Thousands of overvalued ‘affordable’ homes lie idle

by Jennifer Hough

Wednesday, April 01, 2009

THOUSANDS of over-valued "affordable houses" bought by councils at boom prices are lying vacant because people cannot afford to buy them.

Figures from the Department of the Environment reveal that the number of affordable units has risen 40% — from 2,200 at the end of 2007 to 3,700 today.

Officials are concerned they may only be able to sell off about half the current stock, making the additional 2,270 houses coming on stream this year very problematic to offload.

Local authorities are struggling to sell the homes — despite the fact there are approximately 28,000 on the waiting lists — because prices have not fallen in line with the rest of the market.

The houses were bought at pre-recession prices and developers are not renegotiating price cuts despite the drastic change in market conditions.

Added to this, potential buyers cannot secure mortgages because banks will not sanction loans on these overvalued properties, leaving councils searching for other options to deal with the massive housing glut.

Labour spokesman on housing and local government Ciaran Lynch insisted local authorities should talk with developers to find a more equitable price, but a spokesman for the Department of the Environment said this was not likely to happen.

"The problem is that local authorities are contractually committed to the arranged price and developers know councils cannot insist on reducing it."

The department is finalising a circular to all local authorities in an effort to overcome the problem. Suggestions include transferring the properties to the rental accommodation scheme, or using them as temporary social housing support.

Mr Lynch said people hoping to buy under the scheme were finding it hard to get mortgage approval because banks felt the houses were worth less than the sale price. "I know of one couple with mortgage approval in principle for e250,000 and who wanted to buy an affordable house from their local authority.

"The local authority wanted to charge e216,000 for the house, but their mortgage provider only valued the house at e196,000. As a result they would not provide the loan for the house" said Mr Lynch.

Fine Gael spokesman Terence Flanagan said first-time buyers are abandoning affordable housing, as they no longer reflect "affordable" prices.

Mr Flanagan’s Freedom of Information documents show a 141.91% rejection rate across the six Dublin council areas last year. During 2008 there were 6,014 offers made to applicants to view properties, but only 18% viewed the properties.

In response, the Affordable Homes Partnership said it was wrong to state that there is no difference between open and affordable prices. It said affordable housing continues, in the main, to be at a discount to the open market price, but people are waiting to see how things will develop.

This appeared in the printed version of the Irish Examiner Wednesday, April 01, 2009