The Government needs to “significantly reduce” its tax take on the development and sale of new homes to address the housing crisis, the president of the Royal Institute of the Architects of Ireland (RIAI) has said.
Almost one-third of the cost of each home built in Ireland goes into Government coffers through VAT, development contributions and social housing subsidies that developers pass on to buyers, RIAI president David Browne said.
“Affordability is probably the biggest challenge to addressing the housing deficit at the moment. Many house builders are saying that they have trouble selling houses due to the difficulty facing prospective purchasers in obtaining finance,” Mr Browne told the RIAI annual conference. “A significant contributor to this is the high cumulative Government take on every new dwelling that comes to market.”
He said this was also driving higher rents as potential buyers were staying longer in the rental sector where stock was limited.
“This means that young people cannot now afford to both rent and save for the deposit to buy a new house. This is a downward spiral that has to be addressed.”
There was he said a “strong case for supporting purchasers through significantly reducing the Government take on new house purchases”.
Reducing VAT
This could be partially achieved by reducing VAT on new homes up to €350,000 from 13.5 per cent to zero, as was the case in the UK and Northern Ireland. Renters could also be helped by providing tax rebates to those paying more than 30 per cent of their income on rent, he said.
While the supply of housing was gradually increasing in Dublin, the Government needed to secure future large land banks for development and should consider the potential of Dublin Port lands.
“This year, the last sites in the Dublin Docklands are being sold,” Mr Browne said. “At some stage, the port of Dublin will have to move. The relocation of the port is a golden opportunity to create a modern high-density city within the city. If this is to occur, it is of great importance to start the relocation process now if relocation is to be completed by 2050.”
The port lands offered an opportunity for the new Land Development Agency to deliver housing at scale, he said. "If we choose not to use the port for the sustainable growth of Dublin, we need a really viable alternative – where will this be?"
Costly mistake
In response to the suggestion of a tax rebate for renters, Minister for Housing Eoghan Murphy said previous “narrowing out of the tax base” during the boom had proved a costly mistake. “We have to be very careful about any changes to the tax code that might actually in the long term do more damage even though they might be responding to a short-term need.”
Dublin Port was a “critical piece of infrastructure” for the city, Mr Murphy said. However, he said there were substantial landbanks in areas such as the Naas Road which should be used for housing instead of “selling cars or trucks or couches”.
