Dáil Éireann Debate, Tuesday - 24 January 2023
74. Deputy Pearse Doherty asked the Minister for Finance his views on introducing additional tax measures for developers and investors in the residential property market; if he agrees with a previously commissioned report (details supplied) that such incentives would represent a clear waste of scarce public resources and would lead to an increase in site and property prices; and if he will make a statement on the matter. [3149/23]
View answer78. Deputy Darren O'Rourke asked the Minister for Finance his position on introducing additional tax measures for developers and investors in the residential property market; and if he will make a statement on the matter. [3098/23]
View answer247. Deputy Martin Kenny asked the Minister for Finance his position on introducing additional tax measures for developers and investors in the residential property market; and if he will make a statement on the matter. [3182/23]
View answerIn November of last year, the Taoiseach made plain his desire to introduce tax breaks for private developers. That sums up the approach of the Government in housing policy and the cul-de-sac which the Taoiseach's thinking has entered. Unfortunately, he is taking struggling renters and prospective owners down that cul-de-sac with him and stunting their life plans and hopes for the future. Is the Minister for Finance considering the introduction of tax breaks for developers, as the Taoiseach has suggested? What is his view on the fact that the Taoiseach wants him to do this?
I propose to take Questions Nos. 74, 78 and 247 together.
The Government is acutely aware of the difficulties in the housing market. As I have said on many occasions, the key problem is a lack of supply. This is why the Government is committed to increasing the supply of all types of homes: social, affordable, rental and owner-occupier. Under Housing for All, the Government has provided over €4 billion this year to accelerate the delivery of new homes. The Government has also intervened in other areas, including legislating for a residential zoned land tax and a vacant homes tax. These measures are working and in the past year around 28,000 houses were built, the highest number since 2008. However, over the past year we have experienced very high levels of inflation. Data released by the Central Statistics Office, CSO, show that annual inflation in the wholesale price of construction materials was over 16% in November 2022. The increase in costs is adversely impacting the viability of housing projects, which may make it difficult to meet our housing targets this year and beyond. To combat this, all options will be considered to boost the supply of housing.
On tax measures, our recent history suggests that an extremely cautious approach is necessary. In the past such measures were too broadly based and inefficient. They created distortions in the construction sector and proved very difficult to end. For these reasons and more, public expenditure measures continue to be the preferred method of State support. We must also recognise that money alone cannot solve the housing shortage. The viability challenge must be met using all the various tools available to the Government, including regulatory and legal means. In this respect, I welcome recent initiatives by the Department of Housing, Local Government and Heritage on planning reform and the forthcoming report on lowering the cost of construction. I will continue to work with my Cabinet colleagues to ensure that any further interventions in the housing market are appropriately calibrated, represent the best use of scarce public resources and boost the supply of housing in both the public and private sectors.
With respect, I have asked the Minister a direct question here. The Taoiseach is upfront about it - he wants tax breaks for developers. That is the cul-de-sac which he wants us to go down, which underlines the abject failure of the housing policy of this Government and indeed the Taoiseach. Can the Minister for Finance tell the House if he is willing to consider tax breaks for developers? The Taoiseach, who is the Minister's boss, wants him to do it. Is he willing to consider that? Does he side with the Economic and Social Research Institute, ESRI, which in 2015 studied the issue of tax breaks to stimulate construction in the housing market and concluded: "Tax breaks will have limited impact on supply if supply has been constrained by [other factors] ... tax breaks in these circumstances can simply lead to a transfer of tax revenue from the state to developers with no effect on supply." Does the Minister support the view of the Commission on Taxation and Welfare? It reached similar conclusions to the effect that such tax breaks "can lead to further price growth in areas where supply is particularly constrained, the beneficiaries of which are the land owners and developers at the expense of forgone revenues".
Does the Minister support the view of his own Department which said in the past year that tax reductions resulting in transfers from the State to developers without any significant effect on supply have a very significant cost to the taxpayer? The ESRI, the Commission on Taxation and Welfare and the Department have all come out against tax breaks for developers - they have said that all such tax breaks will do is benefit developers, and they will have no impact on supply - but the Taoiseach still wants them because his policies are pro-developer and pro-funds. I will put the question plainly. Is the Minister for Finance willing to contemplate tax breaks for developers, as the Taoiseach wants?
I thank the Deputy for his comments. As I said in my initial response, public expenditure measures are the preferred method of State support. The Deputy asked a very direct question, which he put to me here in writing and has repeated verbally, in respect of introducing additional tax measures for developers and investors in the residential property sector.
I have no such plans. We will, as always, keep all taxation matters under review.
When it comes to stimulating supply and the State playing a greater role in that regard, we have the Croí Cónaithe cities initiative and we need to see the full work-through of that in terms of delivery, in particular of high-density development in our cities. We have the Land Development Agency, LDA, with Project Tosaigh. It is engaging with the private sector at this point to see what that can deliver in terms of high-density developments in our city centres, which we will all agree need to be built at the most affordable rates possible.
Will the Minister take the Taoiseach aside and explain to him that his Department, the ESRI and other experts, including the Commission on Taxation and Welfare, whose members were the experts appointed by the Government, are all of the view that taxpayers funding developers will only deepen the pockets of those developers without actually increasing supply? Will the Minister have that conversation with the Taoiseach? He continues to argue for these types of support which are not going to cut it.
The Minister mentioned that money is not the only issue. However, is it not the case that in the ministerial brief prepared for the Minister for Public Expenditure and Reform, the seat occupied by the Minister, Deputy McGrath, until a couple of weeks ago, pointed out that there was a €1 billion underspend under his watch in the Department of Housing, Local Government and Heritage? The fact is that social housing targets were missed last year by a figure of 2,500 homes. Is the Government going to focus on delivering the amount of money that it committed to spend? In a housing crisis, where people are homeless, 4,000 children are in emergency accommodation tonight and many people are locked out of the market, the pitiful amount of money the Government is putting on the table leaves €1 billion unspent. That is unforgivable.
As Minister for Finance, I will of course be part of all of the discussions on what we are doing and what more we need to do in Government to tackle the housing crisis. I am a member of the Cabinet committee on housing and contribute to that on an ongoing basis. I also did so in my previous role. It is true that it is not all about money. The planning reforms the Minister for Housing, Local Government and Heritage, Deputy Darragh O'Brien, is bringing forward are vitally important and I hope the House and relevant Oireachtas committee will co-operate and provide their support and input into them. There are capacity constraints across the industry and also labour shortages across different specialisms that we are well aware of.
The Deputy mentioned tax. We have used tax in a different way, through the residential zoned land tax and the vacant property tax. We are using the taxation system, where we deem it appropriate, to help bring vacant stock back into use or make land available that is intended or earmarked for residential development.
