With budget day now just 12 days away, Minister for Finance Michael McGrath and his officials in the Department of Finance have much to consider in terms of the demands being made of the exchequer both from within and outside Government Buildings. And while measures to address the cost-of-living pressures being borne disproportionately by lower-paid workers and those dependent on welfare payments are doubtless front and centre in the Minister’s mind, the issue of housing and more particularly its availability and affordability won’t be far behind.
But what should the Government do at this point to tackle the now decade-long crisis created and presided over by its two main Coalition partners? It’s a question that property sector professionals are happy to answer, judging by the plethora of pre-budget submissions sent by various agents and industry lobby groups to the Department of Finance in advance of the Minister’s budget-day address and the subsequent, more-important publication of the Finance Bill. From cuts to or even the elimination of VAT on the sale of new homes, to increasing the Help-to-Buy price threshold and the reintroduction of mortgage-interest relief, to other measures aimed at lowering development levies and the other so-called “soft costs” of construction, Mr McGrath has been provided with an array of options by a number of bodies including Lisney Sotheby’s International Realty, Hooke & MacDonald, DNG, Property Industry Ireland (PII), and the Society of Chartered Surveyors Ireland (SCSI). What follows is a selection of their suggestions.
Lisney Sotheby’s International Realty
1. Extend the Help-to-Buy (HTB) grant for first-time buyers for at least five years and increase the amount given in line with current new-home prices. Lisney notes the current HTB threshold of €500,000 has not increased since 2017, while house prices and construction costs have risen substantially in the same period.
Rate of home mortgages over 90 days in arrears falls to lowest in 15 years
Greystar buys Dublin student housing scheme for around €150m
Typical price paid for home by first-time buyer up €88,000 on five years ago
Housing in Ireland is among the most expensive and most affordable in the EU. How does that happen?
2. Increase the value of properties eligible for the First-Home Scheme (FHS) to allow more purchasers to avail of it.
3. Reintroduce mortgage interest relief to help borrowers defray the increased costs associated with rising interest rates.
4. Increase amounts available to builders for subsidies under the Croí Cónaithe scheme to increase the viability of apartment-building in cities.
5. Encourage landlords to re-enter the market through the use of capital allowances. There is a severe shortage of rental properties available at present. This shortage is even more acute in small towns, where institutional investors in the private-rented-sector (PRS) market are not active.
‘These housing demand forecasts are not worth the paper they’re written on’
6. Reduce VAT on new homes to 0 per cent for a two-year period, and gradually reintroduce it over time at lower rates than the current rate of 13.5 per cent.
7. Increase resources for An Bord Pleanála and the High Court with a view to fast-tracking planning decisions and judicial reviews for new-home schemes.
8. Expand and simplify the Living-Cities initiative and other grants to further encourage urban regeneration and to make it more attractive to convert older office buildings and spaces over retail premises into residential accommodation.
Hooke & MacDonald
1. Reduce VAT on new homes to 5 per cent for five years in order to improve viability of construction and to counter build-cost inflation.
2. Abolish the 5 per cent concrete levy as it will cause new home prices to rise.
3. Provide significant tax reductions for small landlords to halt the mass exodus of these from the market, which is contributing to rental-stock-supply shortages and rental-cost inflation.
4. Accelerate the introduction of measures to arrest viability issues and stimulate the construction of apartments in urban locations for both the public and private markets.
5. Create a taxation climate that will encourage Irish and international pension funds and institutional investors to support and fund a large proportion of the nation’s housing-supply programme.
DNG
1. Reintroduce mortgage-interest relief for first-time buyers to promote home-ownership over long-term rental.
2. Extend the Help-to-Buy scheme until 2026 and amend its terms to increase the applicable tax credit from €30,000 to €40,000, and its price threshold from €500,000 to €600,000.
3. Introduce meaningful tax incentives for medium and small landlords to halt the ongoing exodus from the rental market. Twenty-five per cent of all DNG sales in the last quarter were by landlords leaving the sector. Given this number, we estimate that around 7,000 smaller landlords have exited the market in the last 12 months. To reverse this trend, we believe that landlords should, at a minimum, be allowed a full write-off of PRSI and USC against rental income.
Society of Chartered Surveyors Ireland (SCSI)
1. Adopt a longer-term planning approach across several budgets to drive down construction costs of new housing.
2. Reduce or remove “soft costs” within the Government’s control. The removal of development levies and Uisce Éireann connection costs until March 2024 is a positive in this regard.
[ KPMG advocates suite of tax reforms to address State’s housing challengeOpens in new window ]
3. Resolve delays in electricity, water and wastewater connections and establish a more efficient and streamlined service.
4. The SCSI disagrees with the introduction of a 5 per cent concrete levy. It is counterproductive and will lead to higher construction costs, notwithstanding the fact that it will not apply to pre-cast concrete products. The levy will further challenge the viability and affordability of new homes, including apartments.
5. Introduce a rebate that lowers the Capital Gains Tax rate to 8 per cent specifically for development land utilised in the construction of new housing. Reducing the CGT rate would incentivise developers and investors to engage in the construction of new housing, address the ongoing shortage of supply and contribute to improved affordability/accessibility.
6. Establish a land-price register to promote transparency, support evidence-based decision-making and ensure fairness in land transactions and policy development.
Property Industry Ireland (PII)
1. Deferral of Residential Zoned Land Tax (RZLT) for developers from the moment a site becomes the subject of a planning application to reduce cost of development and to encourage housing construction.
2. Delay the introduction of Land Value Sharing (LVS) scheme pending further consultation with property industry and public. PII is convinced the proposed scheme will “either increase the cost, or frustrate the delivery of new homes”.
3. Improve the Croí Cónaithe (Cities) initiative through the involvement of the Land Development Agency (LDA) and increases in funding to Uisce Éireann and ESB for the connection of services, and to An Bord Pleanála and local authorities to speed up the planning process.
4. Support smaller landlords in the rental market through targeted tax reliefs.
5. Facilitate institutional landlords in the rental market with stable regulatory environment and variation of schemes such as Croí Cónaithe or a widening of the cost-rental scheme.
6. Encourage the conversion of commercial properties for residential use with a full refund from stamp duty where sites or developed property designated for non-residential use are repurposed and made available for residential use. Incentivise these conversions with accelerated capital allowances for capital expenditure on the repurposing.
