Financial Resolution: Stamp Duty.

Minister for Finance (Mr. McCreevy)

I move:

(1)THAT in this Resolution–

"Principal Act" means the Stamp Duties Consolidation Act, 1999;

"Commissioners" means the Revenue Commissioners;

"Schedule 1" means Schedule 1 to the Principal Act;

(2)THAT, subject to paragraph (3) of this Resolution, this Resolution shall have effect as respects instruments executed on or after 15 June 2000.

(3)Paragraph (2) of this Resolution shall not apply as respects any instrument executed on or before 31 January 2001, where–

(a)the effect of the application of paragraph (2) would be to increase the duty otherwise chargeable on the instrument, and

(b)the instrument contains a statement in such form as the Commissioners may specify, certifying that the instrument was executed solely in pursuance of a contract which was evidenced in writing prior to 15 June 2000.

(4)THAT Schedule 1 is amended–

(a)by the substitution of the paragraphs set out in Part 1 of the Schedule to this Resolution for paragraphs (1) to (6) of the Heading ‘CONVEYANCE or TRANSFER on sale of any property other than stocks or marketable securities or a policy of insurance or a policy of life insurance', and

(b)by the substitution of the subparagraph set out in Part 2 of the Schedule to this Resolution for subparagraph (a) of paragraph (3) of the Heading ‘Lease'.

(5)Chapter 2 of Part 7 of the Principal Act is amended by the insertion of the following sections after section 92:

"92A.–(1)The amount of stamp duty chargeable under or by reference to paragraphs (1) to (5) of the Heading ‘CONVEYANCE or TRANSFER on sale of any property other than stocks or marketable securities or a policy of insurance or a policy of life insurance' or clauses (i) to (v) of paragraph (3)(f2>a) of the Heading ‘Lease', as the case may be, in Schedule 1 on any instrument to which this section applies shall be reduced where–

(a)paragraph (1) or clause (i) applies, to an amount equal to three-ninths,

(b)paragraph (2) or clause (ii) applies, to an amount equal to four-ninths,

(c)paragraph (3) or clause (iii) applies, to an amount equal to five-ninths,

(d)paragraph (4) or clause (iv) applies, to an amount equal to six-ninths,

(e)paragraph (5) or clause (v) applies, to an amount equal to seven and one half-ninths,

of the amount which would otherwise have been chargeable but where the amount so obtained is a fraction of £1 that amount shall be rounded up to the nearest £.

(2)Notwithstanding subsection (1)–

(a)where the amount or value of the consideration for the sale which is attributable to residential property, or would be so attributable if the contents of residential property were considered to be residential property, does not exceed £100,000 and the instrument contains a statement certifying that the consideration for the sale is, as the case may be–

(i)wholly attributable to residential property, or

(ii)partly attributable to residential property,

and that the transaction effected by that instrument does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration which is attributable to residential property, or which would be so attributable if the contents of residential property were considered to be residential property, exceeds £100,000, or

(b)where the amount or value of the consideration, or any part of the consideration (other than rent) for the lease which is attributable to residential property, or would be so attributable if the contents of residential property were considered to be residential property, does not exceed £100,000 and the instrument contains a statement certifying that the consideration, or any part of the consideration (other than rent) is, as the case may be–

(i)wholly attributable to residential property, or

(ii)partly attributable to residential property,

and that the transaction effected by that instrument does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration or any part of the consideration (other than rent) which is attributable to residential property, or which would be so attributable if the contents of residential property were considered to be residential property, exceeds £100,000,

then the amount of stamp duty chargeable under or by reference to paragraph (1) of the Heading ‘CONVEYANCE or TRANSFER on sale of any property other than stocks or marketable securities or a policy of insurance or a policy of life insurance' or paragraph (3)(a)(i) of the Heading ‘LEASE', as the case may be, in Schedule 1 on any instrument to which this section applies shall be reduced by an amount equal to 100 per cent of the amount which would otherwise have been chargeable.

