Society says Government should have focused on supply measures
Welcome for tax relief for landlords but calls for investment in residential sector to be treated the same as commercial investment
Tuesday October 11 2016. The Society of Chartered Surveyors Ireland has said the ‘Help to Buy’ scheme announced in Budget 2017 will have very little impact on the housing crisis because supply is the problem, not demand.
Claire Solon, the President of the SCSI said the Government should have focused on supply measures as they would have a much greater impact on the crisis, help stabilise house prices and offer a better return to the taxpayer.
“In our view, the Government should have been focussing on initiatives to make development viable, like reducing VAT on affordable housing, making public land available for affordable housing schemes and providing finance to help kick-start building on sites around the country, with all the employment and tax benefits that this would bring.”
“We can see what the Government is trying to achieve but we just don’t see it happening. The Government believes providing assistance to first-time buyers – who are the first link in the chain of house-buying – will help stimulate development by bringing more buyers into the market and giving builders confidence to start building new homes.”
“However, in the short term at least, this will just mean greater competition for those few properties that are available across all sectors including tenants, students, social and affordable housing. As we have seen increased competition means higher prices” Ms Solon said.
The Society welcomed the allocation of €1.2 billion in funding to the Department of Housing, Planning, Community and Local Government and the undertaking to deliver 47,000 new social houses by 2021.
Interest relief to private landlords
Ms Solon welcomed the increase in interest relief available to landlords to 80% in 2017 and the commitment to increase it to 100% in subsequent budgets. However she said it was disappointing that the Government did not take the opportunity to recognise the importance of a stable residential rental sector to the economy and society as a whole and put it on par with commercial property investment.
“To tax the residential investor differently to the commercial investor does not make sense, as it further reduces the choice and supply to those households who need or want to rent their homes. Property investment is a business and should be treated as such, with realistic tax thresholds, professional management and enforceable standards” she said.
A recent SCSI survey found that the introduction of high levels of taxation was one of the main reasons that private landlords are exiting the sector, along with the introduction of rent certainty measures and the indebtedness of private landlords.
Ms Solon pointed out that residential investors also carry costs like insurance, service charges, property tax, tenancy registration, repairs and fit-out. In commercial lettings these costs are usually borne by the tenant. Traditional landlords are still responsible for most private rented properties, with about 170,000 landlords registered with the Residential Tenancies Board (RTB) as of August 2015.
“While some large multi-family units have been bought by institutional investors in Dublin and other cities, our rental sector continues to need investors to provide good quality housing, particularly in growing suburban areas and provincial towns. Addressing this issue would alleviate the shortage of rental properties and contribute to easing the overall housing crisis” she said.
The Society noted the Minister’s commitment to undertake a review of corporate taxation including Section 110 of the Tax Consolidation Act.
The SCSI urged the Minister to take full account of the use and effect of these provisions and to announce any proposed changes as early as possible to avoid further uncertainty in the market. The Society said there was already evidence of deals being postponed in anticipation of what these proposed amendments will be.
Ms Solon said there appeared to be little doubt that the S110 tax structures have been used for purposes for which they were never envisaged.
“We support the Government’s move to close off unintentional loopholes and abuse of these structures. However we shouldn’t forget just how bad things were for the Irish economy back in 2009 when NAMA was first formed. The liquidity provided by these venture funds meant that NAMA has deleveraged far more quickly than originally foreseen, which is of overall benefit to our national balance sheet” she said.
The Society welcomed a number of other property measures including; the extension of the Home Renovation scheme to 2018, the raising of the income ceiling of the rent-a-room scheme to €14,000 and changes to the Living Cities initiative, expanding the relief to investors and removing the size cap, which the Society called for in its pre-Budget submission and which will bring vacant properties back into the use for which they were originally intended.