The Central Bank has told members of the Oireachtas Housing Committee that a new bill proposed by Minister for Housing Darragh O’Brien (pictured) is likely to have a “limited impact” on dealing with the supply problem in the Irish market.

The Affordable Housing Bill 2020 includes a shared-equity scheme, under which the State would pay up to 30% of the cost of a new home in return for a stake in the property.

Debt risks

A letter from the Central Bank’s director of financial stability Vasileios Madouros, however, said there was “little detail around the contractual obligations on those that might receive this financing”.

He warned that the proposal could leave households at risk of becoming excessively indebted.

The Central Bank letter also expresses concern about the consequences for prices, as the scheme could push up demand at a time when limited supply was still a problem.

Mr Madouros said the construction of new homes had been "below its long-term average for about a decade".

He also expressed concern that banks may be in breach of Central Bank rules limiting mortage lending if they participated in the scheme.