The Government intends to ensure the focus for investment funds is on financing the construction of developments and “not to swoop in” and buy housing estates or developments that are already substantially complete, the Tánaiste has pledged.
Leo Varadkar came under fire in the Dáil amid intense Opposition anger and criticism over the "gobbling up" by investment funds of entire housing estates, which locked first-time buyers out of the market.
The Tánaiste insisted that Minister for Finance Paschal Donohoe and Minister for Housing Darragh O’Brien were developing proposals in the next few weeks, “a solution that doesn’t have unintended consequences”.
Sinn Féin finance spokesman Pearse Doherty said the Government's response would suggest that this is something "that's fallen out of the sky" but it has been happening for years and "well you know it" in Dundrum, Leopardstown, and Lucan last year where Cairn homes sold 229 properties to an investment fund, as well as many other areas.
One property company said it planned to sell 43 per cent of its development to an investment fund, he said.
“Not only have you facilitated it in your party’s policies, you have actually encouraged it, incentivised it through the taxation structure these funds enjoy.
“They pay no corporation tax, no capital gains tax. When they sell the property they pay little stamp duty. They pay no tax on the sky high rental income they charge.”
He said “your party gave them the tax advantage. Your party designed it with the support of Fianna Fáil.
“You created the situation where these international investor funds where these parties are snapping up family homes and locking first-time buyers out of the market.”
He had been calling for changes in this system for the past six years but the Government voted for the status quo, he said.
Mr Doherty also pointed to concerns expressed by the Department of Finance in 2019 and last year about the need to change the tax structure for the funds, which he said the Minister for Finance ignored.
He said that “now that the horse has bolted you’re scrambling to contain the damage that you have caused.
Mr Varadkar said Mr Doherty’s remarks on tax were “misleading” because the funds pay tax on the dividend income “and that’s how these investments are structured.
“There have already been changes in the budget and there may well be other changes required.”
The Tánaiste insisted institutional investors had a role in the housing market and there were housing developments in the city, mainly apartment blocks, that would not have been built if developers had not been financed by investment funds.
“And if they had not been built, we’d have fewer apartments, higher rents, higher prices and perhaps even more people in homelessness, so we need to get the balance right.
“People do need places to rent and they need well-managed developments in particular to rent.”
Social Democrats TD Róisín Shortall said that since 2019 investment funds have spent €4 billion on residential property in Ireland and the Government could not claim it did not know.
The Government has become "a circular firing squad" with Fianna Fáil and Fine Gael TDs blaming each other for the crisis.
She said Fianna Fáil had crashed the property market and Fine Gael allowed “vulture funds loose on the carcass for a decade with tax incentives and fast track planning”.
She said that two weeks ago when her party’s housing spokesman Cian O’Callaghan raised the issue of such investment funds “gobbling up” estates, Mr Varadkar’s “response was to accuse him of being ideological and you had no plans to rein in the investment funds”.
Two weeks later and another estate has been “gobbled up”, she said.
Ms Shortall said the Taoiseach on Wednesday professed surprise and said “it was a new departure and usually funds confined themselves to hoarding properties in cities not suburban estates”, but she argued young people in cities deserved housing too.
People Before Profit TD Richard Boyd Barrett described investment funds as "bloodsuckers" and said they were invited in to "rampage and plunder" the property market.
The Government was claiming the latest purchase was “some sort of isolated incident” but between 2013 and 2014 former minister for finance Michael Noonan had 65 meetings with vulture funds and “invited them in to commence the rampage”.
Nama he said was told at the time to sell off more than €40 billion worth of land and property assets and now “cuckoo funds” had moved on to buying housing estates “pricing ordinary people almost entirely out of the market”.
Mr Varadkar said 10 years ago they were in a very different situation and going back to policy then misunderstands the situation.
The Tánaiste said the Government firmly believed in home ownership and between 65 and 70 per cent of people own their own home.
He said: “We want that to be a reality for people who are in their 20s and 30s, to have the same opportunity to own their own home as their parents did” and that is why they brought in the measures they had.
He said less than 1 per cent of housing stock in Ireland is owned by investment funds.
“Their correct role is to finance the construction of developments not to swoop in and buy housing estates or developments that are already substantially completes and that’s what we need to change and that’s what Government intends to change.”
