Operation Digout - Government Rescues the Builders

The lads over at the pin have been hard at work. I urge anyone who feels strongly about the Builder Bailout to fill out the EU complaint form. The lads have made it quick and easy. Operation Digout

Kerrynorth on the Pin wrote:

a) The proposed scheme that is the matter of this complaint was announced by the Government of Ireland on October 14th, 2008.

b) Potentially between €2.5billion and €6.5billion is to be made available by teh Government of Ireland in the form of loans to residential property purchasers who must purchase their property from certain defined vendors to the exclusion of other vendors in the marketplace.

c) The main beneficiaries are those firms of Residential Developers whom have built New Build Dwellings in Ireland and who are also likely to have a crossover membership with the Construction Industry Federation (CIF) of Ireland.

d) This aid is been given for the benefit of Residential Developers whom have a large overhang of unsold New Build Dwellings in Ireland estimated at circa 40,000 units by various sources and also to artificially prop up residential housing values in a declining market.

Where is this coming from ? Between €2.5billion and €6.5billion ? What am I missing here. I see no measures in the budget for this.

It isn't a simple figure though because the Government is taking equity in the houses.

floatingingalway - do you have a link to the relevant part of the budget?

Only place I can find any reference is in the budget speech transcript.

Housing

EvotingMachine0197 wrote:

Only place I can find any reference is in the budget speech transcript.

Housing

Same here. This is the link to the website of Home Choice Loans www.homechoiceloan.ie

floatingingalway wrote:

EvotingMachine0197 wrote:

Only place I can find any reference is in the budget speech transcript.

Housing

Same here. This is the link to the website of Home Choice Loans www.homechoiceloan.ie

Thanks very much.

Quote :

The Government has invested significantly in housing in recent years. For 2009, the Government is allocating over €1.65 billion in Exchequer funding for a range of housing programmes.

This is all of the money that Government will spend this year on housing, including repairs, refurbishment and building of social housing, social and affordable housing and housing built by housing associations.

You dont understand how Homechoice works. It will not be funded as part of the 1.65bn in the budget. It will be an extension of the Housing Finance Authority which raises money as commercial paper backed by the state. It works by lending the money to local authorities who lend it to the house buyers. There is currently about 3.6bn or 3.8bn raised this way. The current maximum allowed under legislaiton is currently 6bn, although they currently have approval for abound 4.4bn.

The figures mentioned in the propertypin were based on comments by the housing minister at a meeting in Galway on monday.

I thought nothing of the scheme when it was announced until I understood how it worked.

It is all super cool and "fair" (ie you lend to people who would only have access to sub prime rates at prime rates). Only problem is if the people are overpaying, the state could pick up the tab for the negative equity if the people default.

Read all about it here in the annual report and corporate plan of the HFA

http://www.hfa.ie/hfa/Live/Release/WebSite/HomePage/Home.asp

Oh and evenin all

recursive wrote:

You dont understand how Homechoice works. It will not be funded as part of the 1.65bn in the budget. It will be an extension of the Housing Finance Authority which raises money as commercial paper backed by the state. It works by lending the money to local authorities who lend it to the house buyers. There is currently about 3.6bn or 3.8bn raised this way. The current maximum allowed under legislaiton is currently 6bn, although they currently have approval for abound 4.4bn.

The figures mentioned in the propertypin were based on comments by the housing minister at a meeting in Galway on monday.

I thought nothing of the scheme when it was announced until I understood how it worked.

It is all super cool and "fair" (ie you lend to people who would only have access to sub prime rates at prime rates). Only problem is if the people are overpaying, the state could pick up the tab for the negative equity if the people default.

Read all about it here in the annual report and corporate plan of the HFA

http://www.hfa.ie/hfa/Live/Release/WebSite/HomePage/Home.asp

Oh and evenin all

There are more problems:-

a) it is about lending money to people who have been refused loans - and presumably they have been refused loans for a very good reason (either they cannot afford it or the house is overpriced)
b) it is encouraging people into negative equity. House prices are clearly falling - to help people to buy a house now is insane - it is effectively getting a few unfortunate individuals to donate tens of thousand pounds towards the builders and/or the recapitalisation of the banks
c) the scheme is clearly about helping the builders because it only applies to new properties. As soon as someone buys a house using this scheme, their house will drop in value because all the other sub-prime buyers will be ineligible to buy it.

recursive wrote:

You dont understand how Homechoice works. It will not be funded as part of the 1.65bn in the budget. It will be an extension of the Housing Finance Authority which raises money as commercial paper backed by the state. It works by lending the money to local authorities who lend it to the house buyers. There is currently about 3.6bn or 3.8bn raised this way. The current maximum allowed under legislaiton is currently 6bn, although they currently have approval for abound 4.4bn.

