ESRI urges more aggressive site tax to spur housing supply

Think tank also presses for closure of loopholes allowing landowners avoid tax

Goodbody Stockbrokers’ chief economist said he expected 21,000 houses to be completed this year, down from an earlier forecast of 22,000. Photograph: Alan Betson

Vacant development sites should be taxed more aggressively and loopholes being used by landowners closed to cut the cost of building homes and spur supply, according to a senior economist at the Economic and Social Research Institute (ESRI).

Speaking to reporters ahead of the publication on Thursday of the ESRI’s latest quarterly economic commentary, research professor Kieran McQuinn said taking the “speculative element” out of land prices was the quickest route to lowering construction costs, as labour and raw material costs are set to continue to rise over the medium term.

“You need to look whether [the vacant site levy] is taxed aggressively enough in certain cases,” Prof McQuinn said “Clearly there is a need for differentiation, depending on the serviceability of land in question, but certainly we need to look at that.”

Prof McQuinn said there was also “anecdotal evidence to suggest that the loopholes” were being availed of by landowners to avoid paying the tax. “We need to tighten up on that,” he said.


There are currently more than 360 plots of land – valued at €364.2 million in total – registered across local authorities for the vacant site tax, Minister for Finance Paschal Donohoe said last week in response to a parliamentary question Mick Wallace TD.

An initial 3 per cent levy due this year on sites registered in 2018, when the tax came into effect, will raise an estimated €7.6 million nationally, Mr Donohoe said. This should rise to €25.5 million in 2020, as an increased rate of 7 per cent is applied on the value of relevant sites from 2019, he added. The levy is payable a year in arrears.

House completions

Prof McQuinn's comments come as economists lower their projections for house completions amid a slowdown in house-price growth as Central Bank mortgage restrictions bite and as construction costs rise.

Goodbody Stockbrokers’ chief economist Dermot O’Leary said on Monday that he now expects 21,000 houses to be completed this year, down from an earlier forecast of 22,000, even though many commentators, including the ESRI, estimate the Republic needs between 30,000 and 35,000 new homes a year.

Last year saw 18,023 new properties completed as residential property prices rose 6.3 per cent nationally. Figures out this week showed that house price inflation had eased to an annual rate of 3.1 per cent in April from 3.8 per cent a month earlier and 4.3 per cent in February.

Dublin house prices were flat in April. “Given the higher level of house prices in Dublin and the surrounding area, it is likely the Central Bank rules are binding most in these areas and this is contributing to the more marked decline in the growth rate observed in the capital area,” the ESRI said in its latest report.

Still, the growth in rents shows that demand for accommodation remains high, it said, noting that residential rent prices grew by just under 7 per cent in the last quarter of 2018.

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Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times