Targeted tax incentives to encourage developers to build more apartments and increased capital investment in infrastructure to support new schemes form the main housing measures of Budget 2026.
Ireland’s housing crisis was “to the forefront of my mind” when preparing this year’s budget, Minister for Finance Paschal Donohoe said in his speech in the Dáil on Tuesday.
Announcing a €11.3 billion allocation to the Department of Housing, Minister for Public Expenditure Jack Chambers said building more homes was “this government’s absolute priority”.
The VAT rate on the sale of new apartments will be reduced to 9 per cent from 13.5 per cent, effective from Tuesday night until the end of 2030.
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“This reduction will help address the viability gap in apartment construction as part of a social policy to deliver more and higher density apartments,” Mr Donohoe said.
In an effort to further incentivise apartment building, there will be a corporation tax deduction for some costs incurred in the building of new apartments and the conversion of non-residential buildings into apartments.
The rental profits from homes that fall within the Cost Rental Scheme will be exempt from corporation tax in an effort to ramp up the building of affordable homes.
A new derelict property tax will replace the derelict site levy. That new tax will not be lower than the current levy of 7 per cent and will be implemented some time in 2027.
Some €205 million will be allocated to a new housing activation infrastructure fund to support the work of the new Housing Activation Office (HAO).
The HAO aims to co-ordinate and accelerate home building by unblocking infrastructure delays and is made up of senior department officials and infrastructure providers such as the ESB and Uisce Éireann.
This focus on the delivery of more homes meant there was less in terms of one-off reliefs for renters, first-time buyers and current homeowners than in previous budgets.
The Rent Tax Credit was extended for three years at its current level of €1,000 for an individual or €2,000 for a couple.
There had been a commitment in the Programme for Government to progressively increase this tax credit, but this did not happen.
Budget 2026: What it means for Irish households and businesses
There were no big changes to any of the affordability measures currently available to would-be first-time buyers. The Help to Buy scheme, where first-time buyers of newly built homes under €500,000 can secure tax relief of up to €30,000, is extended.
This measure is part of the Starter Homes programme, which also includes the First Home Scheme, vacancy grants, Affordable Purchase and Cost Rental schemes.
[ Budget 2026: Tax cuts for developers of cost-rental apartments consideredOpens in new window ]
The Starter Homes programme was allocated a budget of €1.2 billion, with a target of delivering 15,000 new homes in 2026.
For those who already own their home, the mortgage interest tax relief was extended for another two years, but it will be reduced for the final year. People will be able to claim the existing level of €1,250 for 2025, and €625 for 2026.
In terms of social housing supports, there will be a €2.9 billion budget for the delivery of 10,200 new-build social homes and second-hand acquisitions by local authorities.
This is the same target as last year.
The housing measures caused some backlash from Opposition party members and representative groups.
Social Democrats housing spokesman Rory Hearne said: “Those in need of affordable homes – renters, generations stuck in their childhood bedrooms, and working families – will see little change from a budget completely lacking in vision.”
Meanwhile, Focus Ireland said it is “incredible” that there was “no mention of homelessness for the second year in a row”.
The homeless charity’s director of advocacy Mike Allen said this “raises serious concerns about the Government’s commitment to addressing one of the nation’s most pressing challenges”.