The figures mentioned in the propertypin were based on comments by the housing minister at a meeting in Galway on monday.

I thought nothing of the scheme when it was announced until I understood how it worked.

It is all super cool and "fair" (ie you lend to people who would only have access to sub prime rates at prime rates). Only problem is if the people are overpaying, the state could pick up the tab for the negative equity if the people default.

Read all about it here in the annual report and corporate plan of the HFA

http://www.hfa.ie/hfa/Live/Release/WebSite/HomePage/Home.asp

Oh and evenin all

Hi recursive. There's a cup of tea for you in the Signing In thread. Thanks for that, I haven't had the time to dig this out and am just trying to get my head around it. Also thanks to Zakalwe.

If we nationalised the banks, we would have got all those empty houses anyway.

DeGaulle wrote:

recursive wrote:

You dont understand how Homechoice works. It will not be funded as part of the 1.65bn in the budget. It will be an extension of the Housing Finance Authority which raises money as commercial paper backed by the state. It works by lending the money to local authorities who lend it to the house buyers. There is currently about 3.6bn or 3.8bn raised this way. The current maximum allowed under legislaiton is currently 6bn, although they currently have approval for abound 4.4bn.

The figures mentioned in the propertypin were based on comments by the housing minister at a meeting in Galway on monday.

I thought nothing of the scheme when it was announced until I understood how it worked.

It is all super cool and "fair" (ie you lend to people who would only have access to sub prime rates at prime rates). Only problem is if the people are overpaying, the state could pick up the tab for the negative equity if the people default.

Read all about it here in the annual report and corporate plan of the HFA

http://www.hfa.ie/hfa/Live/Release/WebSite/HomePage/Home.asp

Oh and evenin all

There are more problems:-

a) it is about lending money to people who have been refused loans - and presumably they have been refused loans for a very good reason (either they cannot afford it or the house is overpriced)
b) it is encouraging people into negative equity. House prices are clearly falling - to help people to buy a house now is insane - it is effectively getting a few unfortunate individuals to donate tens of thousand pounds towards the builders and/or the recapitalisation of the banks
c) the scheme is clearly about helping the builders because it only applies to new properties. As soon as someone buys a house using this scheme, their house will drop in value because all the other sub-prime buyers will be ineligible to buy it.

Lots of stuff there in those two posts. I'll read the hfa link tomorrow.

DeGaulle, I have to disagree with your point c). A house has a market value irrespective of how the owner managed to buy it. No?

I think Zakalwe's pointing out that second hand houses might be harder to sell as they are not eligible under the scheme. Is that right Z. ?

EvotingMachine0197 wrote:

DeGaulle, I have to disagree with your point c). A house has a market value irrespective of how the owner managed to buy it. No?

Perhaps I am exaggerating somewhat, but if it is easier to get a mortgage buy a new house than a second-hand house then that should increase the price of new houses relative to second-hand houses.

recursive wrote:

You dont understand how Homechoice works. It will not be funded as part of the 1.65bn in the budget. It will be an extension of the Housing Finance Authority which raises money as commercial paper backed by the state. It works by lending the money to local authorities who lend it to the house buyers. There is currently about 3.6bn or 3.8bn raised this way. The current maximum allowed under legislaiton is currently 6bn, although they currently have approval for abound 4.4bn.

The figures mentioned in the propertypin were based on comments by the housing minister at a meeting in Galway on monday.

I thought nothing of the scheme when it was announced until I understood how it worked.

It is all super cool and "fair" (ie you lend to people who would only have access to sub prime rates at prime rates). Only problem is if the people are overpaying, the state could pick up the tab for the negative equity if the people default.

Read all about it here in the annual report and corporate plan of the HFA

http://www.hfa.ie/hfa/Live/Release/WebSite/HomePage/Home.asp

Oh and evenin all

It is also to be noted that if the houses are Affordable Homes then the state probably owns 100% of the equity as it is.

The guys on the Pin are starting to see their campaign in the mainstream media.

http://www.thepropertypin.com/viewtopic.php?f=4&t=15291&start=0&st=0&sk=t&sd=a]200 complaints against plan for first-time buyers

The closer you look at the budget, the more it's apparent that it is constructed with a central agenda of maintaining construction, no matter what the cost.
There is the sub prime scheme - construction
Then there is the NDP with its multimillion greyhound stadia - construction
Private hospitals - construction
Anything else that I missed?

