A sim­ple tweak of the tax laws could end this in­er­tia and put homes and land on the mar­ket

Irish Independent - - NEWS - Ja­son O’Sul­li­van Ja­son O’Sul­li­van is a so­lic­i­tor and pub­lic af­fairs con­sul­tant at J.O.S So­lic­i­tors

WITH the Dáil re­sum­ing this week, the hous­ing cri­sis in Ire­land con­tin­ues to present myr­iad well-doc­u­mented is­sues for Hous­ing Min­is­ter Eoghan Mur­phy, who has to care­fully nav­i­gate be­tween im­prov­ing the prop­erty land­scape for first-time buy­ers while pro­tect­ing the in­ter­est of ten­ants and low­er­ing lev­els of home­less­ness.

He an­nounced ear­lier this month pro­posed strate­gies to tackle th­ese is­sues, such as pledg­ing to build an ex­tra 800 so­cial homes next year, bring­ing the total to 3,800, while promis­ing to de­liver an ex­tra 200 emer­gency beds in Dublin. Other mea­sures in­cluded broad­en­ing the re­mit of the Res­i­den­tial Te­nan­cies Board and es­tab­lish­ing a new in­ter- agency group to over­see home­less ser­vices.

Many crit­ics have ar­gued that such pro­pos­als are not rad­i­cal enough and fall well short of what is needed to ex­pe­di­tiously ad­dress th­ese chronic hous­ing prob­lems fac­ing our cit­i­zens. There’s lit­tle doubt that Mr Mur­phy faces a mam­moth task in try­ing to deal with such so­ci­etal prob­lems and will be ex­pected to ex­plore all lo­gis­ti­cal av­enues.

An im­me­di­ate and ef­fec­tive mea­sure the Hous­ing Min­is­ter should con­sider, if not al­ready done so by his de­part­ment, is the seven years’ Cap­i­tal Gains Tax (CGT) ex­emp­tion in­tro­duced un­der Sec­tion 64 of the Fi­nance Act 2012 by for­mer fi­nance min­is­ter Michael Noo­nan in Bud­get 2012. CGT is a tax charged at a rate of 33pc on the cap­i­tal gain (profit) made on the dis­posal of any as­set such as prop­erty and is payable by the in­di­vid­ual mak­ing the dis­posal (sale or trans­fer).

The cap­i­tal gain is viewed as taxable in­come and com­pa­nies are also sub­ject to CGT, ei­ther as in­cluded in their cor­po­rate tax re­turns or through CGT re­turns, when com­pa­nies make a profit from sell­ing or trans­fer­ring devel­op­ment land.

The relief mea­sure adopted in 2012, as noted above, of­fered in­vestors who ac­quired prop­erty start­ing from the pe­riod of De­cem­ber 7, 2011, and ini­tially up to De­cem­ber 31, 2013 (later ex­tended to De­cem­ber 31, 2014), to avail of CGT ex­emp­tions on those prop­er­ties if they re­tained own­er­ship for seven years. The relief was wide-rang­ing and in­cluded all prop­erty ac­quired in Ire­land and through­out Europe. Those in­vestors who re­tain the prop­erty for longer than seven years can still avail of the relief up to that time but will be li­able for CGT on a pro­por­tional ba­sis after.

Ire­land was in the midst of aus­ter­ity when this tax relief mea­sure was ini­tially en­vis­aged and en­acted. It was an at­tempt by the then govern­ment to try to en­cour­age in­vest­ment in the prop­erty sec­tor.

The fis­cal ini­tia­tive did have the de­sired ef­fect and con­trib­uted sig­nif­i­cantly to the in­crease of prop­erty sales within the much ma­ligned sec­tor. A di­rect con­se­quence, how­ever, has been the dis­tor­tion of the mar­ket. It has merely en­cour­aged prop­erty in­vestors to adopt a land-hoard­ing men­tal­ity.

This has left a plethora of build­ings and devel­op­ment lands through­out the coun­try, bought dur­ing that four-year pe­riod, tied up in a

con­tin­ual state of in­er­tia un­til the ear­li­est date of Jan­uary 2019 (the ex­pi­ra­tion date of the seven-year term for prop­er­ties pur­chased after 7 De­cem­ber 2011).

The chronic hous­ing short­ages are ev­i­dent from the 2016 Cen­sus fig­ures, which show that a mere 8,800 prop­er­ties over­all were added to Ire­land’s hous­ing stock over the past five years.

Brendan McDon­agh, chief ex­ec­u­tive of Nama, re­cently told the Oireach­tas fi­nance com­mit­tee that since Nama’s cre­ation in 2009, the agency has dis­posed of land sites with the ca­pac­ity to de­liver 50,000 hous­ing units, while only a mere 3,000 are un­der con­struc­tion. He also lay blame with the so-called “land hoard­ers” for ex­ac­er­bat­ing the cri­sis.

It is there­fore rea­son­able to as­sume that in or around Jan­uary 2019, a large pro­por­tion of prop­erty as pur­chased in 2011 will hit the prop­erty mar­ket and in­vig­o­rate same. This should make a pos­i­tive con­tri­bu­tion to mak­ing avail­able much­needed houses for first-time buy­ers and devel­op­ment sites for builders. This in turn will likely ease the rental mar­ket as it re­moves those first-time buy­ers from ten­ancy agree­ments and frees up rental prop­er­ties.

If such pos­i­tive ef­fects could be achieved in Jan­uary 2019 and on­wards to Jan­uary 2022, some log­i­cal think­ing could be adopted by the Govern­ment to al­ter the seven-year re­quire­ment by sim­ply chang­ing it to six years. This would fast-track the di­rect and in­di­rect ben­e­fits of the scheme for the hous­ing mar­ket and help mit­i­gate the cur­rent cri­sis.

The 2018 Bud­get has yet to be fi­nalised, there­fore am­ple time re­mains for nec­es­sary leg­isla­tive changes to be made and to of­fer some hope to those who re­ally need it.

Hous­ing Min­is­ter Eoghan Mur­phy still has time be­fore the Bud­get is fi­nalised

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