Housing crisis and taxation

 

Sir, – The housing crisis continues and the politicians are making promises to address the issue.

Traditionally, housing demand and need has been met primarily by the private sector and is the means by which the problem will be tackled eventually. So, as housing lists lengthen, rents increase and mortgage rules cannot be met, why does the State add to the cost and seek to profit from housing provision?

VAT is not applicable to the purchase of land, the finance costs, nor development levies. In the development process, it is mainly the materials and labour that incur VAT charges.

Yet from the sale of units the State collects a full 13.5 per cent “value” added tax. To put that in contest, of the reported average house cost in Dublin last year of €356,000, this includes over €42,000 in VAT.

The magic €220,000 figure rises by €29,700 due to VAT. First-time purchasers have to find nearly €6,000 additional deposit and meet the Central Bank qualifying criteria for approval for the balance.

What value has been added to the land, and other elements? Indeed in the cost the purchaser is even paying VAT on subsidising the social housing element through part V of the Planning Acts. The elimination of VAT would make housing more attainable. A reduction to a VAT neutral rate would also have a marked benefit and in turn, increased output would restore the tax returns.

In the meantime, this additional burden effects the viability and affordability of housing and reflects government’s treatment of housing not as a necessity, but as a luxury. – Yours, etc,

PAUL KEENAN , FRIAI,

Dublin 2.