As spillercork said in his blog on the budget, the CIF was the only organisation that did not complain about the budget ,not excepting IBEC.

I can't help wondering if this complaint is really covered by European competition laws. From what I've read, the EU competition laws deal with issues between countries and not within a specific country. While there might be an issue if a German builder was operating in Ireland and was put in a disadvantaged position becuase of the builder bail-out, for example, there is no real issue when the competition is between one Irish builder and another Irish builder.

Can anyone clarify this?

rockyracoon wrote:

I can't help wondering if this complaint is really covered by European competition laws. From what I've read, the EU competition laws deal with issues between countries and not within a specific country. While there might be an issue if a German builder was operating in Ireland and was put in a disadvantaged position becuase of the builder bail-out, for example, there is no real issue when the competition is between one Irish builder and another Irish builder.

Can anyone clarify this?

Article 82 from the EU competition lawbook

Quote :

Any abuse by one or more undertakings of a dominant position within the common market
or in a substantial part of it shall be prohibited as incompatible with the common market
insofar as it may affect trade between Member States.
Such abuse may, in particular, consist in:
(a) directly or indirectly imposing unfair purchase or selling prices
or other unfair trading conditions;
(b) limiting production, markets or technical development to the prejudice of consumers;
(c) applying dissimilar conditions to equivalent transactions with other trading parties,
thereby placing them at a competitive disadvantage;
(d) making the conclusion of contracts subject to acceptance by the other parties
of supplementary obligations which, by their nature or according to commercial usage,
have no connection with the subject of such contracts.

Johnfás on the 'I hate' thread.

He loves it though.

Hiya A9. This is the catch (and a very big one in my estimation) " . . . insofar as it may affect trade between Member States"

The entire clause is inherently focused on trade between memeber states and doesn't reference internal market competition. Like I said, if another group of builders from another nation operating in Ireland was affected, this clause would apply.

I hope the complaints had other clauses to reference because, imho, this article is not relevant or targetted on the actual complaint. gl

PS. maybe the presence of UK building firms (ie the North) doing business in the ROI might be a worthwhile complaint issue. I wonder if anyone referenced this in their complaints?

EvotingMachine0197 wrote:

DeGaulle wrote:

recursive wrote:

You dont understand how Homechoice works. It will not be funded as part of the 1.65bn in the budget. It will be an extension of the Housing Finance Authority which raises money as commercial paper backed by the state. It works by lending the money to local authorities who lend it to the house buyers. There is currently about 3.6bn or 3.8bn raised this way. The current maximum allowed under legislaiton is currently 6bn, although they currently have approval for abound 4.4bn.

The figures mentioned in the propertypin were based on comments by the housing minister at a meeting in Galway on monday.

I thought nothing of the scheme when it was announced until I understood how it worked.

It is all super cool and "fair" (ie you lend to people who would only have access to sub prime rates at prime rates). Only problem is if the people are overpaying, the state could pick up the tab for the negative equity if the people default.

Read all about it here in the annual report and corporate plan of the HFA

http://www.hfa.ie/hfa/Live/Release/WebSite/HomePage/Home.asp

Oh and evenin all

There are more problems:-

a) it is about lending money to people who have been refused loans - and presumably they have been refused loans for a very good reason (either they cannot afford it or the house is overpriced)
b) it is encouraging people into negative equity. House prices are clearly falling - to help people to buy a house now is insane - it is effectively getting a few unfortunate individuals to donate tens of thousand pounds towards the builders and/or the recapitalisation of the banks
c) the scheme is clearly about helping the builders because it only applies to new properties. As soon as someone buys a house using this scheme, their house will drop in value because all the other sub-prime buyers will be ineligible to buy it.

Lots of stuff there in those two posts. I'll read the hfa link tomorrow.

DeGaulle, I have to disagree with your point c). A house has a market value irrespective of how the owner managed to buy it. No?

I think Zakalwe's pointing out that second hand houses might be harder to sell as they are not eligible under the scheme. Is that right Z. ?

i'd love to respond to that but can't find my post!

rockyracoon wrote:

While there might be an issue if a German builder was operating in Ireland and was put in a disadvantaged position becuase of the builder bail-out, for example, there is no real issue when the competition is between one Irish builder and another Irish builder.

Can anyone clarify this?

In regard to Governmental policy you have various aspects of the Treaty which could apply. You are however correct in that it must affect inter state trade within the Union in order for it to breach European Law. That is not to say that it must in actuality affect it, the ECJ are open to complaints from the Commission where there is a clear potential that it would. We do however have domestic Competition Law which is derived from EC Law and the ECJ has also been very broad in its interpretation of cross border activity.*

You would have two relevant Treaty Provisions. The first being a competition law aspect - Article 87 EC.

