Finally, Ireland’s vacant property myth has been debunked.
The notion that the State was sitting on tens of thousands of empty homes (they were thought to number 200,000 at one stage) while simultaneously mired in an unprecedented housing crisis whipped opposition politicians and others into a frenzy a few years back.
The controversy stemmed, however, from a very loose definition of the word, vacancy, and a misinterpretation of the data.
It’s now thankfully been put to bed by the Department of Finance, which last week released the initial batch of returns from the Government’s new Vacant Homes Tax (VHT).
They showed that just 3,000 properties – out of national stock 2.3 million – are liable for the tax. This is expected to net the exchequer a grand total of €3 million a year.
The department noted that as of November 20th, over 50,000 properties had been reported through Revenue’s VHT portal, with approximately 5,000 properties declared as vacant and 45,000 as occupied.
Out of this total, approximately 2,000 of these properties have claimed an exemption from the tax, leaving approximately 3,000 properties with a liability, it said.
Either way, the idea that a massive inventory of unused property was there to be repurposed was never the case. And it remains to be seen whether the bandwidth and resources expended in chasing down and taxing the owners of these properties was worthwhile.
Revenue presumably had to work through the thousands of homeowners who appealed their liability, suggesting there is an administrative burden attached to the measure.
Ironically it is estimated that there were 3,500 council homes classified as vacant in the first six months of 2023, at a time when over 57,000 households are on social housing waiting lists.
The idea that we had this low-hanging vacancy fruit gained traction after Central Statisics Office’s 2016 population census, which appeared to suggest that there were 245,000 empty dwellings in the State, equating to over 12.3 per cent of the housing stock, which would have been, if true, one of the highest vacancy rates in the world.
However the figures entirely overestimated the level of permanent vacancy. About 62,000 were holiday homes and therefore did not qualify. But even the majority of the remaining 183,000 non-holiday homes were vacant for legitimate reasons.
Census enumerators captured a large number of homes that were simply vacant on Census night because the occupiers were on holiday or temporarily absent for medical reasons; or because the property was being refurbished, in the process of being let or tied up in probate.
Census 2022 quantified vacancy at 163,433 units but again this was based on a low-bar definition of vacancy.
“A dwelling is classed as vacant by census enumerators if it is unoccupied on Census night, is not used as a holiday home and is not usually inhabited by occupants who are temporarily absent at the time of census,” the Central Statistics Office says.
On its website, the agency cautions that the Census definition of a vacant dwelling “is a point in time indicator taken on Census night” and should not be used as a measure of long-term vacancy.
Last year the Government’s high-level tax strategy group weighed into the debate, estimating that the State’s vacancy rate was even lower, at just 3.2 per cent. The estimate was based on Revenue data.
In Dublin, the city with the most obvious accommodation problems, the group found that there were just 5,800 vacant properties, corresponding to a vacancy rate of 2.6 per cent. “Similarly low rates” were detected in other areas of high demand such as Cork City (2.6 per cent), Galway city (2.4 per cent) and Limerick city and county (2.5 per cent).
Overall, the group concluded that the level of vacancy here is low and “in line with a functioning housing market”.
Temporarily vacant doesn’t mean permanently idle. The criteria applied by the Government to attract the Vacant Homes Tax is that the relevant property is in use as a dwelling for less than 30 days in the year – a much stricter definition of vacancy. The owner is currently charged three times the basic rate of Local Property Tax but this is being increased to five times. If the average cost of a home is €320,000, the Vacant Homes Tax liability this year would be €945.
But there are still exemptions: properties being sold or listed to let; if the owners are in long-term care or hospital; if the property is undergoing repairs or renovations or if vacancy has been caused by the death of the owner.
“The key objective of the tax is to increase the supply of homes available for rent or purchase, by encouraging the owners of vacant residential properties to bring those properties back into use,” the department said.
The concept of taxing empty homes – as a part solution to the housing problem – is being taken up by policymakers. There are similar taxes in Melbourne, Australia; Leuven in Belgium; and Vancouver, Canada and there’s one planned for Hong Kong.
It’s right – and politically popular – to penalise speculators who are sitting on much-needed housing and maybe a trickle of vacant homes will re-emerge here on the back of the Government’s tax but the great silver bullet of vacancy was an illusion all along.