COMHAIRLE CONTAE ÁTHA CLIATH THEAS
SOUTH DUBLIN COUNTY COUNCIL

MEETING OF SOUTH DUBLIN COUNTY COUNCIL

Monday, January 11, 2010

MOTION NO.5

MOTION: Councillor C. Jones

That the manager will give a report on the situation where occupants of affordable housing within the county have negative equity in their property.

REPORT:

Affordable Homes were sourced by South Dublin County for eligible affordable housing applicants through the  1999 scheme, part v of the Planning and Development Act 2000 ( as amended), the affordable housing initiative and the affordable homes partnership. These affordable homes were provided at substantial discounts on the  open market value, in some cases  a discount  of up to 40% of the open market value was available..Provision was made in the Planning & Development Act 2000 to apply a claw back in the event of a re-sale of an affordable home , and it is in place to prevent inappropriate profits arising from the sale of an affordable home.However, on the sale of an affordable home in a depreciating market , the clawback to be repaid to the local authority is based on the Housing Miscellaneous Provisions Act 2002, section 9 sub section 3(d) and the Planning and Development Act 2000, section 99 sub section 3(c) "“Where the amount payable under paragraph (a) [the clawback amount] would reduce the proceeds of the sale (disregarding solicitor and estate agent's fees and costs) below the price actually paid, the amount payable shall be reduced to the extent necessary to avoid that result.”

The legislation states that the amount of clawback  should not reduce the proceeds of the sale below the price actually paid. This allows the Local Authority to reduce the amount due under the clawback where a borrower would suffer a loss as a result of the clawback. The following example illustrates how it works when the home is sold below the original Market value;

Example

Original Market Value;                                €280,000

Original Affordable Price                           €196,000

Clawback %                                                         30%

New Market Value ( Resale Price)            €260,000

• Where the Resale Price is lower than the Original Market value €280,000, but higher than the Original Affordable Price € 196,000, the amount of clawback is based on the Current  Market Value or the Resale price of €260,000
• The Affordable Price is deducted from the resale €260,000 ---€196,000 = €64,000
• The difference is €64,000, which is the Clawback payable to the local authority.

On the sale of an affordable home, if the resale price (current market value) is lower than the original affordable price, the clawback payable to the local authority is zero.  Despite the foregoing legislative provisions, it is possible that  affordable home owners could find themselves in a negative equity position because of the current market conditions.  The latter is outside the control of the local authority.