Conor O’Connell: Yes. Building apartments had become unviable. Something had to change
Apartment delivery in Ireland has proven extremely challenging in recent years. Our National Planning Framework (NPF) requires at least 50 per cent of residential delivery in the main urban centres to be “within the existing built environment”. The aim is to achieve more compact growth, utilise existing infrastructure, reduce commute times and deliver a more sustainable way of living.
But this ideal sits in stark contrast to actual delivery over the lifetime of the previous NPF adopted in 2018. In that period the only place where apartments were being delivered at scale was in Dublin, and this was largely funded by pension funds and other institutional investors. The result was a moderation of rent cost inflation in the capital at a time when costs were rising elsewhere. In contrast, the recent collapse in new supply of apartments is the principal driver of increasing rental cost inflation. Clearly a return to sustained moderation in rental costs can only be achieved by a significant increase in new supply.
Over the last two years, this institutional investment has collapsed from €2 billion in 2022 to €124 million in 2024. Apartment completions declined by 24 per cent in 2024 and now the only purchaser or funder of apartments is the State itself through the Approved Housing Body sector or the Land Development Agency. The cost of delivering an apartment had risen considerably making it unviable. The rents achieved could not justify the construction costs.
To deliver our housing targets, international capital is required. The State simply does not and cannot deliver the required capital to deliver 50,500 units annually. The annualised capital required is estimated by the Department of Finance at over €22 billion annually. It is also not sustainable or desirable to have public housing as the only mechanism for apartment delivery.
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To attract institutional capital on the scale required to meet our needs, change was required across a range of areas – including planning certainty, more zoned land and infrastructure, a reduction in the tax and regulatory costs and the realignment of our apartment standards with international standards and thus reducing the cost of apartment delivery. Depending on which report you read, the tax, and other soft costs account for 50 per cent of the delivery costs. VAT alone is at 13.5 per cent.
The recent changes to the Planning Acts, section 28 guidelines on the implementation of the NPF, VAT reduction on apartments and the revised apartment guidelines were all sending a positive message that Ireland was trying to reduce the cost of apartment delivery, realign our standards with international norms and modernising our regulatory environment. The feedback from investors and developers was positive – it was felt that the combination of these measures would result in greater apartment viability and increased delivery.
A judicial review has now been initiated to the recently revised apartment design standards. This is a very significant setback in our aim of building more apartments – and any move from taking judicial reviews against planning decisions to taking judicial reviews against decisions of Government is very worrying. This development will delay investment decisions, delay delivery, reduce supply and increase rents and prices.
The only way to deliver more homes is to reduce costs, provide more land, build infrastructure, reduce the timeline for planning and build at scale.
If you’re wanting to rent or buy and finding it difficult, the harsh reality is that the principal barrier to securing a home of your own are the high regulatory and tax costs, and a planning and legal system that continues to facilitate the frustration and denial of that legitimate and basic need.
Conor O’Connell is director of Housing, Planning and Development Services at the Construction Industry Federation
John McCartney: No. Tax cuts for developers stifle competition, waste taxpayers’ money and reinforce an unhealthy relationship
Tax cuts for apartment development may temporarily accelerate housing delivery. But they ultimately stifle competition, waste taxpayers’ money and reinforce the unhealthy relationship between developers and the State.
Until last week, Ireland’s strategy for stimulating housing supply majored on consumer supports like Help-to-Buy and the First Home Scheme. Fearful of alienating voters by directly subsidising developers, successive Governments simply gave the money to home buyers, knowing it would get passed on to developers through the back door. These “supports” draw out additional supply, but only by first driving up prices – the exact opposite of what society wants and needs. So a better way of increasing output is to reduce development costs, enabling developers to make their profit without inflicting high prices on consumers.
The announcement of big tax cuts for apartment developers in Budget 2026 is a notable departure. The headline grabber is a time-bound VAT cut on new apartment sales from 13.5 to nine per cent, but there are also Corporation Tax breaks for construction costs.
By reducing the cost of apartment development, the Government hopes these measures will create profit opportunities which attract more developers into the field. But this is unrealistic because of how developers value land. The standard approach takes the expected amount the apartments can be sold for when they are completed, and subtracts the cost of materials, labour, professional fees, finance, marketing and taxes. The developer’s profit is then deducted, and the remainder is the maximum that should be paid for a site.
[ The budget bet big on apartments. Will it help fix the housing crisis?Opens in new window ]
Cutting taxes will momentarily attract more developers. But this will be short-lived because more developers means more competition for sites, and this will drive up land prices – potentially by the full amount of the tax cuts. So new entrants will not experience an overall cost reduction, merely a shift from taxes to site costs.
While new blood will be frozen out by high land costs, incumbent developers will have a field day. The budget measures have inflated the value of their land banks at the stroke of a pen. More importantly, because these players do not need to buy sites, the tax cuts will turbocharge their profits.
The Government has taken a political risk by favouring developer tax cuts over cost-of-living measures for households. The stated purpose of stimulating apartment supply will not be achieved through the attraction of new developers. However the tax cuts will incentivise the incumbent developers behind Dublin’s 39,000 un-commenced apartments to expedite construction. In addition, because these operators’ profits are being boosted by cost savings, viability should not depend on higher prices for consumers. With the bar set low by years of policy failure, these factors probably constitute a win.
But there is also much to criticise about the new measures. By inflating land costs they will create an uneven playing field that benefits insiders and stifles competition from new entrants. In the longer term this may curtail supply.
Because the VAT cuts went live on budget day, they also create windfalls for the developers of apartments that are already on-site. In Dublin alone, where 19,300 units are under construction, this could cost the taxpayer over €450 million. As these developments were evidently already viable, and as the tax changes did not trigger their commencement, this serves no policy objective.
More generally, Budget 2026 perpetuates an unhealthy codependence between developers and the State. For years, the taxpayer has subsidised home-building through indiscriminate “consumer supports” that boost profits on viable developments while indemnifying unviable schemes against entrepreneurial risks that are already supposedly priced in to development margins. Now additional support is being given through direct subsidies. The State’s role as backstop and funder-in-chief embeds inefficiencies and unnecessarily high costs that are eventually borne by the taxpayer. As Budget 2026 demonstrates, sacrifices have to be made for this indulgence.
Dr John McCartney lectures in property economics at Technological University Dublin and is adjunct associate professor at University College Dublin
