COURAGE WAS NEEDED INSTEAD OF ACTIVITY POSING AS REAL ACTION
IDEOLOGY and horsetrading with colleagues and industry tends to determine the housing policies the relevant minister comes up with. This has not served us well over the last few decades, and inept policy has made our cities in particular unaffordable for renters, with nothing new to buy. However, it seems no bad policy goes unpunished.
In Dublin over the last 34 years, Fine Gael has collapsed from 21 TDs to just seven, while Fianna Fáil has gone from 15 TDs to eight. The Greens have increased their grasp on power from a single TD in 1989 (Roger Garland) to eight today. Sinn Féin has benefited the most from the shifting landscape, going from having no TDs in Dublin in 1989 to nine in 2023.
At the next election, voter preferences and political casualties will increasingly be driven by housing issues: the lack of housing, the lack of the right kind of housing, the lack of affordability, and the lack of rights for all tenants once you are in a house. Take your pick.
Annual Budget-fests are therefore an opportunity for government parties to regain some lost ground, to buy voter love with tax breaks, reliefs, incentives and associated general giveaways – all the while maintaining they are parties of fiscal responsibility. And housing is one of the biggest ground-losers for the Government.
At a high level, therefore, not affecting anyone’s pockets directly, Finance Minister Michael McGrath has increased the Vacant Homes Tax to five times the Local Property Tax rate from its current three times. This is him turning the screw on some of the owners of the 163,000 vacant homes in the country who have no excuse for owning a property that’s vacant.
Looking at average house prices and Local Property Tax, this will amount to €1,575 per house or €131 per month. We have a high tolerance for housing waste in this country and a fear of tackling those who are wasters, so this might stimulate some owners to ‘de-vacate’ their houses, although it probably needs to ratchet up another notch or two.
For tenants, Mr McGrath has increased the Rent Tax Credit from €500 to €750 per year.
For a person renting alone, this is about two weeks’ rent on average nationally, or about 12 days’ worth of rent in Dublin. It is a sticking plaster that unsticks far too quickly.
To add insult to injury, tenants whose landlords are not registered with the Residential Tenancies Board – as landlords are legally required to do – cannot claim the relief. This is unfair and a missed opportunity to identify all those unregistered landlords by allowing all tenants to claim the benefit.
Landlords benefit much more than tenants, as you might expect. They will see a portion of their rental income from €3,000 to €5,000 disregarded for tax if they stay in the market for the next four years.
Given the short time horizon of this measure, it is not one that is likely to attract new landlords to the market, but it may delay the exit of existing ones.
Much braver would have been to have linked tax reliefs to better security of tenure for tenants – the longer the lease, the better the tax treatment for rental income and if the property is sold.
More interesting might have been to reduce landlord taxation to about 25%, but concurrently impose the same level of taxation on the large funds and other corporate landlords who pay zero or close to zero tax.
Like Lazarus, mortgage interest relief has been revived on the additional interest between 2022 and 2023 for 160,000 households with borrowings of €80,000 to €500,000. The relief is capped at €1,250, and will obviously benefit those on variable or tracker mortgages and not those prudent souls who fixed at higher rates but whose taxes will pay for the relief anyway.
Some €1.9billion in capital funding has been allocated to deliver 9,300 new-build social homes, or €204,300 per house. This is welcome, obviously, but it is also telling regarding what it costs the State to build houses rather than buying them from others as it regularly does.
For purchasers, the Help to Buy scheme has been extended until the end of 2025 (and will undoubtedly be extended again). Although it has helped many people buy their first home, it has also caused them to pay more for it than they would have otherwise. Help to Buy is an inflationary measure in an economy where all efforts are being made to bring down inflation, so it seems Government policy is actively working against itself.
However, when looked at through the prism of realpolitik, housing policy, which is about keeping new home prices high in order to stimulate more construction, it makes more sense. Even if that approach is in itself somewhat perverse.
There were lots of other things that were called for by various bodies, most of them cheap and cheerful and often taken as a given in other countries, that could have been done but weren’t for reasons unknown.
Where was the mention of a deposit protection scheme for tenants? Or money to train and recruit the 541 town planners the country needs to make the planning system more efficient? There was no mention of a land price register, equivalent to the Property Price Register but for land, which is where all the real money action happens in housing and property development.
For a Government and three parties under pressure at the next election, I would have thought a more courageous budget in housing would have been a no-brainer, instead of activity masquerading as action.
But maybe it’s as Sir Humphrey once told prime minister James Hacker: ‘Controversial only means this will lose you votes; courageous means this will lose you the election.’
It’s a sticking plaster that unsticks far too quickly