Donohoe w arned 3pc levy on vacant sites is ‘very, very low ’
A PLANNED tax on vacant sites should be much higher than the 3pc of market value proposed by the Government, the ESRI has said.
The think-tank has urged Finance Minister Paschal Donohoe to fast-track the introduction of the tax which is currently due to come into effect from 2019.
Kieran McQuinn of the Economic and Social Research Institute (ESRI) said developers hoarding lands that are already well serviced should be targeted for extra penalties.
Current policy is for a levy of 3pc of the market value to be applied by planning authorities on empty development sites, starting in 2019 on locations that were vacant during 2018.
Mr McQuinn described the 3pc rate as “very, very low”.
At the Oireachtas Committee on Budgetary Oversight he also criticised the Government’s Help-to-Buy scheme which gives grants to first-time buyers.
“When you stimulate demand you are shoving up prices and that is ultimately what is likely to happen with such a scheme,” Mr McQuinn said.
While advising the Government to be “especially careful” that any future investment doesn’t lead to a fresh economic crisis, the ESRI said increased spending on social housing was warranted.
The committee also heard warnings from the Irish Fiscal Advisory Council (Ifac) that the State’s response to the housing crisis could have knock-on impacts on other sectors of the economy. Ifac’s chairman Seamus Coffey said housing was a “serious issue” which “could have a severe impact on the economy”.
“We do feel that housing output should increase, we just need to be cautious of the impact that could have on the economy,” he said.
Mr Coffey warned that unless future investment was carefully measured, the economy could overheat “very quickly”.
Michael Tutty of Ifac said the body could see no “magic formula” for fixing the housing crisis and was not saying efforts to increase supply should be slowed down.
However, he warned that if construction ramped up, “we can’t be ramping up everything else in the economy at the same time or there will be overheating”.
Several TDs questioned whether there were enough tradespeople to sustain the growth in construction activity, with Dr Martina Lawless of Ifac replying that if people had to migrate to Ireland to fill gaps in the building sector it could have “spiralling effects”.
She said the high level of payments for property were a cause for concern in terms of the competitiveness and wage demands.
Ifac told the committee that by its measurements Mr Donohoe would have in the region of €500m for new spending and tax changes on Budget Day.
Mr Coffey said “substantial progress” had been made in terms of moving the public finances to a “safer position” since 2008.
“The Government is likely to run a budget balance in 2018 for the first time in a decade, debt ratios look to be on a steady downward trajectory, and near-term interests and growth prospects are relatively favourable,” he said.
He said the economy was not overheating at present, “yet this is not a phenomenon that the Irish economy has been unfamiliar with, and conditions are changing rapidly”.
“Unemployment rates are already falling quickly, and supply pressures are evident in the housing market. Were a sharper than expected recovery in housing construction to take hold and overshoot regular annual completions so as to deal with any backlog of pentup demand, overheating could materialise in future years.”