Affordable Housing - is it really worth it?

Jaybee

CherieAmour wrote:

And for the record, men and women who buy houses that aren't AH can do whatever the hell they like with them - they haven't conned the system and other people in genuine need of housing by availing of a scheme that disallows them to do so.

First time buyers are liable to pay stamp duty & Tax on rental income on properties they rent out within the first 5/10 yrs not sure which one. So they are NOT allowed do what they want with it. Most get get caught applying for Mortgage TRS on two properties, and then a Revenue letter comes through the door.

I dont have an attitude your just extremely niave!!

godtabh

Moonbeam wrote:

Wages go up,people get better jobs with better money etc

I bought my house because I wanted a house that was mine,that I could do what ever I liked with.It is not in the area I would like nor is it as big as I would like but I worked hard for it and still do to pay if off every month.
When I am older and paid better or settle down with someone then I plan to trade up,I will have made money on my house compared to what I paid for it but not compared to the cost another house that I will buy will go up in the meantime and inflation.

Warrenaldo - Personally I think you are better off waiting for a house as you have a partner and child and that way you will have something a more long term to settle in and you never know your circumstances may change and you maybe able to afford a house in the meantime:)

The point that I was trying to make was that if he cant afford it now with the attention of children that affording it in the future might not be possible wither. Wages go up and so does everything else

comer_97

here's my thinking on this...

you are paying a mortgage of 180k so repayments of approx 1k a month. If you are renting you will be paying the exact same, if not more, lets say 1200.

After 5 years you will have a mortgage of approx 160k (check out http://www.jeacle.ie/mortgage/)

So you sell up at 320k and you have nothing to pay, of course you may sell for less, this rough work out is done over 25 years. Things could go well though, prices could go up as well as down.

You only loose if prices go down sharply and in that case you just don't sell.

If you rent you don't have any oppurtunity!

jdivision

Afuera wrote:

Can you tell me which local authorities do that? I can't seem to find anything online suggesting that the buyer of an affordable house is shielded from making a loss when they sell.

I believe it happens in Fingal. From my understanding when I bought my place I was liable to a clawback on the sale price minus what I'd spent on it and that I couldn't make a loss on it. I think somebody posted a link to something on that on another thread here.

Afuera

comer_97 wrote:

You only loose if prices go down sharply and in that case you just don't sell.

To get from 360k down to 320k over 5 years only requires a year-on-year decline of 2.25%. That's not exactly a sharp drop.

comer_97 wrote:

If you rent you don't have any oppurtunity!

As pointed out by many other posters, the affordable housing scheme should not be looked upon as an investment opportunity. It's there to put a roof over someones head. In the case of the OP it doesn't appear that what they are being offered would be adequate for their future needs (it's only just adequate for there current ones).

CherieAmour

jenben1982 wrote:

First time buyers are liable to pay stamp duty & Tax on rental income on properties they rent out within the first 5/10 yrs not sure which one. So they are NOT allowed do what they want with it. Most get get caught applying for Mortgage TRS on two properties, and then a Revenue letter comes through the door.

I dont have an attitude your just extremely niave!!

Read your own post. You said Oh and men and women who buy houses NOT on the AH are doing it too. as in, renting out their homes. Yes they may be liable for stamp duty & tax on it, but they are still allowed to do it. There is no rule that says a private owner can't rent out their property. There is a rule that states that the owner of an AH can't. It's as simple as that.

Believe me, I'm not naive.

I am, however, sick of people like yourself you seem to think it's okay to do something wrong provided you don't get caught. You're from the "everyone else is doing it so why can't I?" school of thinking and this equals "having an attitude" which you say you don't have.

What if we all went around doing whatever we liked and thinking solely of ourselves? Where would that leave us?

You seem to have missed the point that more than myself is trying to get through to you and that is that just because you CAN doesn't mean you SHOULD.

