The 1984 Surrender Grant of £5,000 introduced by Fine Gael was an attempt to meet two policy objectives with a single measure. Higher earning Council tenants, armed with a substantial taxpayer funded grant, could move out of their Council estate and purchase a newly built home on a private estate, thus fulfilling the Government’s housing policy priority of encouraging homeownership and promoting new construction. Meanwhile much-needed Council homes would be freed up for those on the waiting lists.
In the four years the scheme was under operation, up to 8,000 Council properties were surrendered, equal to almost half the total output of new Council homes during the same period.5 The surrenders were heavily concentrated in a small number of estates with 75 percent of the Dublin properties located in just four areas, Darndale, Ballymun, Clondalkin and Tallaght.6 All of those households availing of the grant were in employment.
While it is important not to overstate the significance of the grant given the relatively small numbers involved (approximately 6 percent of total social housing stock), the concentration in certain estates and its short life span, the impact was nonetheless significant.
Firstly, it reduced considerably the income mix in the estates affected, many of which already had high concentrations of poverty and social welfare dependence. The arrival of heroin in many of those areas from the early 1980s and the accompanying sensationalist media stories of ‘problem estates’ riven with drugs and crime combined to create a public perception of Council estates as ghettos and social housing as bad housing.
It also marked a shift in Government thinking and practice with respect to who Council housing was for. A report by Threshold, the country’s leading charity supporting renters, in 1987 described the Surrender Grant as having the effect of ‘concentrating disadvantage’ in certain areas. Their study highlighted the fact that allocation practices in many Councils shifted considerably during this period with a greater number of single-parent families and people transitioning from homelessness securing allocations by the end of the surrender grants operation.7
Tenant purchase was also initially affected by the onset of the recession with a significant fall off in the number of Council homes bought annually from 1983. While purchases had averaged at 4,000 units a year for most of the previous decade 1983 saw a decline starting at 3,492 purchases in that year dropping to a low of 533 in 1986.8 While a recovery of sorts took place in the following two years Government responded with a new heavily discounted scheme in 1988.9 The response was dramatic, with purchases jumping to 18,166 in 1989, the highest on record.
The consequence of these measures, particularly as they continued into the 1990s, was to significantly alter both the perception and the reality of social housing. Norris is correct when she argues that
No matter what the intent of the reforms of the 1980s, their effect was to redefine the role of social housing: it ceased to become available to workers on low incomes and instead became welfare housing, increasingly targeted on a narrow range of long term welfare dependent households. The association between poverty and social housing tenure had always been present to some degree … But from the mid 1980s, the association of social housing with poverty became more direct.10
However, it is important to stress that as tenant purchasers remained in their existing estates the actual impact of the policy changes of the 1980s had a greater impact on future social housing developments and allocations. As tenant purchasers were generally the higher earning tenants, Councils also lost a significant portion of their rental revenue, impacting on their ability to maintain the remaining stock.
The End of Asset-Based Welfare
While the level of State support for private home buyers had started to reduce during the 1970s its role was still significant. In 1966/67 Small Dwelling Acquisition loans accounted for 32 percent of all mortgage lending. By 1972/73 it had fallen but still covered 18 percent of new loans.11 Despite the placing of a ceiling on the total value of Mortgage Interest Tax Relief in 1974, it still covered 23 percent of the total price of the purchase of the home for mortgages taken out in 1975.12
However, throughout the 1980s private purchaser supports were increasingly restricted. In 1982 the £3,000 grant for first-time buyers was extended to five years. In 1986 it was replaced with a smaller £2,250 builders grant for first-time buyers of new buildings only. Existing home improvement grants were abolished the following year. In 1988 the income limit for Small Dwelling Acquisition loans was further reduced and for the first time limited to those unable to secure loans from commercial lenders.13 The decade ended with a further reduction in the Mortgage Interest Tax Relief ceiling.
Taken together the changes to supports for both social housing and subsidised owner-occupation saw a 60 percent reduction in expenditure on housing as a percentage of GDP from 1975 to 1990. Nevertheless, working families who wanted to own their own homes had an alternative source of finance, namely the banks and building societies, which in the short term at least would ensure than unlike those dependent on social housing, private homeowners could have a non-state source of finance to ensure access to a home.
Letting Private Finance In
Ending direct subsidies and tax relief for would-be homeowners was more a fiscal necessity than an ideological preference for both the Fine Gael and Fianna Fáil Governments of the 1980s. However, it could not be allowed to undermine both parties’ core policy objective, namely homeownership. Thus while the liberalisation of bank lending would be a key ideological plank of both the Reagan and Thatcher regimes, Ireland was an early convert and for much more practical reasons.
Pádraig Flynn, the then Fianna Fáil Minister for Environment, made clear the logic of his support for bank liberalisation in 1987 when he claimed that despite reductions in Government loans for home purchase, private finance would provide ‘an adequate supply of mortgages for all income groups in all areas’.14
While the primary driver of the restrictions to and reductions in direct Government loans for home buyers was to cut expenditure, it was also designed to ensure that the ‘competitive advantage’ held by the Local Government sector was removed to ‘encourage’ greater lending by banks and building societies.
In an attempt to boost the volume of Building Society mortgages the Government introduced a short-term subsidy to bring down interest rates in 1981 and increased the subsidy again in 1982. However, take up of loans from this sector remained sluggish, in part because of the requirement for many borrowers to have deposits ranging from 20 percent to 30 percent. In response, and in an attempt to get banks directly involved in lending, the preferential treatment for Building Societies was ended in 1983 and Central Bank credit rules were replaced with indicative guidelines the following year.15
Further financial reforms were introduced restricting price setting by banks, facilitating Building Society lending for bridging and refurbishment loans and allowing societies access to inter-bank lending. By the end of the decade Government policy was firmly focused on ensuring private finance was the principal provider of mortgage lending into the future.16
Despite the significant withdrawal of traditional State support for home purchasers, the number of new mortgages increased from 27,632 in 1986 to 38,580 in 1989 providing the Government with comfort that their shift from public to private finance for owner-occupiers was working.17
The shift was in line with developments elsewhere in the Anglo-Saxon world. For much of the twentieth century, mortgage lending in Britain was the preserve of Building Societies. However, in response to bank liberalisation in the United States, Margaret Thatcher introduced significant changes in both 1979 and 1986, opening the United Kingdom market to greater foreign competition and inter-bank lending.
Building Societies were also allowed access to the wholesale markets, further increasing the volume of credit available to the British mortgage market. Not only did borrowing for home purchase increase but a new phenomenon of equity withdrawal (borrowing against the value of your home) became an increasingly popular means for households financing other areas of expenditure.
The result according to Josh Ryan-Collins was a dramatic increase in the volume of mortgage-related lending, which jumped from 20 percent of Gross Domestic Product in the late 1970s to 55