Vol. 537 No. 3
39 Ms O. Mitchell asked the Minister for the Environment and Local Government the steps he intends to take to revive construction activity in the provision of rented accommodation which has been seriously affected as a direct result of Government policy. [15653/01]
The Government recognises the need for a thriving, diverse and well managed private rented sector. Government policy seeks to promote investment in the supply of accommodation on the basis of long-term commitment to the sector and to discourage speculative investment, which serves only to drive up house prices and fuel rent increases. Recommendations for improvements to the sector, including measures to increase supply, were made by the commission on the private rented residential sector. The Government's response to these proposals, which was announced in January 2001, forms the basis for the reform of the sector and includes, inter alia, the establishment of a private residential tenancies board for facilitating speedy dispute resolution, the introduction of legislation to improve security of tenure as well as taxation incentives to encourage increased supply. Some of these taxation proposals have already been implemented in this year's Finance Act.
In addition to these measures aimed specifically at the private rented sector, a wide range of measures has been implemented by Government to maximise the supply of housing. Changes were recently made to investor stamp duty rates so that the owner occupier rates now apply in respect of new houses, with the 3% rate applying to properties up to £150,000 rather than the 9% rate which previously applied. This should assist in encouraging investment in the sector and increasing the supply of accommodation.
Section 50 of the Finance Act, 1999, provides an incentive to increasing the supply of purpose built student accommodation. I understand that returns received recently by the Department of Education and Science indicate that some 2,260 bed spaces have been certified by third level colleges under section 50 and a further 14,000 are at various stages of planning.
This Government has also improved the position of tenants in the private rented residential sector by twice increasing the ceilings for income tax relief. The ceiling in respect of rent paid by tenants under 55 was doubled. In the case of tenants over 55 a doubling of the ceiling, coupled with standard rating of the relief, means that 80% of such tenants gain a doubling of relief. A rent a room scheme was announced in the 2001 budget which provides for an exemption from income tax in respect of gross rental income of up to £6,000 per annum, for accommodation provided in a person's principal private residence. This measure will facilitate the provision of accommodation thereby easing the pressure on the private rented sector and will also improve the utilisation of the housing stock.
Would the Minister of State accept that housing outputs are down but the output of apartment accommodation for rent has simply disappeared altogether, and that it is entirely due to his policy of withdrawing interest relief? Has he any idea of the misery it is causing right throughout the market as it is forcing people out at the bottom end of the market? They are the people who are suffering most.
I can understand targeting speculators but his measure hit the investor, not the speculator. Either he wants a private rented sector or he does not. All the evidence shows that there will not be a private rented sector unless there are changes in this law. Is the Minister of State in charge of this or is the Minister for Finance, Deputy McCreevy, setting the agenda? Would the Minister of State accept that if there is to be a private rented sector, which is needed for all of those people who are most vulnerable, then the Minister of State must move on this?
First, housing output is up. There is no point in denying the figures. They may be down at the end of the year but that is what is shown by the statistics available to date.
That is a great consolation.
The Deputy is mixing up housing starts with completions.
I am not.
Indeed she is.
It is 25% down on four years ago.
Let us have an orderly Question Time.
Mortgage interest relief for investors, which the Deputy has raised here, was abolished in action on housing prices following recommendations in the first Bacon report as it was considered it was a serious contributory factor to overheating and distortion in the housing market and the exclusion of many first time buyers. Removal of interest deductibility has helped reduce the increase in house prices and increase the proportion of housing going to first time purchasers. It would be undesirable to reintroduce mortgage interest relief for investors on a general basis, if that is what the Deputy is suggesting, as it was a preferential tax treatment of investors over owner occupiers as mortgage interest relief for the individual is capped. It led to increasing speculative demand in a market where there was an existing shortfall between supply and demand.
The other tax relief, which the Deputy did not mention, was section 23 relief. The commission on the private rented residential sector did recommend that section 23 relief should apply for a limited period to the provision of rented accommodation to target groups identified as having priority needs having regard to local authority housing strategies. The Government agreed to this recommendation and it is being considered having regard to the overall balance of supply and demand within the housing market and the necessity of avoiding undesirable house price increases or the displacement of first time purchasers.
If the Minister of State will not accept the social arguments of the need for a private rented sector, would he accept the economic argument? If there is to be a flexible labour force, then it is absolutely essential that there is a flexible housing market in order that people, who come here even for a few months or a year, would not have to buy a house in order to get accommodation. As institutions invest in every other kind of property, why would they not invest in private rented accommodation which could then be managed by corporations or by the voluntary associations? Would the Minister of State agree that if there is ever to be a professional quality well regulated private rented sector which perhaps would attract institutions, we must put it on a proper business footing with the same reliefs which are available to every other business? They should not receive special treatment, just the same treatment.
We must proceed to Question No. 40.
