New Government has plenty to discuss on housing

New Government has plenty to discuss on housing

So it looks like today will finally be the day we get a Government.

Seventy days on from the General Election way back in February, Enda Kenny is expected to be returned as Taoiseach this afternoon before announcing his new Cabinet.

One of the immediate challenges facing the new Government is in relation to housing and, if reports are to be believed, a Minister for Housing will be appointed to highlight the significance of the matter.

There have been rumours about the deal which Fine Gael cut with Fianna Fáil to allow them to form a minority government but if some of them are to be believed then tackling homelessness and dealing with the ever-growing social housing waiting lists will be towards the top of the agenda.

In order to alleviate those more building needs to take place and there has been speculation that tax breaks will be given to builders in order to make that happen.

It might be a couple of weeks yet before we know exactly what the new Government has planned to tackle these matters but yesterday outgoing Minister for Finance Michael Noonan indicated that he was not in favour of giving tax breaks to the building industry to alleviate the housing crisis.

Instead, he said he would give tax breaks to buyers to put more money into the pocket of the purchaser.

Earlier in the week, the Construction Industry Federation appeared before the committee calling for VAT on new homes to be cut from 13.5% to 9%.

Mr Noonan told the Oireachtas Housing and Homeless Committee that the cost of reducing VAT on new homes down to 9% was €210m.

He said no decision has been made yet, but he told the committee to bear in mind the move was in the interest of builders.

Mr Noonan said research by the ESRI found that tax incentives aimed at developers would be unlikely to have much effect on supply.

He also said that tax incentives targeted at home buyers, such as mortgage interest relief, would increase house prices with a limited increase in supply.

However, he added that he would be open to “selective interventions” in the property market where targeted action can be justified.

On NAMA, he said it had utilised its commercial remit to contribute to housing supply in a number of ways by either fund development or completion of housing units on sites.

He warned there was no quick fix to the housing shortage and there was a need to be careful of the unintended consequences of any intervention, however well-intentioned.

There are undoubtedly some difficult decisions ahead even if today does finally bring about a new Government.

  • What would you like to see happen?
  • What do you think the Government’s main priorities should be?
  • Would tax breaks be better for a first-time buyer than a developer?

Have your say below…

There are 4 comments for this article
  1. Pingback: New Government has plenty to discuss on housing | Rosalie Rodney
  2. Tipp O’C at 3:40 pm

    Mary, this is an interesting perspective. I am very intrigued as to why market prices are so much lower than build costs? It seems that with obviously heightened demand and a well documented supply constraint that market prices would reflect higher. Are you saying that the costs to build are unusually high for some reason? or that home buyers cant afford the current market prices or obviously any increased price. It seems odd to me that professional builders could not produce a good quality house at scale for a price that house buyers could afford. if there is quantitative evidence to support your argument I would be very interested in seeing it. Thanks

    • J1234 at 9:20 pm

      Dear Tipp– Site costs are high. Perhaps between 50 to 100k in Dublin. This is too big a part of a house that sells for 250 — 500k

  3. Mary Robinson at 12:29 pm

    Tax breaks for builders or purchasers will not alter the economics of house building in Ireland. Market prices for properties are significantly less than the new build costs and builders embarking on new build projects under the depressed pricing would be committing financial suicide. Restoring property prices to reflect build costs has to tackled first.

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