually increase their ownership of the property by buying out the local authority, and paying rent on a smaller portion of the property’s value as they increase their ownership of the home.
AIB researchers Pat O’Sullivan and Rory McGuckin propose that the scheme should be restricted to single people earning no more than €60,000, and dual applicants with a maximum household income of €100,000.
It should focus on first-time buyers.
There would also be a restriction on the value of houses that would qualify for the scheme, with a maximum of €450,000 in Dublin, and €400,000 outside the Dublin commuter belt.
There have been shared ownership schemes in the past, but AIB said they were ended in 2011 when the Government concentrated on social housing as opposed to affordable housing.
A State affordable purchase scheme was recently introduced, but it is limited to homes built on local authority and State owned lands. AIB said this restricts the supply of affordable homes.
The economists at the bank said they agree with Central Bank estimates that between 30,000 and 35,000 new homes a year are needed.
Mr O’Sullivan and Mr McGuckin wrote: “We believe there is some merit in introducing either a shared ownership scheme or a shared equity scheme in the Irish market that targets the affordability segment.”
“There is a large cohort of households on average incomes that could afford home ownership but are constrained from doing so,” they wrote.