Minister warns funds may exit market if apartments included in new stamp duty

New 10% duty on bulk-bought homes comes into effect

Sinn Féin claimed the Government only wanted to give a ‘semblance’ of action but it was a proposal ‘designed to fail’ . File photograph: The Irish Times

Sinn Féin claimed the Government only wanted to give a ‘semblance’ of action but it was a proposal ‘designed to fail’ . File photograph: The Irish Times

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Minister for Finance Paschal Donohoe has warned of a “significant risk” that developers will exit the apartment building market if they are included in his proposal to apply a 10 per cent stamp duty on multiple purchases of houses.

Defending the financial resolution measure to apply the increased rate on purchases of more than 10 houses, Mr Donohoe said it would come into effect at midnight on Wednesday, with a three-month transition period for transactions begun but not completed.

Introducing the measure in a tetchy debate, Mr Donohoe insisted that investment funds were crucial to achieve a balance between addressing multiple purchases of homes while ensuring funding of apartments.

The Dáil accepted the Minister’s proposals without a vote after it rejected a series of Sinn Féin amendments including a 70 to 60 vote against including apartments in the increased stamp duty measures. Four regional Independent TDs voted with the Government and there were no abstentions.

Mr Donohoe said the new rate when combined with other measures from Minister for Housing Darragh O’Brien should “ensure greater availability of housing” .

‘Surrendered’

But Sinn Féin finance spokesman Pearse Doherty told the Minister: “This is the hour where you have surrendered this city to the vulture funds, the investment funds. You have hoisted the white flag over this city and said it’s a free-for-all for vulture funds. Instead of giving the funds the red flag you have given them the green light.”

Mr Doherty said there were so many loopholes in the 10 per cent stamp duty initiative that “you could drive a coach and four through it”. And he claimed the Government only wanted to give a “semblance” of action but it was a proposal “designed to fail”.

Labour finance spokesman Ged Nash said 10 per cent “is not a punitive rate – it is a puny rate”. He believed it should be at least 15 per cent if not 17 per cent because otherwise the funds would absorb the stamp duty over time.

The Louth TD called for a full review of the tax treatment of institutional funds and asked if this was a “form of unfair State aid” ahead of the legislation that would be introduced to give full effect to the measure.

Social Democrats joint leader Róisín Shortall said the Government obviously believed that apartments were for students and renters but not for families or individuals to own.

She said the majority of planning permissions granted last year were for apartments – 26,000 – compared to 18,000 for houses.

She said that if the Minister really wanted to do something he would deal with rents, pointing out that in Kildare they averaged €1,450 a month but institutional funds were now seeking €1,995 a month for a two-bed in Maynooth, where the bulk-buying controversy erupted.

‘Warning shot’

Government backbencher Fine Gael TD Bernard Durkan said the measure was a “warning shot” for institutional investors who attempted to increase the price of apartments.

Earlier, Tánaiste Leo Varadkar said the Government may re-examine a vacant home tax and may increase the new stamp duty on bulk purchases if it does not prove effective.

In a letter to members of the Fine Gael parliamentary party, Mr Varadkar also said he thought the coalition would need to re-examine the role of approved housing bodies and local authorities in bulk-buy housing estates.

Elsewhere, Green Party TDs will push to make apartments available for purchase by owner-occupiers. Plans brought to Cabinet on Tuesday envisaged up to half of new houses and duplexes would be made available for purchase under a so-called “owner-occupier guarantee”, but not apartments.

However, Mr O’Brien said he would examine whether apartments could be included in the scheme after resistance from Green Ministers. Steven Matthews, Green party TD for Wicklow and chair of the housing committee, said: “We can’t end up in a situation where city centre apartments are investor, build-to-rent models. We want living cities where people can buy and raise families.”

Mr O’Brien was challenged on aspects of the Government’s reforms to limit purchases by so-called “cuckoo funds” during his attendance at a meeting of the Green Party parliamentary party.

It is understood Green Party members, during a meeting which sources said was constructive, raised the exemptions for apartment investment. TDs Neasa Hourigan and Brian Leddin, as well as MEP Ciarán Cuffe and Senator Pauline O’Reilly were among those to raise the issue.

Mr O’Brien told the Green Party members that he is going to keep the reforms under review as he goes on, and committed to work on policies focused on city and town centres and apartment building as part of his forthcoming “Housing for All” policy.

It is understood Ms Hourigan also criticised the build-to-rent planning classification, saying it had been around for five years and failed to increase supply - and was a failed Fine Gael policy that should be shelved. Mr O’Brien said the policy would also be kept under review, sources said.

There were also questions over the shared equity scheme contained in Mr O’Brien’s Affordable Housing Bill, which has been the focus of criticism among the opposition, as well as the subject of analyses by the Central Bank, ESRI and others which suggest it could drive up house prices.

Mr O’Brien is said to have told the meeting that the capital being committed under the shared equity scheme was dwarfed by investments in other areas, including the cost rental format, which enjoys strong support in the Green Party.

His meeting with the Green Party was cut short due to Dáil votes, and Mr O’Brien committed to coming back next week to continue the discussion.