How would you feel about being offered a property while a family on the same affordable housing list who genuinely need to be housed are still waiting and you just buy yours to rent it out? Can you not see that this is wrong on so many levels?

- Actually, you probably can see that it's wrong, but your overriding opinion that you should be able to do as others in the wrong have done would dispel any doubts you might have in considering it.

comer_97

I was answering the OP's concerns. The affordable housing scheme is not supposed to be a stop gap measure but there are a lot of people out there who see it as that.

We may all be in the gutter but we are looking at the stars.

Afuera

jdivision wrote:

I believe it happens in Fingal. From my understanding when I bought my place I was liable to a clawback on the sale price minus what I'd spent on it and that I couldn't make a loss on it. I think somebody posted a link to something on that on another thread here.

I had a look at Fingal's website but still can't see anything about how they protect people from making a loss when they sell. The following text is pulled from one of the documents they have on their site:

http://www.fingalcoco.ie/YourLocalCouncil/Forms/Housing/ApplicationForm,1419,en.doc

5.CAN I SELL THE PROPERTY?
Homes purchased from the Council under the Shared Ownership/Affordable Housing Scheme can be sold. In the event of re-sale the seller must pay back to the Council any remaining mortgage or rented equity still owing and the clawback percentage of the actual amount the property is sold for.

The clawback percentages vary from property to property. These are set at time of sale and are based on the sale price and the market value price of the property.

The amount payable to the County Council reduces each year after year 10. The clawback no longer applies after year 20.

Example

House sold after five years for €300,000

Outstanding mortgage (estimated) €125,000
Clawback (30% of €300,000) €90,000
Amount owing to County Council €215,000

Balance €85,000

As far as I can see, since the clawback percentage is applied to the price that the house sells for later on, then it would still be applied even if they are selling at a loss.

Example:

House originally worth 200k, but bought under AH for 100k. The clawback percentage is 50%.

House sold 5 years later for 100k. 50k (50% of the sales price) needs to be returned to the council for the clawback. Outstanding mortgage of 80k (estimated) still needs to be paid back to bank. The AH buyer/seller is left 30k out of pocket.

The AH buyer is definately in a better position than the person that payed 200k outright for the same property but I can't see how they are immune to making a loss should they have to sell at a reduced price.

Jaybee

CherieAmour wrote:

Read your own post.
Believe me, I'm not naive.

I am, however, sick of people like yourself you seem to think it's okay to do something wrong provided you don't get caught. You're from the "everyone else is doing it so why can't I?" school of thinking and this equals "having an attitude" which you say you don't have.

You seem to have missed the point that more than myself is trying to get through to you and that is that just because you CAN doesn't mean you SHOULD.

How would you feel about being offered a property while a family on the same affordable housing list who genuinely need to be housed are still waiting and you just buy yours to rent it out? Can you not see that this is wrong on so many levels?

- Actually, you probably can see that it's wrong, but your overriding opinion that you should be able to do as others in the wrong have done would dispel any doubts you might have in considering it.

Hold on missy I AM NOT DOING IT!!!

CherieAmour

jenben1982 wrote:

Hold on missy I AM NOT DOING IT!!!

Fair enough, but you still don't see anything wrong with it

Madong

Afuera wrote:

I had a look at Fingal's website but still can't see anything about how they protect people from making a loss when they sell. The following text is pulled from one of the documents they have on their site:

http://www.fingalcoco.ie/YourLocalCouncil/Forms/Housing/ApplicationForm,1419,en.doc



As far as I can see, since the clawback percentage is applied to the price that the house sells for later on, then it would still be applied even if they are selling at a loss.

Example:

House originally worth 200k, but bought under AH for 100k. The clawback percentage is 50%.

House sold 5 years later for 100k. 50k (50% of the sales price) needs to be returned to the council for the clawback. Outstanding mortgage of 80k (estimated) still needs to be paid back to bank. The AH buyer/seller is left 30k out of pocket.

