In his first budget, Minister for Finance Jack Chambers stressed the need to give young people hope that fiscal decisions “will help them afford a home of their own”. With an election looming, this remains the Government’s biggest challenge. So, how far will these measures go to improve housing delivery?
The emphasis is on spending more to build more homes and water and electricity infrastructure that underpins housing – all while programmes to support buyers and renters are expanded. The Help to Buy Scheme is prolonged until the end of the decade. The rent tax credit also rises.
The €7.8 billion housing package includes €3.1 billion in exchequer funding. An additional €1.25 billion goes to the Land Development Agency for building on State lands and €1.65 billion goes to the Housing Finance Agency for loans to local authorities and approved housing bodies.
This embraces more than €2 billion for 10,000 new social homes and almost €700 million for 6,400 “affordable” homes. Large as these figures are, housing campaigners said more was needed. “This is simply insufficient,” said Wayne Stanley of the Simon Communities, arguing for a 15,000 social housing target instead of the “stay-the-course” allocation for 10,000 homes.
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If all of this represents a continuation of current policy with more money behind it, tax changes from the new Minister displeased the property sector. To keep professional investors at bay, Chambers increased stamp duty rates. He will also take more tax from buyers at the top of the market.
The stamp duty rate when buying 10 or more houses rises to 15 per cent from 10 per cent, the aim being to direct new homes towards private and first time-buyers rather than bulk buyers. Estate agents Savills argued the change was less likely to “significantly divert supply” and more likely to dampen investor confidence at time of dissent over rent caps.
This, however, is a price the Government is willing to pay.
Chambers also imposed a new 6 per cent stamp duty rate on homes priced above €1.5 million, with the existing 1 per cent remaining on the price up to €1 million while the existing 2 per cent rate stays on the price between €1 million and €1.5 million. This new “mansion tax” will not trouble first-time buyers and the forecast annual yield is modest at €80 million. So it will not generate huge amounts of revenue. Still, it may yet antagonise some of the Government’s more prosperous supporters.
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“It’s hard to understand why they would do this for any other reason than optics. It would appear to be probably a symbolic or easy target,” said John McCartney, director of research at BNP Paribas Real Estate Ireland. “People won’t have much sympathy for people selling at that end of the market. It is hard to sell a house at those levels anyway as the depth of the buyer pool is quite shallow. If you’re adding in a punitive transfer tax it obviously compounds the natural difficulty that vendors would face.”
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Chambers increased the vacant home tax to seven times the property’s existing base local property tax rate, the aim being more about encouraging owners to release such homes into the market than raising tax per se. The estimated annual yield is no more than €1 million.
He will also proceed with the residential zoned land tax, the contentious measure to counter land-hoarding that was postponed a year ago. Residential landowners whose property is rezoned will be exempt, with local authorities required to “consider and accommodate rezoning requests where landowners seek to continue undertaking existing economic activity”. In essence, this means farmland zoned for housing will remain untaxed if it is rezoned for agriculture.
In addition, legal changes will defer liability for the tax for 12 months between “the grant of planning and commencement of development”. Property will also be exempt during third-party judicial review proceedings over planning measures.
With house prices still on the rise to record levels as the economy booms, these are incremental measures on the long and rocky road to stability.
