Brian Hayes MEP today outlined a list of housing measures which he urged the new government to prioritise in order to address the serious housing crisis in Ireland.
“Housing is going to be a huge issue for the new government. Clearly the talks between Fine Gael and Fianna Fail and Independents has concentrated on how we can build more houses and provide more lending facilities to borrowers.
“We have a dysfunctional housing market. While we must never go back to the boom and bust property model – measures can be taken which can dramatically improve the supply of housing. By increasing the supply of housing, this will help to stem the tide of homelessness which is currently creating such hardship for many Irish citizens.
“I am calling on the next government to commit to a number of policy proposals in the short to medium term:
- Introduce a ‘Help to Buy’ scheme: An equity loan scheme could both help first-time buyers get onto the property ladder and help the construction industry to increase building activity. Help to Buy schemes in the UK have been hugely successful in developing property ownership. In the UK the buyer has to provide 5% of the property price as a deposit while the government offers a 20% stake.
- Introduce a tax incentive scheme for first-time buyers: To encourage people to put away savings for a deposit, the government could develop a tax incentive scheme, whereby for every €4 saved by a first-time buyer, the government would contribute €1. The government contribution could be capped at €1,500 per year over a five year period.
- Reduce VAT for construction of new homes to 9%: The VAT rate for the construction of new homes and apartments is currently 13.5%, this should be reduced to 9% as was done successfully with the tourism sector. This would vastly incentivise the building of new homes and would be hugely beneficial in terms of meeting our housing demands.
- Adapt Central Bank’s mortgage deposit rules: The Central Bank’s new mortgage lending rules have been useful in cooling house prices, particularly in Dublin. However, these rules should be adapted to changing market conditions. The Central Bank should assess the rules twice a year to determine if changes are required. The measures (i.e. the deposit required) would tighten if say house prices exceeded a certain level but that they might loosen if house prices (& other indicators) were particularly low.
- Change to 7 year Capital Gains Tax Exemption: The 7 year capital gains tax exemption for property, while it has been useful, it has also encouraged the holding of property – there is no requirement to develop the land during that 7 year period. In order to facilitate the best use of land, a tiered relief system for the capital gains tax liability could be introduced which would be reduced each year during the 7 year period.
“These measures are achievable and progressive. As the economy recovers, we need to focus on a modern housing policy that is sustainable into the future. We need to make conditions more favourable for homebuilders – the cost of construction is very high compared to house prices in many parts of the country.
“Dublin in particular is suffering from our current housing policy. While the city is growing and is becoming an important economic driver of growth, we don’t have adequate housing supply to cater for the population. At the same time, this is causing rents to increase massively and forcing people into homelessness.
“This problem cannot be tackled by quick-fixes; it needs a comprehensive set of policy responses that are inter-linked. Clearly this will take time, but I believe the government should take early action when it begins its new term.”