Government move on cuckoo funds ‘an abuse of public money’, Dáil told

Social Democrats criticise re-instating lower stamp duty rate for institutional investors

Taoiseach Micheál Martin had told the Dáil the measure was necessary to prevent the risk of 2,400 social homes being lost this year if the lease arrangements were not in place. Photograph: Alan Beton

Taoiseach Micheál Martin had told the Dáil the measure was necessary to prevent the risk of 2,400 social homes being lost this year if the lease arrangements were not in place. Photograph: Alan Beton

 

The decision by the Government to re-instate a lower stamp duty for investment funds that bulk buy homes to lease to the local authorities has been described as “an abuse of public money”.

In the ongoing fallout after the 74 to 59 Dáil vote on Wednesday night in favour of exempting such funds from the 10 per cent stamp duty, Social Democrats joint leader Catherine Murphy also described the move as “desperate value for money”.

Taoiseach Micheál Martin had told the Dáil the measure was necessary to prevent the risk of 2,400 social homes being lost this year if the lease arrangements were not in place.

But Ms Murphy said the 2,400 deals for 2021 is a “big surprise” when last year 1,440 social homes delivered through that lease programme.

She said Minister for Housing Darragh O’Brien is saying that the number of lease deals is substantially more than the total amount leased last year “despite everyone in Government agreeing that this is terrible value for money”.

Green Party leader Eamon Ryan, standing in for Tánaiste Leo Varadkar on leaders’ questions, said these were short-term arrangements but “we do need to change the policy and the approach”.

He said one option could be through much longer leases with ownership reverting to local authorities or other s arrangements.

He said that nobody is saying the “current leasing arrangement is something we think is the future”.

There are legacy issues and “certain contracts have to be delivered upon” but the key change coming, signalled by the Taoiseach yesterday is one that I agree with”, for a change in strategy to ensure local authorities own homes they lease.

Ms Murphy said “you describe this as a short-term emergency measure, for 25 years”.

She said the local authority is going to pay “the equivalent if not more in terms of a mortgage for 25 years and will then refurbish the house and hand it back”.

“This is not short-term, this is an abuse of public money.”

The Kildare North TD also said that cuckoo funds were not only “not content with paying virtually no tax on their profits, or the extraordinary lucrative 25-year contract that have been described as ‘Government bonds on steroids’, but the State had to further sweeten the deal and exempt them from this stamp duty increase if it wants them to play ball”.

She also questioned the timing of the move and said that when Minister for Finance Paschal Donohoe announced stamp duty of 10 per cent would have to be paid for block purchases of 10 or more homes, he said three bodies would be exempt - local authorities, approved housing bodies and housing agencies.

“If he had signalled that he was about to exempt cuckoo funds from a measures that was designed to target cuckoo funds it certainly would have stood out and caused a row in the Dáil.”

Sinn Féin finance spokesman Pearse Doherty accused the Government of “unleashing these vulture funds to wreak havoc” and said it is the “ordinary people of this city and State who lost out”.

Mr Ryan signalled that in the Housing for All strategy to be published later this month there will be a change in direction. It won’t be a complete switch, because there will be a “very small number” of instances where leasing arrangements may have a role, but the strategy will offer a number of different models.

The Dail on Thursday passed the Affordable Homes Bill by 100 votes to eight with the support of Sinn Féin. The legislation encourages local authorities to build affordable homes on public land, includes a requirement for 10 per cent of all developments to be affordable housing as well as 10 per cent social housing. It also includes the controversial shared equity scheme allowing the State to take a stake of up to 20 per cent in a property.