Monday 20 November 2017

Home truths: Why U-turn by 'Philo' will tax house building

Mark Keenan

Mark Keenan

A much shared YouTube clip shows a lady householder from Crumlin chasing RTE's practical joker Jennifer Maguire out of her front garden with a carving knife.

Maguire pretended to be an official calling to supervise the installation of a 3ft-high mechanical monstrosity – purportedly her new domestic water meter.

The householder bustled inside and emerged wielding the carving knife, forcing Maguire to reveal frantically (and on the run) that she was with RTE and it had all been a cod. Just like the justification behind residential property tax.

There is a palpable anger out there about local authority taxation – water tax and RPT, which was supposed to fund local authority services in the first place.

When RPT was first mooted, we were told that Ireland's house-holders had been ducking their responsibilities on local funding. There could be no more trimmed grass verges, pothole fillings and tree trims without stumping up to pay for it.

But recently the Irish Independent revealed that Environment Minister Phil Hogan has U-turned more abruptly than Maguire on his promise that 80pc of the money raised locally would be spent locally.

It now emerges that it goes into a central fund from which all local authorities will receive money. The fund will be used to pay for water meters and more cash will be skimmed out of it to service national debt

City local authorities – which have the biggest numbers of homeowners and therefore the highest costs for local services – will have a good deal less of their contributions returned to them.

Aside from infuriating the civic minded who initially supported RPT as a sensible local funding model, there is also an impact to the capital's housing market.

The local authorities have historically relied on cash from a central government fund via a localised annual budget.

The purse strings were historically so tight that local authorities were forced to add their own revenue raising initiatives. The latter included tapping into home development just as the property boom began.

Development levies which had run at around a thousand quid a dwelling in the mid nineties were soon ratcheted up to between €15,000 and €25,000. At these rates, the local authority would have taken between €3m and €4m from Priory Hall for example.

Dublin's local authorities were variously gleaning between one-third and (in one case) 60pc of their total annual funds from development levies.

Developers factored the cost into their margin and added it to the price of every home sold.

The long run of leaning on new home development has caused a number of problems. (A): Over reliant local authorities went broke when the crash kicked in.

(B): City authorities still favour apartments rather than houses to maximise land use and cash.

(C): With property prices halved, the high rates of levies and the 20pc social housing contribution have now killed the builders' margins and prevented house building.

But residential property tax – as originally promised to us – offered a way out of this ridiculous conundrum.

By funding Dublin's local authorities to finally cover the cost of services, the newly RPT-enriched city authorities wouldn't have to insist on apartment development. Neither would they have to lean disproportionately on developers for levies and social housing contributions.

With reasonable margins available, builders could have started constructing houses again and with more houses being built prices might have stabilised.

Thanks to Philo's U-turn the city home buyer and homeowner once again coughs up for everything and everyone. Small wonder knives are out on urban doorsteps.

Irish Independent

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