The AH buyer is definately in a better position than the person that payed 200k outright for the same property but I can't see how they are immune to making a loss should they have to sell at a reduced price.

Housing Micelanoeous Act 2004 covers clawback! http://www.irishstatutebook.ie/2004/en/act/pub/0043/sec0001.html#sec1

section 9 ;-)

CherieAmour

Madong wrote:

Housing Micelanoeous Act 2004 covers clawback! http://www.irishstatutebook.ie/2004/en/act/pub/0043/sec0001.html#sec1

section 9 ;-)

(d) Where the amount payable under paragraph (a) would reduce the proceeds of the sale (disregarding solicitor and estate agent's costs and fees) below the price actually paid, the amount payable shall be reduced to the extent necessary to avoid that result.


Nice one Madong! Knew I heard it somewhere!

godtabh

CherieAmour wrote:

(d) Where the amount payable under paragraph (a) would reduce the proceeds of the sale (disregarding solicitor and estate agent's costs and fees) below the price actually paid, the amount payable shall be reduced to the extent necessary to avoid that result.


Nice one Madong! Knew I heard it somewhere!

So does that mean you cant make a loss on the transaction? Just cant make as much as some people would like

CherieAmour

kearnsr wrote:

So does that mean you cant make a loss on the transaction? Just cant make as much as some people would like

That's my understanding of it... where the amount payable to the council as a result of paragraph A (the clawback) would reduce the proceeds, the council reduce the amount payable to them to avoid that happening.

ixoy

How do they determine the % of the clawback? Their outlined example gives a figure but not where they arrived at it.

CherieAmour

ixoy wrote:

How do they determine the % of the clawback? Their outlined example gives a figure but not where they arrived at it.

The formula is in Madong's link

Afuera

Madong wrote:

Housing Micelanoeous Act 2004 covers clawback! http://www.irishstatutebook.ie/2004/en/act/pub/0043/sec0001.html#sec1

section 9 ;-)

Thanks Madong, that's what I was looking for but couldn't find referenced elsewhere.

So with this provision in place, the clawback is waived (or reduced) if it pulls the seller into negative equity territory. Therefore the OP only really has to worry if the value of the property goes below the outstanding mortgage that they have on it.

After 5 years paying a mortgage of 180k, the OP will likely have about 160k left outstanding. For the apartment to reduce from it's current value of 360k to 160k, it would constitute a 55% drop. While it can't be ruled out, it's way up there with the highest estimations of overvaluation, and not likely to reach there that quickly.

Based on this, I don't think the OP has too much to worry about if they go ahead with the AH offer. The amount they pay for the mortgage is similar to the amount for rent. They may not be able to trade up in 5 years time as there may be no equity in the property, but they would be in a similar situation if they were renting anyway.

godtabh

Afuera wrote:

Based on this, I don't think the OP has too much to worry about if they go ahead with the AH offer. The amount they pay for the mortgage is similar to the amount for rent. They may not be able to trade up in 5 years time as there may be no equity in the property, but they would be in a similar situation if they were renting anyway.

The renting market could work out better for them in the long term in that the cost invloved in going up in the renting market would be smaller than that if they were to trade up by buying

Afuera

kearnsr wrote:

The renting market could work out better for them in the long term in that the cost invloved in going up in the renting market would be smaller than that if they were to trade up by buying

True. Also, the loss of FTB status may be an important factor too.

jdivision

Afuera wrote:

I had a look at Fingal's website but still can't see anything about how they protect people from making a loss when they sell.

Fair enough but just because it's not listed there doesn't mean it's not true. I was merely stating my understanding of the situation.

Afuera

CherieAmour wrote:

(d) Where the amount payable under paragraph (a) would reduce the proceeds of the sale (disregarding solicitor and estate agent's costs and fees) below the price actually paid, the amount payable shall be reduced to the extent necessary to avoid that result.


Nice one Madong! Knew I heard it somewhere!

The more I think about this, the more I wonder whether people could abuse this provision...

