What is the Affordable Housing Scheme?
The Affordable Housing Scheme is primarily aimed at lower-income households that seeks to enable first-time purchasers (who are eligible) to buy a home. As part of the scheme, newly constructed dwellings can be bought for much less than their current market value.
In July 2021, a new Affordable Housing Scheme was approved by the government and divided into two new affordable housing schemes, a national scheme and a local authority scheme. We look at the details of each of these below.
1. Local Authority Affordable Housing Purchase Scheme
This affordable housing scheme is to help Households which, using their combined deposit and their approved maximum mortgage, cannot afford the home at its open market value. These newly built homes will be in areas where housing needs and affordability are an issue. This affordable housing scheme will primarily be for first-time home buyers with the greatest affordability challenges. Provision is also made for:
Applicants must have a legal right to reside and work in the State and be able to demonstrate that they are habitually resident in Ireland.
Who Qualifies for the Local Authority Affordable Housing Purchase Scheme?
To qualify for this affordable housing scheme, you must meet the criteria set down by your own local authority (which differs significantly across the Country).
The affordable purchase price* for the properties will be discounted on the market value and based on the specific purchasing capacity of eligible applicants.
*The price you pay for your new home and the equity share the local authority takes in it are calculated by the local authority. This calculation takes into account your maximum mortgage capacity and the minimum price set for the home by the local authority. These calculations are done in accordance with regulations. The maximum equity share the local authority will take in your home is 40% and the minimum is 5%.
The purchasing capacity of applicants will be calculated as the combined total of:
** Applicants who have savings above a certain amount, may not qualify for the scheme. Applicants can have the money to cover the deposit on the home and an additional €30,000. Any savings above this amount is added to the applicant purchasing power and if this purchasing power exceeds 95% of the market value of the home, the application is not eligible for the scheme.
How Do I Apply for the Local Authority Affordable Housing Purchase Scheme?
Each local authority introduces its own affordable housing scheme and manages the application process. When homes are available under the scheme they will be advertised on the local authority’s website and in a local newspaper. The advertisement will include details about the scheme including how and when to apply. You apply for affordable homes as they become available and are advertised, there is no central application system.
In most cases, you will apply online where you input your information and upload any additional documentation. In the application, you may need to:
You should apply for homes that you can afford with the scheme and that suit the size of your household. You must submit your application by the closing date for the scheme.
Can I buy back the local authority’s equity share in my home?
You must buy back the local authority’s equity share in your home after 40 years. You can buy it back before then and you can make repayments at any time – your Financial Advisor can explain why this makes good financial sense to do so where you have affordability. You can buy back the full equity share in one payment or pay it back partially as you can afford to. However, the minimum repayment is €10,000.
If you decide to sell your home, you must pay off the equity share in your home. If you die, the equity share must also be paid off.
The equity share in your home is a percentage of the market value of your home. So, if property prices increase, the amount you have to pay back will increase. For example, if you bought your property in 2023 for €380,000 and the local authority provided equity of 20% or €76,000 and you want to buy back the equity share in 2025 when the property is valued at €400,000, you will have to pay 20% of this, which is €80,000.
2. First Home Affordable Housing Scheme
The First Home Scheme (FHS) is an affordable housing scheme, which supports people to buy new homes. The FHS is a shared equity scheme, where the State and participating banks pay up to 30% of the cost of your new home in return for a stake in your home. If you want, you can buy back the stake at any time. If you don’t buy back the share, the equity becomes due payable when the property is ultimately sold.
The scheme is available nationwide for first-time buyers and certain other people (fresh start qualified applicants) who want to buy a new home but can’t afford to. Your income is not assessed for the FHS. You can check your eligibility online and the price limits which apply (regularly updated) at https://wwwfirsthomescheme.ie
There is a similar local authority affordable home scheme where the local authority buys a stake in your home. However, this scheme only applies in certain areas.
Your home must be within the price limits for your area.
Your new home (you must reside in the property as your only place of residence) must cost less than the price limit for your local authority area. These limits are different depending on where you buy and what type of property you purchase. The limits are linked to the median price for first-time buyers in each area. They are reviewed regularly and changed if needed. See price limits at https://wwwfirsthomescheme.ie