The new affordable home purchase scheme will allow households buy a home at a price that is initially lower than the market value of the property. It is a national scheme that will see affordable homes built on public land in co-operation with local authorities. The scheme is aimed at households who would be able to repay a mortgage but are finding it difficult to buy a home. The new scheme replaces previous affordable purchase initiatives.
The legislation behind this scheme is Part 5 of the Housing (Miscellaneous Provisions) Act 2009, which was commenced in June 2018. At present, each local authority is preparing a “scheme of priority” that will govern how eligible households will be selected when affordable homes are available to buy. Regulations (S.I. No. 81 of 2019) describing what local authorities’ must include in their scheme of priority were published in March 2019 and can be found on the Irish Statue Book website
Affordable home purchase and the “equity share”
Lowering the purchase price paid at the outset will help households access homeownership. However, over time, the buyer will pay the full market value of the affordable home. The difference between the initial purchase price and the market value of the home at the time of purchase will be expressed as a percentage of the market value and converted into an equity share in the property held by the local authority. The equity share gives the local authority a stake in the future market value of the property and must be paid back in full by the household.
The table below is example of how this might work:
|Open market value at time property is first sold||€300,000||100%|
Discounted purchase price paid by the eligible household
Household meets initial purchase price via mortgage and savings
Value of local authority's 20% equity share
The local authority’s equity share can vary (up to a maximum of 40%)
The scheme will reduce the amount of money the buyer must initially raise to purchase a home. The household pays the lower initial purchase price using savings and a mortgage. The buyer gets full title to the home and repays the mortgage on the property in the same way as any other mortgage. The affordable home must be the household’s normal place of residence.
While the local authority’s equity share in the property must be repaid in full, the timing of the repayment(s) is flexible. After five years, the household can choose when to make repayments on the equity share and has some freedom to decide the amount it wishes to repay at a particular time. The total amount of money the household pays to clear the local authority’s equity share in the property will depend on the future market value of the home and the timing of the repayment(s). If the household is not in a position to repay the equity share earlier, the local authority will receive the value of its stake in the property when the household decides to sell the home.