Property developers want a VAT cut and other tax breaks in October’s budget to aid their industry in tackling the housing crisis.
Government policy aims to produce up to 60,000 new homes a year over the rest of the decade from a likely 40,000 this year.
But lobby group Irish Institutional Property (IIP) said the current trajectory would only get to the “high 30,000s or low 40,000s new dwellings” a year.
In a budget submission to Minister for Finance Simon Harris, IIP said the reduced 9 per cent VAT rate should apply to all home building, not just to apartment construction.
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The Government cut VAT on apartment building in its budget last October, a move criticised by the opposition, to make such properties more affordable by easing building costs.
VAT was costing builders money, said IIP, whose members control €20 billion worth of property in the Republic.
“Reducing it would improve scheme viability and reduce the cost passed through sale prices and rents,” the organisation’s submission said.
It also said the Government should review capital gains tax concerning property and consider cutting or introducing temporary reliefs to support investment in house building.
Irish capital gains tax was high by European standards, which hit investment, the group said.
The State was also “competing for capital”, its submission said. “If returns are more attractive and more predictable elsewhere, housing investment will move elsewhere,” IIP said.
Government should also change how the residential zoned land tax, the 3 per cent charge on vacant sites, was applied when developers sold properties in “forward funding” deals, it said.
Such transactions involve the buyer providing cash to build houses or apartments on a site. But IIP said rules dealing with deferrals and clawbacks of the tax in these situations were causing problems.
The group also called for the residential stamp duty refund scheme to be streamlined. This scheme allows someone who builds homes on non-residential land to claim back some stamp duty.
But the IIP said it was too rigid and risked forcing developers to repay amounts claimed under the scheme when delays hit construction.
It also said frequent tax changes created uncertainty, which deterred the international investors that the Republic must tap for some of the cash needed to build homes here.
“Ireland cannot increase housing supply while simultaneously increasing uncertainty for the capital needed to fund it,” the developers’ lobby group said.
The amount of cash available for housing must double if the State wanted to meet its targets, the submission for the October budget said.
The State should maintain spending pledged to local authority housing and affordable homes schemes, as well as under programmes such as cost rental and the Secure Tenancy Affordable Rental investment plan, IIP said.
IIP also said the Government should avoid up and down investment trends. “Spending should be optimised in key programmes by refining and reforming schemes as appropriate,” it said.
Work is under way on almost 16,000 new homes in the State, according to recent Government figures.
Most building industry groups expect the industry will complete around 40,000 homes this year. However, recent data showed home building slowed over the last three months.