(3)This section shall apply to–

(a)any instrument to which section 92 applies, or

(b)any instrument, other than one to which section 92 applies, which contains a statement, in such form as the Commissioners may specify, certifying that–

(i)the instrument gives effect to the purchase of a dwellinghouse or apartment, and

(ii)until the expiration of the period of 5 years commencing on the date of the execution of the instrument or the subsequent sale (other than a sale the contract for which, if it were a written conveyance, would not, apart from section 82, be charged with full ad valorem duty or a sale to a company under the control of the vendor or of any person entitled to a beneficial interest in the dwellinghouse or apartment immediately prior to the sale or to a company which would, in relation to a notional gift of shares in that company taken, immediately prior to the sale, by any person so entitled, be under the control of the donee or successor within the meaning of section 16 of the Capital Acquisitions Tax Act, 1976, irrespective of the shares the subject matter of the notional gift) of the dwellinghouse or apartment concerned, whichever event first occurs, that dwellinghouse or apartment will be occupied as the only or principal place of residence of the purchaser, or if there be more than one purchaser, of any one or more of the purchasers or of some other person in right of the purchaser or, if there be more than one purchaser, of some other person in right of any one or more of the purchasers and that no person, other than by virtue of a title prior to that of the purchaser, will derive any rent or payment in the nature of rent for the use of that dwellinghouse or apartment, or of any part of it, during that period.

(4)Where subsection (1) or (2) applies to an instrument and at any time during the period referred to in section 92(1)(b)(ii) or in subsection (3)(b)(ii) of this section, some person, other than by virtue of a title prior to that of the purchaser, derives any rent or payment in the nature of rent for the use of the dwellinghouse or apartment concerned, or of any part of it, the purchaser, or where there be more than one purchaser, each such purchaser, shall–

(a)jointly and severally become liable to pay to the Commissioners a penalty equal to the difference between the amount of the duty which would have been charged in the first instance if the dwellinghouse or apartment had been conveyed or transferred or leased by an instrument to which neither subsection (1) nor (2) applied and the amount of duty which was actually charged together with interest on that amount charged at a rate of 1 per cent per month or part of a month from the date when the rent or payment is first received to the date the penalty is remitted, and

(b)the person who receives the rent or payment shall, within 6 months after the date of the payment, notify the payment to the Commissioners on a form provided, or approved of, by them for the purposes of this section, unless that person is already aware that the Commissioners have already received such a notification from another source.

(5)Where the instrument is one to which this section and section 92 applies–

(a)the reference in subsection (4) to the amount of duty which would have been charged in the first instance shall be construed as a reference to the duty which would have been charged had the relief under section 92 continued to apply, and

(b)the reference to the amount of duty which was actually charged in subsection (2)(a) of section 92 shall be construed as a reference to the duty which would have been charged had the relief under this section been denied,

and the penalty referred to in subsection (4) shall be in addition to any penalty payable under section 92.

(6)Notwithstanding subsection (3), subsections (1) and (2) shall not apply unless the consideration for the sale or lease concerned which is attributable to residential property is wholly attributable to residential property which would otherwise qualify for relief under this section or where the sale or lease concerned forms part of a larger transaction or of a series of transactions unless the aggregate consideration for that larger transaction or series of transactions which is attributable to residential property is wholly attributable to residential property which would otherwise qualify for relief under this section.

(7)Notwithstanding subsection (3), this section shall not apply to an instrument to which section 92B applies.

92B.–(1)In this section–

‘first time purchaser' means a person who, at the time of the execution of the instrument to which this section applies, has not, either individually or jointly with any other person or persons, previously purchased (other than the purchase of a leasehold interest by way of grant or assignment for any term not exceeding one year), or built on his or her own behalf, another dwellinghouse or apartment or a part of another dwellinghouse or apartment.

(2)The amount of stamp duty chargeable under or by reference to paragraphs (1) to (5) of the Heading ‘CONVEYANCE or TRANSFER on sale of any property other than stocks or marketable securities or a policy of insurance or a policy of life insurance' or clauses (i) to (v) of paragraph (3)(a) of the Heading ‘Lease', as the case may be, in Schedule 1 on any instrument to which this section applies shall be reduced where–

(a)paragraph (1) or (2) or clause (i) or (ii) applies, to an amount equal to three-ninths,

(b)paragraph (3) or clause (iii) applies, to an amount equal to three and three quarter-ninths,

(c)paragraph (4) or clause (iv) applies, to an amount equal to four and one half-ninths,

(d)paragraph (5) or clause (v) applies, to an amount equal to seven and one half-ninths,

of the amount which would otherwise have been chargeable but where the amount so obtained is a fraction of £1 that amount shall be rounded up to the nearest £.

