Fears concrete blocks levy of 10% ‘will hike house prices’
A 10% LEVY on concrete blocks and ready-mix concrete is to be introduced to help fund the cost of the mica redress scheme, it was revealed in the Budget.
The levy aims to raise €80million a year – but it will add significantly to builders’ and developers’ costs which could put the profitability of many housing schemes in doubt.
The concrete tax will add around €4,000 to the building cost of an average three-bed semi-detached house, according to Society of Chartered Surveyors Ireland (SCSI) estimates.
Homelessness charity Focus Ireland said the extra cost could hamper the delivery of new homes. Director Mike Allen said: ‘This is a concerning development at a time when inflation is already impacting the cost of construction, and ultimately will increase the cost of building new, much-needed homes.’
The levy is to be applied from next April at a rate of 10% on blocks and concrete after a Government decision last November to introduce the measure to fund a redress scheme.
The SCSI said the levy will ‘challenge the viability and affordability of new homes’, adding : ‘For many years we have been urging the Government to tackle the soft and hard costs of new home construction. In this Budget, no measures aimed at tackling soft costs were announced while the
‘Future viability of homes’
introduction of the levy will drive up hard costs.
‘The Minister said that planning permission has been granted for 44,000 new homes this year but the introduction of this levy in April next year has raised question marks over the future viability of those homes and their affordability for first-time buyers.’
Meanwhile, the tenants’ rent tax credit announced yesterday will not provoke landlords to increase rents, Finance Minister Paschal Donohoe insisted.
Renters are in line for a €500 tax credit before Christmas and a second one before the end of 2023.
The Minister also dismissed suggestions that rent freezes should have been introduced to curb rental inflation, which is running at almost 13% a year.
‘I believe that a rent cap will only lead to more landlords leaving the private rented sector. That means rents going up even higher,’ Mr Donohoe said. ‘The change that we’ve made in the rent credits has to be seen in the context of all of the changes that we have made in personal taxation.
‘[Landlords] have to adhere to the regulations that form a key part of the rent pressure zones.
‘If I hadn’t made any change in relation to the rent credits, no doubt I would face criticism for not recognising these tenants. If we were to bring in a post rent freeze in relation to private landlords, I believe this will lead to even more landlords looking to sell their properties and even higher rent.’
Elsewhere, Public Expenditure Minister Michael McGrath said the decision to double the pre-letting expenses scheme was a ‘signal to landlords that the Government wants them to stay’. The scheme has doubled in value to €10,000 and there is also a reduction in the period for which a premises must be vacant, from 12 to six months.
The SCSI said the move would not halt the exodus of landlords, but Mr McGrath said it will help.
‘We’re not suggesting that the measure alone will change the dial in relation to the exits we have seen. But I do hope that we’ll see that this is a Government that wants to support the continued provision of rental accommodation. I think it’s a step in the right direction,’ he said.
The Government will consider additional measures to encourage landlords to stay in the rental market, according to Housing Minister Darragh O’Brien.
He said last night: ‘It’s a start in the right direction. I’m acutely aware of the number of small landlords that have exited the market since 2016. This isn’t just a recent phenomenon. We will look at measures.’
However, Social Democrats TD Cian O’Callaghan warned that the proposed tax credit for renters to held them afford spiralling rents will simply ‘be gobbled up’ by landlords through rent increases.
The party’s housing spokesman said: ‘Without properly enforced nationwide rent controls, the tax credit for renters will simply be eroded by landlords through rent increases. This will further fuel spiralling rent inflation.
‘For this tax credit to really benefit renters, it must go hand in hand with properly enforced nationwide rent controls. It beggars belief that the Minister for Housing doesn’t understand this.
‘New rents have increased by about 9% in the past year – well beyond the rent caps allowed under current legislation. The Rent Pressure Zone (RPZ) legislation is not working and is not being enforced properly.’
Cabinet heard yesterday that remediating apartments and duplexes with defects could cost the State up to €2.5billion. In plans set out in a memo brought to Cabinet by Mr O’Brien, his department will set up an interdepartmental and agency group to bring proposals to Government by the end of the year.