The Attorney-General is being consulted by Government to ascertain if its proposal to prevent so-called cuckoo funds from buying up entire housing development in the suburbs will amount to a breach of Constitutional rights on property.
Minister for Housing Darragh O'Brien and Minister for Finance Paschal Donohoe are working on options to address the practise where large international investment funds have moved into the residential housing market.
In the past week, it has been disclosed that one global property firm, Round Hill Capital, has acquired in a joint venture hundreds of homes in two new housing developments that would normally be targeted at first time buyers, and intends to put them on the private rental market at prices close to €2,000 per month.
The company has bought close to 150 homes in the Mullen Park in Maynooth and 112 houses in Bay Meadows in Hollystown, Dublin 15. The company intends to rent out the houses as single family homes.
Amid an escalating political crisis for the Government on this matter, Mr O’Brien and Mr Donohoe are expected to present a number of options to Government next week, which might provide solution.
Mr O’Brien is said to be considering reintroducing a Bill he published while in Opposition in 2019, which was designed to prevent investment funds acquiring entire developments. It stipulated that 30 per cent of all units be reserved for first-time buyers.
If the Bill were reintroduced in tandem with proposed changes to Part V of the Planning and Development Acts, (which provide for 10 per cent social housing and a further 10 per cent affordable housing on all new developments), it would mean that 50 per cent of all new housing developments would be reserved for social, affordable and first-purchase, houses.
Labour’s spokeswoman on Housing Rebecca Moynihan said she would reintroduce Mr O’Brien’s 2019 Bill word-for-word if he failed to do so.
The second option being examined is to ban such practices outside of city centre cores or areas of high density development. The Government is of the view that block buying apartments for private rental can have a role, especially for highly-paid employees of social media and technology companies. They tend to be younger, single and are not interested in purchasing property because of mobile lifestyles.
Mr Donohoe is also looking at the tax laws to see if changes can be made to discourage such practices.
However, a Government source said on Thursday that all of the options might impinge on constitutional rights in relation to property and the advice of A-G Paul Gallagher was being sought to ensure they did not breach such rights.
The source also tempered expectation of an immediate solution saying it would take several weeks to arrive at a final decision.
Speaking at the Oireachtas finance committee on Thursday , Mr Donohoe said he was looking at the tax structure in place in relation to investment funds acquiring bundles of homes in Ireland.
“I am currently looking at this particular issue of whether there is anything in our tax code that is incentivising the purchase of homes that are already built.”He said that he “will not give any indication” in relation to what tax changes may occur. “But myself and Minister O’Brien are looking at this matter”.
Still, he said that funds “do have a role to play” in the housing market, especially in pre-funding the development of rental properties. He said that institutional investors own about 15,000 apartments in Ireland, which is a “small share” of the total market.
He said that a “balance” needs to be struck as he examines the tax structure and he wants to make sure that any potential change “doesn’t undermine the delivery of new homes and new apartments being built”.
Outright Ban
On Thursday Mr O’Brien said all measures would be considered to stop investment funds buying up full housing estates “up to and including” an outright ban.
Mr O’Brien said he was committed to having proposals ready by next week with regard to legislating for investment funds.
Speaking on Newstalk’ Pat Kenny show, Mr O’Brien said that the tax treatment of such investment funds was where the issue would be resolved in the long term.
The Minister said he was considering all options, but that ultimately the Department of Finance would have to bring forward proposals to deal with the tax element.
It was not acceptable to have investment funds come into the country to buy up family homes “from under the nose” of families, he added.
Earlier Minister for Transport Eamon Ryan repeated the Government's determination to stop the practice of investment funds bulk-buying new homes, and said the issue would be tackled through the planning process.
Speaking on RTÉ radio's Morning Ireland, Mr Ryan said: "We do have to stop it. We can't have people being kept out of the market."
Mr Ryan said Mr O’Brien was going to address the issue through the planning process, but different approaches would also be required as it was a complex issue. “I believe the best approach is planning,” he added.
Mr Ryan said the Government is committed to not allowing the housing market be dominated by investment funds who were freezing couples out of the market, but added that investors were needed for projects such as large apartment buildings and the State needed to operate cost rental schemes.
Mr Ryan said he did not believe the practice of bulk-buying houses in new estates was widespread, but the Government had to stop it before it became widespread. The housing market is not functioning as it is and other measures would be needed, he said.
Mr Ryan said the move could require legislation which would take time. This is echoed by some sources involved in the discussions, who fear the process could be fraught with legal difficulties.
Swoop in
Minister for Higher Education Simon Harris has said it was “never, ever” intended that investment funds could “swoop in” to bulk buy homes and keep them from first time buyers.
The Government was going to move “very swiftly” to ensure that what had happened in the housing estate in Maynooth could not happen again, there was “absolute clarity” across Government on the issue.
Private investment funds did have a role to play in helping housing supply, but situations like Maynooth would not be tolerated he told RTÉ radio’s Today with Claire Byrne show. There would always be a role for private investors, to say otherwise was not the truth, he said.
Actions would be taken to tighten the tax loopholess, he said. The Government wanted to level the playing field for first time buyers. The issue could not be personalised and proposals were from all of Government “not just Darragh O’Brien, Fianna Fáil or Fine Gael.”