(3)Notwithstanding subsection (2)–

(a)where the amount or value of the consideration for the sale which is attributable to residential property, or would be so attributable if the contents of residential property were considered to be residential property, does not exceed £150,000 and the instrument contains a statement certifying that the consideration for the sale is, as the case may be–

(i)wholly attributable to residential property, or

(ii)partly attributable to residential property,

(b)where the amount or value of the consideration, or any part of the consideration (other than rent) for the lease which is attributable to residential property, or would be so attributable if the contents of residential property were considered to be residential property, does not exceed £150,000 and the instrument contains a statement certifying that the consideration, or any part of the consideration (other than rent) is, as the case may be–

(i)wholly attributable to residential property, or

(ii)partly attributable to residential property,

and that the transaction effected by that instrument does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration or any part of the consideration (other than rent) which is attributable to residential property, or which would be so attributable if the contents of residential property were considered to be residential property, exceeds £150,000,

then the amount of stamp duty chargeable under or by reference to paragraph (1) of the Heading ‘CONVEYANCE or TRANSFER on sale of any property other than stocks or marketable securities or a policy of insurance or a policy of life insurance' or paragraph (3)(a)(i) of the ‘LEASE', as the case may be, in Schedule 1 on any instrument to which this section applies shall be reduced by an amount equal to 100 per cent of the amount which would otherwise have been chargeable.

(4)This section shall apply to–

(a)any instrument to which section 92 applies and which contains a statement, in such form as the Commissioners may specify, certifying that the purchaser, or where there is more than one purchaser, each and every one of the purchasers, is a first time purchaser, or

(b)any instrument, other than one to which section 92 applies, which contains a statement, in such form as the Commissioners may specify, certifying that the purchaser, or where there is more than one purchaser, each and every one of the purchasers, is a first time purchaser, and that–

(i)the instrument gives effect to the purchase of a dwellinghouse or apartment, and

(5)Where subsection (2) or (3) applies to an instrument and at any time during the period referred to in section 92(1)(b)(ii) or in subsection (4)(b)(ii) of this section, some person, other than by virtue of a title prior to that of the purchaser, derives any rent or payment in the nature of rent for the use of the dwellinghouse or apartment concerned, or of any part of it, the purchaser, or where there be more than one purchaser, each such purchaser, shall–

(a)jointly and severally become liable to pay to the Commissioners a penalty equal to the difference between the amount of the duty which would have been charged in the first instance if the dwellinghouse or apartment had been conveyed or transferred or leased by an instrument to which neither subsection (2) nor (3) applied and the amount of duty which was actually charged together with interest on that amount charged at a rate of 1 per cent per month or part of a month from the date when the rent or payment is first received to the date the penalty is remitted, and

(6)Where the instrument is one to which this section and section 92 applies–

(a)the reference in subsection (5) to the amount of duty which would have been charged in the first instance shall be construed as a reference to the duty which would have been charged had the relief under section 92 continued to apply, and

and the penalty referred to in subsection (5) shall be in addition to any penalty payable under section 92.

(7)Notwithstanding subsection (4), subsections (2) and (3) shall not apply to an instrument which gives effect to a sale or lease of more than one unit of residential property or where the sale or lease concerned forms part of a larger transaction or of a series of transactions comprising more than one unit of residential property.".

(6)IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).

SCHEDULE

STAMP DUTY ON INSTRUMENTS

Part 1

Conveyance or Transfer on Sale of any property other than stocks or marketable securities or a policy of insurance or a policy of life insurance

