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New vacant homes tax won’t solve housing crisis – Finance officials

Department casts doubt on tax touted as key part of housing plan

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Finance Minister Paschal Donohoe. Photo: Colin Keegan/Collins Dublin

Finance Minister Paschal Donohoe. Photo: Colin Keegan/Collins Dublin

Finance Minister Paschal Donohoe. Photo: Colin Keegan/Collins Dublin

A vacant property tax would have a “very limited” impact on increasing the supply of housing, with some urban areas having very few empty homes, the Department of Finance has said.

Finance Minister Paschal Donohoe’s own department has cast doubt over how effective plans to hike Local Property Tax on vacant homes, in a bid to increase supply, would be in tackling the housing crisis.

Housing Minister Darragh O’Brien said earlier this month that a vacant property tax would be introduced by the Government next year and Tánaiste Leo Varadkar has also backed the plan.

The tax was pitched as a key part of the Housing for All plan, the Government’s ­strategy to combat the housing crisis.

But in a note to the Oireachtas Housing Committee, a senior official in the tax policy division of Mr Donohoe’s department said a recent sample analysis, carried out on the number of vacant properties in 16 of the State’s rent pressure zones, showed that the “urban areas of Cork and Dublin continued to show very low rates of vacancy”.

The note states: “The north inner city of Dublin showed a vacancy rate of 0.86pc while the rate for Clontarf was just 0.24pc.

In the southeast of Cork city, the rate was 0.77pc.”

The Government’s Housing for All plan commits to a review of the forthcoming Local Property Tax returns in November “with a view to introducing a new Vacant Property Tax to ensure empty properties are used”.

Fine Gael leader Varadkar suggested the tax could be applied on vacant homes at the end of next year and payment collected in 2023.

Mr Donohoe has been more circumspect, saying ­previously he would await the data on exactly how many homes in the State are empty, and why they are empty.

It has been reported that there could be a potential five-fold increase in the level of the Local Property Tax on houses and apartments that have been vacant for more than six months or 12 months.

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However, the Department of Finance notes that a report commissioned by Mr Donohoe in 2018 did not recommend the introduction of the tax “as it considered it would not be an effective response to deal with the housing challenges”.

In relation to the report carried out by economic consultants Indecon, the Department note states the tax “could ­represent a distraction from the need to significantly accelerate the building of new social housing, affordable housing and the facilitation of private sector supply”.

It notes that the Indecon report stated that while such a tax would be likely to generate significant media and public attention and may be seen as part of an effective response to our housing problems, they did not believe that this would be supported by the evidence in their report.

Sinn Féin TD Eoin Ó Broin said: “If Government is serious about tackling vacancy and dereliction, they need to get advice from housing policy experts, not the Department of Finance or Indecon.

“A vacant property tax is a vital tool in tackling our high level of speculative dereliction.

“But it must be accompanied by dedicated vacant homes officers and increased capital funding for local authorities, and a reform of the Compulsory Purchase Order ­legislation to reduce the time and cost of CPO’ing vacant homes.”



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