Tuesday 27 September 2016

Developers will get sweeteners to sell homes below value

Niall O'Connor and Daniel McConnell

Published 08/10/2015 | 02:30

Alan Kelly and Mairia Cahill at Government Buildings before Ms Cahill was unveiled as a Labour Seanad nominee Photo: Frank McGrath
Alan Kelly and Mairia Cahill at Government Buildings before Ms Cahill was unveiled as a Labour Seanad nominee Photo: Frank McGrath

Developers who sell homes at below market value will be given cash incentives as part of the Government's desperate bid to tackle the housing supply crisis.

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A string of sweeteners for builders and landlords are to be introduced by Environment Minister Alan Kelly, along with strict new rules aimed at protecting tenants.

For the first time, landlords will have to give three months notice prior to eviction and will be offered concessions for entering into long-term lease arrangements.

Under Mr Kelly's plan, some 8,650 affordable homes in Dublin and Cork will be unlocked by the end of 2017 at a cost of €180m to the taxpayer.

The ambitious plan will target developers with large land banks, such as those with at least 50 new homes, and which already have planning permission.

There are 21,000 planning permissions in the Dublin area active at present.

Mr Kelly is concerned that many apartments currently being built are being put on the market at prices in excess of €300,000 - out of the reach of many first-time buyers.

However, the Government is willing to refund developers "in return for accelerating the delivery of new homes at increased volumes and at prices that are more affordable," say sources familiar with the plan.

For example, it is envisaged a landlord who sells a €300,000 home in Dublin next year for €270,000 would be compensated by the State.

It is envisaged 7,650 affordable homes will be delivered in Dublin over the next two years, and a further 1,000 in Cork.

However, the size of the sweetener offered to developers will reduce from 2017 in a bid to fast track the provision of homes from next year.

Sources say that the principle of the radical plan has been agreed within Government, however, the funding of the scheme will be discussed by Mr Kelly and Finance Minister Michael Noonan at a special pre-budget meeting today.

Mr Kelly has proposed that the €180m plan be funded by either an increase in the local property tax, exchequer grant funding or tax expenditure.

The Labour Party deputy leader says the plan could be paid for either through an increasing of the Local Property Tax by €161 per eligible household or exchequer funding.

However, as revealed by the Irish Independent on Saturday, Mr Noonan has already pledged to freeze property tax rates until 2019.

Meanwhile, the package due to be thrashed out by the two ministers today also aims to introduce so-called 'rent certainty' for both tenants and landlords.

In relation to landlords, the plan proposes to provide tax reliefs to landlords who house low income families for a minimum of five years.

This is to address the crisis of landlords refusing those on rent supplement and other State benefits.

The incentives set to be offered include 100pc interest relief on borrowings for landlords who let for a minimum of five years to welfare recipients. At present, relief of 75pc is offered.

Capital Gains Tax (CGT) relief for landlords also in this category is on the table. There will also be concessions for those property owners who enter into long-term leases.

Central to the plan for tenants is the decision to link rent prices to the rate of inflation in a bid to tackle spiralling accommodation costs. This will be a short-term measures until 2019, when it is expected housing supply would have recovered.

As part of a major beefing up of tenants rights, renters are to be given a minimum of 90 days notice for rent increases, as well as longer notice periods for evictions.

This will mean that people living in apartments for five years or more will be given a 140-day period before having to leave.

Reassurance

"This will provide reassurance to those on middle and low incomes who may be fearful of losing their homes. It may also abate somewhat the drift into homelessness for the lowest income cohort," said a Government source.

Central to Mr Kelly's plan is addressing the worsening homeless crisis, particularly in urban areas.

The Government has been criticised for its response to date after two homeless people died in close proximity to Leinster House.

Irish Independent

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