“(1)Where the amount or value of the consideration for the sale which is attributable to residential property, or would be so attributable if the contents of residential property were considered to be residential property, does not exceed £150,000 and the instrument contains a statement certifying that the consideration for the sale is, as the case may be–
(a)wholly attributable to residential property, or
(b)partly attributable to residential property,
and that the transaction effected by that instrument does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration which is attributable to residential property, or which would be so attributable if the contents of residential property were considered to be residential property, exceeds £150,000	9 per cent of the consideration which is attributable to residential property but where the calculation results in an amount which is not a multiple of £1 the amount so calculated shall be rounded up to the nearest £.
(2)Where paragraph (1) does not apply and the amount or value of the consideration for the sale which is attributable to residential property, or would be so attributable if the contents of residential property were considered to be residential property, does not exceed £200,000 and the instrument contains a statement certifying that the consideration for the sale is, as the case may be–
(a)wholly attributable to residential property, or
(b)partly attributable to residential property,
and that the transaction effected by that instrument does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration which is attributable to residential property, or which would be so attributable if the contents of residential property were considered to be residential property, exceeds £200,000	9 per cent of the consideration which is attributable to residential property but where the calculation results in an amount which is not a multiple of £1 the amount so calculated shall be rounded up to the nearest £.
(3)Where paragraphs (1) and (2) do not apply and the amount or value of the consideration for the sale which is attributable to residential property, or would be so attributable if the contents of residential property were considered to be residential property, does not exceed £250,000 and the instrument contains a statement certifying that the consideration for the sale is, as the case may be–
(a)wholly attributable to residential property, or
(b)partly attributable to residential property,
and that the transaction effected by that instrument does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration which is attributable to residential property, or which would be so attributable if the contents of residential property were considered to be residential property, exceeds £250,000	9 per cent of the consideration which is attributable to residential property but where the calculation results in an amount which is not a multiple of £1 the amount so calculated shall be rounded up to the nearest £.
(4) Where paragraphs (1) to (3) do not apply and the amount or value of the consideration for the sale which is attributable to residential property, or would be so attributable if the contents of residential property were considered to be residential property, does not exceed £300,000 and the instrument contains a statement certifying that the consideration for the sale is, as the case may be–
(a)wholly attributable to residential property, or
(b)partly attributable to residential property,
and that the transaction effected by that instrument does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration which is attributable to residential property, or which would be so attributable if the contents of residential property were considered to be residential property, exceeds £300,000	9 per cent of the consideration which is attributable to residential property but where the calculation results in an amount which is not a multiple of £1 the amount so calculated shall be rounded up to the nearest £.
(5)Where paragraphs (1) to (4) do not apply and the amount or value of the consideration for the sale which is attributable to residential property, or would be so attributable if the contents of residential property were considered to be residential property, does not exceed £500,000 and the instrument contains a statement certifying that the consideration for the sale is, as the case may be–
(a)wholly attributable to residential property, or
(b)partly attributable to residential property,
and that the transaction effected by that instrument does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration which is attributable to residential property, or which would be so attributable if the contents of residential property were considered to be residential property, exceeds £500,000	9 per cent of the consideration which is attributable to residential property but where the calculation results in an amount which is not a multiple of £1 the amount so calculated shall be rounded up to the nearest £.
(6)Where paragraphs (1) to (5) do not apply and the amount or value of the consideration for the sale is wholly or partly attributable to residential property	9 per cent of the consideration which is attributable to residential property but where the calculation results in an amount which is not a multiple of £1 the amount so calculated shall be rounded up to the nearest £.”.

Part 2

Lease

“(a)where the consideration, or any part of the consideration (other than rent), moving either to the lessor or to any other person, consists of any money, stock or security, and–
(i)the amount or value of such consideration which is attributable to residential property, or would be so attributable if the contents of residential property were considered to be residential property, does not exceed £150,000 and the lease contains a statement certifying that the consideration (other than rent) for the lease is, as the case may be–
(I)wholly attributable to residential property, or
(II)partly attributable to residential property,
and that the transaction effected by that instrument does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration (other than rent) which is attributable to residential property, or which would be so attributable if the contents of residential property were considered to be residential property, exceeds £150,000	9 per cent of the consideration which is attributable to residential property but where the calculation results in an amount which is not a multiple of £1 the amount so calculated shall be rounded up to the nearest £.
(ii)the amount or value of such consideration which is attributable to residential property, or would be so attributable if the contents of residential property were considered to be residential property, does not exceed £200,000 and the lease contains a statement certifying that the consideration (other than rent) for the lease is, as the case may be–
(I)wholly attributable to residential property, or
(II)partly attributable to residential property,
and that the transaction effected by that instrument does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration (other than rent) which is attributable to residential property, or which would be so attributable if the contents of residential property were considered to be residential property, exceeds £200,000 and clause (i) does not apply	9 per cent of the consideration which is attributable to residential property but where the calculation results in an amount which is not a multiple of £1 the amount so calculated shall be rounded up to the nearest £.
(iii)the amount or value of such consideration which is attributable to residential property, or would be so attributable if the contents of residential property were considered to be residential property, does not exceed £250,000 and the lease contains a statement certifying that the consideration (other than rent) for the lease is, as the case may be–
(I)wholly attributable to residential property, or
(II)partly attributable to residential property,
and that the transaction effected by that instrument does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration (other than rent) which is attributable to residential property, or which would be so attributable if the contents of residential property were considered to be residential property, exceeds £250,000 and clauses (i) and (ii) do not apply	9 per cent of the consideration which is attributable to residential property but where the calculation results in an amount which is not a multiple of £1 the amount so calculated shall be rounded up to the nearest £.
(iv)the amount or value of such consideration which is attributable to residential property, or would be so attributable if the contents of residential property were considered to be residential property, does not exceed £300,000 and the lease contains a statement certifying that the consideration (other than rent) for the lease is, as the case may be–
(I)wholly attributable to residential property, or
(II)partly attributable to residential property,
and that the transaction effected by that instrument does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration (other than rent) which is attributable to residential property, or which would be so attributable if the contents of residential property were considered to be residential property, exceeds £300,000 and clauses (i) to (iii) do not apply	9 per cent of the consideration which is attributable to residential property but where the calculation results in an amount which is not a multiple of £1 the amount so calculated shall be rounded up to the nearest £.
(v)the amount or value of such consideration which is attributable to residential property, or would be so attributable if the contents of residential property were considered to be residential property, does not exceed £500,000 and the lease contains a statement certifying that the consideration (other than rent) for the lease is, as the case may be–
(I)wholly attributable to residential property, or
(II)partly attributable to residential property,
and that the transaction effected by that instrument does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration (other than rent) which is attributable to residential property, or which would be so attributable if the contents of residential property were considered to be residential property, exceeds £500,000 and clauses (i) to (iv) do not apply	9 per cent of the consideration which is attributable to residential property but where the calculation results in an amount which is not a multiple of £1 the amount so calculated shall be rounded up to the nearest £.
(vi)the amount or value of such consideration is wholly or partly attributable to residential property and clauses (i) to (v) do not apply	9 per cent of the consideration which is attributable to residential property but where the calculation results in an amount which is not a multiple of £1 the amount so calculated shall be rounded up to the nearest £.”.

