Local Authority Affordable Purchase Scheme
- What is the Local Authority Affordable Purchase Scheme?
- Do I qualify for the Local Authority Affordable Purchase Scheme?
- How much will my new home cost?
- How do I apply for the Local Authority Affordable Purchase Scheme?
- Can I buy back the local authority’s equity share in my home?
- What if I bought a home under a previous affordable housing scheme?
What is the Local Authority Affordable Purchase Scheme?
The Local Authority Affordable Purchase Scheme helps people on moderate incomes to buy new homes at reduced prices. New homes under this scheme are located in areas with the greatest housing need and where affordability is an issue. The local authority takes a percentage stake in your home that covers the reduction in price. So, if you buy the home at a 20% discount, the local authority will have a 20% stake in your home.
You must buy back the local authority’s stake after 40 years or if you sell your home, but you can repay it any time before this. This scheme is aimed at first-time buyers, but there are some exceptions.
There is also the First Home 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.
Do I qualify for the Local Authority Affordable Purchase Scheme?
To qualify for this scheme you must meet certain income, property and residency criteria, see below.
Your income and savings
To qualify for the scheme:
- Your income must be below a certain level. This is calculated by
multiplying your gross annual income by 3.5. This figure is known as your
'purchasing power' and it must then be less than 85.5% of the market value
of the affordable home.
- You must have proof from a bank or financial institution that you cannot get a mortgage for 85.5% of the market value of the home. The applicant may not be able to get a mortgage for a number of reasons, for example, because of their age.
The market value of the properties is agreed by the local authority running the scheme before the scheme is launched.
The Affordable Purchase Housing Income Assessment Policy provides detail of how your household income is assessed by local authorities for this scheme. It includes information about what income is taken into account and what income is disregarded (not taken into account). For example, certain social welfare payments are not considered.
If you have savings above a certain amount you may not qualify for this scheme. You can have the money to cover the deposit for the home and an additional €30,000. Anything above this is added to your purchasing power. And, if this goes above 95% of the market value of the home you are not eligible for the scheme.
You must be a first-time buyer or ‘fresh start’ applicant.
You are a first-time buyer if:
- You have not previously bought or built a property to live in.
- You do not own or have an interest in any property in Ireland or abroad.
Note: You may be eligible if the home you have an interest in is no longer suitable for your household.
You are a ‘fresh start’ applicant if you previously owned a home, but you no longer have a financial interest in it because:
- You are now divorced, separated, or your relationship has ended
- You have gone through personal insolvency or bankruptcy
The scheme only applies to properties that are bought as your home. You must live in it as your normal place of residence.
You have the right to live in Ireland.
The qualifying criteria for this scheme is set-out in the Affordable Housing Act 2021 and the Affordable Housing Regulations 2023.
How much will my new home cost?
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%.
You can get a mortgage from a bank or financial institution for your stake in the home. The Local Authority Home Loan may also be available if you meet the terms and conditions of the loan.
How do I apply for the Local Authority Affordable 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:
- Provide your personal information, such as, your name, date of birth and PPS number
- Confirm you are a first-time buyer or a fresh-start applicant
- Declare your gross annual income for the previous 12 months
- Provide evidence of a deposit and any savings, for example, bank statements
- Provide evidence of how you are going to pay for the home, for example, mortgage approval in principle or a mortgage calculator
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.
How are applications prioritised?
If there are more applications than homes available, applications will be prioritised based on the local authorities Scheme of Priority. The Scheme of Priority must prioritise at least 70% of the units based on:
- How suitable the property is for the size of your household. For example, households with at least 3 people will be given priority for a 4-bedroom home.
- When eligible applications are received.
The remaining 30% of units are prioritised based on how suitable the property is for the household and then on any additional requirements that the local authority decide in their Scheme of Priority. For example, they may prioritise applications from people living in their own local authority area.
What happens if my application for an affordable home is successful?
If your application is successful, you will get an offer letter from the local authority. Your information will be given to the developer, and you will be invited to visit the site and choose your home. You may need to pay a booking deposit at this point to secure the home. You will need to get a solicitor to do the legal work involved in buying your affordable home.
You will have a contract with the local authority, which sets out the rules about the equity share they have in your home. This contract is called an Affordable Dwelling Purchase Arrangement. You will sign this contract before or at the same time as you sign your standard contract of sale with the developer.
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. But, you can buy it back before then and you can make repayments at any time. 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.
What if I bought a home under a previous affordable housing scheme?
There were a number of similar affordable housing schemes before this one, but they were discontinued in 2011. However, there are still people living in houses they bought under these schemes. This section describes what happens if you want to sell a home you bought under one of these schemes.
If you sell your house within 20 years, you will have to pay the local authority a percentage of the proceeds of the sale - known as clawback. This percentage is the percentage difference between the sale price and the market value of the house. This amount will be reduced by 10% each year after you have owned your home for 10 years. So, if you sell your home after 20 years, you will not have to pay any clawback to the local authority.
The market value at the time of selling your affordable home is used to calculate the amount of clawback due to the local authority. If the gap between the original sale price and market value has narrowed, the amount due to the local authority will also reduce. If the proceeds of the sale of your affordable home are below the initial price actually paid, you will not have to pay the local authority a percentage of the proceeds of the sale.
Find out more about living in an affordable home under the previous affordable housing schemes.