I'm thinking of a scenario where someone gets an offer for an Affordable House and buys it, but then sells it immediately at the cost price to a relative/friend. Is there anything in place to stop someone doing that? Do they have to sell it at market value?

If it's sold at the cost price, the clawback would be waived but the proceeds would be enough to clear the original mortgage. The relative/friend who now owns the property would not have any of the restrictions that an Affordable House has. They could gift it to the original buyer, who could then rent it out or sell it at the real market value without having to pay any clawback.

This is totally against the spirit of AH so I hope that there is something to prevent people doing this. It's a little worrying that a system which is in place to help people could be abused like that though.

Afuera

jdivision wrote:

Fair enough but just because it's not listed there doesn't mean it's not true. I was merely stating my understanding of the situation.

Your understanding is correct, and I wasn't trying to negate your comment. I was just trying to find out how exactly it prevented it.

Nermal

Afuera wrote:

They could gift it to the original buyer, who could then rent it out or sell it at the real market value without having to pay any clawback.

This is totally against the spirit of AH so I hope that there is something to prevent people doing this. It's a little worrying that a system which is in place to help people could be abused like that though.

Nice. What about gift tax though, am I allowed to get a house as a 'present' without being taxed?

OP, if it's a two-bed you could live there in 'official' if not actual terms and let under the rent-a-room scheme.

Madong

Afuera wrote:

The more I think about this, the more I wonder whether people could abuse this provision...

I'm thinking of a scenario where someone gets an offer for an Affordable House and buys it, but then sells it immediately at the cost price to a relative/friend. Is there anything in place to stop someone doing that? Do they have to sell it at market value?

If it's sold at the cost price, the clawback would be waived but the proceeds would be enough to clear the original mortgage. The relative/friend who now owns the property would not have any of the restrictions that an Affordable House has. They could gift it to the original buyer, who could then rent it out or sell it at the real market value without having to pay any clawback.

This is totally against the spirit of AH so I hope that there is something to prevent people doing this. It's a little worrying that a system which is in place to help people could be abused like that though.

OP if sold at cost price, this would not be market price! the second charge on the mortgage stipulate the clawback will be based on the market price at date of sale, so if he sells to his "brother" at cost the "brother "wins" but he has a bill to the local authority based on the "market price!", take it from me they are protected! the sale cannot go through to "the brother" unless this happens! its a legal responsibility!

hence......... no loophole

Drapper

think he could be right you know!

godtabh

I think the have all the loop holes closed at this stage after a few high profile fcuk ups

Brooklyn74

Nermal wrote:

OP, if it's a two-bed you could live there in 'official' if not actual terms and let under the rent-a-room scheme.

Unless you're buying the property through the Shared Ownership scheme, in which case the council's rules may prohibit you renting a room at all (this is definitely the case in Dublin City at least).

warrenaldo

hey guys this has been great reading - think it covers all my problems. looking at that "Housing Micelanoeous Act 2004" i am pretty confident that taking the place on offer from the affordable housing is the right course of action.

Cant believe someone found that - there are numerous threads on this board where people are wondering about the clawback. Thats great.

I have rang/emailed the affordable housing and they stated that "The amont to be payed back is directly linked to the initial discount that you received when you purchased your home. ie: if you got 50% discount then you would have to pay 50% back"

I assume that whoever i have rang and emailed in SDCC just does not know there facts - as negative equity has propbably not been discussed too often in the irish property market of late.

podge018

Thanks for finding that provision in the Housing ACt, I bought a 2 bed affordable apartment in December 06 for for 156k, market value 312k and was worried that it might drop.

Afuera

warrenaldo wrote:

hey guys this has been great reading - think it covers all my problems. looking at that "Housing Micelanoeous Act 2004" i am pretty confident that taking the place on offer from the affordable housing is the right course of action.

Yes, I don't think you need to worry too much about accepting the offer now. Best of luck in the new apartment.