Fine Gael and Fianna Fáil are on a collision course over plans to introduce tax breaks for developers, with increasing tensions between the parties in advance of a Cabinet committee meeting on housing on Monday.
Fianna Fáil sources are standing by plans to introduce incentives to stimulate private-sector investment and are privately defending those proposals by stating these will be more restrictive and more targeted than controversial schemes that came before such as section-23 tax breaks.
There is understood to be opposition within Fine Gael, with sources this weekend pointing towards comments made by Minister for Finance Paschal Donohoe who last week spoke of “evidence that we have from the financial crisis regarding how tax decisions can undermine the safety of the public finances”.
On social media on Sunday, Tánaiste and Fine Gael leader Simon Harris also sounded a warning note and said: “We can never go back to the failed policies of the past when it comes to housing.”
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Fianna Fáil figures are increasingly of the view that drastic action is needed to ramp up house building paid for through private capital. They believe it would be more politically unpalatable to fail to meet housing targets and disappoint young people than risk political criticism for tax breaks.
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Figures from Revenue have revealed the high cost, however, of schemes such as the section-23 tax breaks. This scheme enabled investors to offset taxable rental income for buying a new property for rental purposes. Critics of the original tax-incentive scheme said it went too far, leading to unsuitable and inappropriate developments while driving excessive lending.
By 2005, that scheme was costing the exchequer nearly €240 million. Under the previous section-23 rules, full rental relief was normally dependent on the property being let for 10 years.
Mr Donohoe will not be present at Monday’s Cabinet committee, as he will be in Brussels for a Eurogroup meeting.
The Cabinet committee on housing is to consider other proposals aimed at targeting short-term letting and apartment building.
Ministers are to consider a law to crackdown on Airbnb and other short-term lets, with plans immediately to draft the Short-Term Letting and Tourism Bill.
Guidelines to accompany the new law are to be developed for local authorities. The Government believes that as many as 12,000 short-term lets could come back on to the long-term rental market.
Ministers will also discuss plans to set up a new clearing house to solve infrastructural delays, as well as options to incentivise apartment delivery in urban areas. This could involve regulations aimed at lowering the cost of construction and the publishing of standardised approaches to the design of housing.
Sinn Féin hit out on Sunday at suggestions that the Government was planning tax breaks for developers.
Cork South Central TD Donnchadh Ó Laoghaire said that while it is Sinn Féin’s view there “is a place for private investment” in the market, a section 23-type tax break “is not going to work”.
Government Chief Whip Mary Butler told RTÉ’s The Week In Politics that Monday’s Cabinet committee would be a “very serious meeting” and there would be “actions coming from that”. She said the Government’s aim was “to amplify building.”
Speaking on Instagram, Mr Harris described the housing crisis as “the biggest domestic issue bar none”.
“Housing, housing, housing and housing supply. We have to get this right. I read lots of different things in newspapers and the like. We can never go back to the failed policies of the past when it comes to housing. We have to make sure, instead, that we remove any blockages that are in place when it comes to the delivery of housing,” he said.
