Proposed changes to the Fair Deal Scheme: Part 1 – Housing Stock
The Nursing Homes Support Scheme, also known as the “Fair Deal”, is operated by the HSE and provides financial support to people who need long-term nursing home care. In May of 2018, the Law Society made a pre-budget submission to the Department of Finance.
Under the heading ‘Freeing up Housing Stock’, the Law Society suggested that “one factor which is potentially hampering the release of housing stock are the terms of the ‘Fair Deal’ scheme”.
Under the Fair Deal scheme, an applicant requiring long term residential care services will make a contribution to the cost of care services, while the HSE will pay for the balance. The level of the contribution made by a Fair Deal applicant is determined as follows:
- 80% of the applicant’s income is paid to the nursing home.
- The applicant must also put aside 7.5% of the value of any assets per year (outside of the first €36,000 which is protected).
- When assessing the value of assets, the applicant’s principal residence is only included in the financial assessment for the first three years. Over the three years 22.5% (7.5% x 3) of the value of the applicant’s primary residence can be owed to the nursing home as the applicant’s contribution. After three years, the applicant’s primary residence is not included in the valuation of assets, thus there is a ’22.5% cap’.
- Payment of the contribution from assets can be deferred and ultimately collected from the applicant’s estate.
The 22.5% cap in relation to the primary residence may have inadvertently affected housing stock. The sale of a primary residence would put the sale proceeds beyond the protection of the 22.5% cap and within the 7.5% of all other assets per year (outside of the first €36,000), making Fair Deal patients reluctant to place their property on the housing market. The Law Society has recommended:
“[T]hat where a house which would qualify as a principal private residence is sold then where the sales proceeds are retained the Fair Deal applicant should be assessed on the same basis as if the house had not been sold. We would also recommend allowing the Fair Deal applicant to keep a personal allowance of greater than 20% of the rental income from their principal private residence.”
The Law Society’s proposed change in relation to extending the 22.5% cap to the proceeds of sale of the patient’s primary residence should have the effect of releasing houses trapped within the 22.5% cap onto the property market.
Given the current shortage of rental properties, particularly in Irish cities, the proposal to allow a patient to keep greater than 20% of the rental income (currently 80% would be due to the nursing home as part of the patient’s income) would incentivise the primary residence being placed on the rental market while the patient is in residential care.
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