Quote :

Save as otherwise provided in this Treaty, any aid granted by a Member
State or through State resources in any form whatsoever which distorts
or threatens to distort competition by favouring certain undertakings
or the production of certain goods shall, insofar as it affects trade
between Member States, be incompatible with the common market.

However, you have various mitigating factors on which such aid can be justified by a Member State, aid due to exceptional circumstances and aid having a social character being two. There would seem to be ample room for justification here even if one did not agree with it.

A secondary point a German builder, for instance, can raise if they feel there is a State policy which excludes them from the Irish Market is under the law relating to Freedom of Establishment (Arts 43 & 48 EC) and the Freedom to Provide Services (Art 49 EC) on a cross border basis within the Common Market. Again, on foot of a complaint by the Commission, it need not be proven that there was actual infringement, merely that a policy causes potential infringement. Further, there need not be an intention to limit these freedoms so long as the effect of a policy is similar to such a restriction.

However, despite the above, the builder 'bail out' is not so much a clear bail out but a fiscal policy carried out via the taxation system. Taxation remains an area of sovereignty for Member States and provided the taxes do not discriminate against builders from other Member States, or even if they do that there is no objective justification, then there would not seem to be much cause for the EU to get involved.

I hope that clears the issue up. To be honest I'm nipping out the door so I only read the last couple of posts and not the whole thing so I might not be answering what is being asked. I will clarify later on.

*For instance, in the context of personal rights of free movement,
whilst you do not gain these rights if you are resident in your own
State, if you move State and come back, even without gaining
citizenship of the third State, you do assume these rights... somewhat
artifically. It used to be called 'doing a Dublin' in the UK. For instance, I believe cactus spent some time in the UK and therefore would be entitled to all the protections of free movement of EU citizens, as if from a third member state, despite being an Irish citizen (presumably) resident in Ireland.

zakalwe wrote:

EvotingMachine0197 wrote:

DeGaulle wrote:

recursive wrote:

You dont understand how Homechoice works. It will not be funded as part of the 1.65bn in the budget. It will be an extension of the Housing Finance Authority which raises money as commercial paper backed by the state. It works by lending the money to local authorities who lend it to the house buyers. There is currently about 3.6bn or 3.8bn raised this way. The current maximum allowed under legislaiton is currently 6bn, although they currently have approval for abound 4.4bn.

The figures mentioned in the propertypin were based on comments by the housing minister at a meeting in Galway on monday.

I thought nothing of the scheme when it was announced until I understood how it worked.

It is all super cool and "fair" (ie you lend to people who would only have access to sub prime rates at prime rates). Only problem is if the people are overpaying, the state could pick up the tab for the negative equity if the people default.

Read all about it here in the annual report and corporate plan of the HFA

http://www.hfa.ie/hfa/Live/Release/WebSite/HomePage/Home.asp

Oh and evenin all

There are more problems:-

a) it is about lending money to people who have been refused loans - and presumably they have been refused loans for a very good reason (either they cannot afford it or the house is overpriced)
b) it is encouraging people into negative equity. House prices are clearly falling - to help people to buy a house now is insane - it is effectively getting a few unfortunate individuals to donate tens of thousand pounds towards the builders and/or the recapitalisation of the banks
c) the scheme is clearly about helping the builders because it only applies to new properties. As soon as someone buys a house using this scheme, their house will drop in value because all the other sub-prime buyers will be ineligible to buy it.

Lots of stuff there in those two posts. I'll read the hfa link tomorrow.

DeGaulle, I have to disagree with your point c). A house has a market value irrespective of how the owner managed to buy it. No?

I think Zakalwe's pointing out that second hand houses might be harder to sell as they are not eligible under the scheme. Is that right Z. ?

i'd love to respond to that but can't find my post!

This is not so different from the "First Time Buyers Grant" that was only usable for buying a new house. Once there was an undersupply of houses it was not a buyers grant, but a sellers grant, as the seller could push the price up to as much as people could afford. The grant had the effect of depressing the price of smaller "second hand"/older houses, that are normally the way that young couples can get into a cheap home. The grant condemned many a rural cottage to ruin.

Why do people want to buy newer homes, apart from obvious stamp duty issues which I think existed in the past. Alot of newer housing developments are very poorly built in comparison to their older counterparts.

stamp duty still exists. why pay the govt 30k plus for the privilage of moving into a bigger house to accommodate a growing family?

and while the house may not be as well built, a new build has many advantages over an old house, most notably it tends to be higher spec inside and better insulated/wired.