Deputies on all sides of the House are well aware of the increases in house prices which are making things difficult for people who wish to enter the housing market at present. In particular, the problems are most acutely felt by those who are trying to purchase their first home. The Government has already taken a series of actions which were designed to increase housing supply, dampen investor demand and thereby moderate house price increases. While these measures are having positive effects, the Government is now proposing a range of further initiatives to deal with continued rising demand for houses for owner-occupiers in particular.

The Government has considered the results of a further study commissioned by my colleague, the Minister of State at the Department of the Environment and Local Government with responsibility for housing and urban renewal, Deputy Molloy, and undertaken by Peter Bacon and Associates, Economic Consultants. This study reviews and evaluates the effects of measures taken by the Government, in particular, under "Action in the Housing Market" in April 1998 and "Action on House Prices" in March 1999. It also reviews other recent developments regarding housing demand, housing supply and house prices as well as providing a general review of the market since the publication of previous studies by the same consultancy firm. The consultants have concluded that considerable progress has been made in increasing housing output and in moderating the rate of price increase in new and existing houses, and that this has been achieved against a background in which housing demand has grown even more rapidly than was anticipated.

It is clear from their analysis that the supply-demand imbalance in the housing market and the resultant increase in prices is fuelling demand further and leading to market instability as demand is brought forward to avoid anticipated future price increases and as investors seek to take advantage of capital appreciation. Recent moderation in overall house price trends masks a number of developments, in particular the fact that prices at the lower end of the housing market are now rising more rapidly than those at the upper end of the market.

The consultants' recommendations to bring stability to the housing market focus on measures to expedite the supply response to meet rising demand and on certain targeted demand reduction measures to curb speculative and brought forward demand in the short-term. The Government is now proposing a comprehensive package of measures to maximise housing output to meet the continuing strong demand for housing, to curb short-term speculative demand, to strengthen the position of first time purchasers in the market, to increase the supply of social and affordable housing to meet rising housing needs and to improve the institutional arrangements to facilitate the delivery of housing related infrastructure and thereby increase overall housing supply.

The consultants concluded that house price increases since the revision of stamp duty rates in 1998 have resulted in an increase in the burden of stamp duty, making it again a potential barrier to first time buyers entering the existing house market. This is significant because first time buyer housing needs are now being met increasingly from the existing house market. The analysis of the housing market carried out by the consultants suggested that there is a significant element of speculative or transitory demand which hampers efforts to meet fundamental demand with increased supply. The consultants therefore considered it appropriate that measures should be introduced to dampen this element of demand.

They considered changes in stamp duties are one appropriate means to achieve this. The Government endorses these conclusions and has now decided to revise the existing stamp duty structure for second hand residential properties bought by owner-occupiers and for all residential properties bought by investors in order to bene fitowner-occupiers and, in particular, those owner-occupiers who are first time buyers.

The consultants also recommended the introduction of an annual tax of 2% to 3% of the value of properties which are not principal private residences as another measure to deal with demand. In view of evidence of increased speculative demand, the Government has decided to introduce an annual tax of 2% which will apply for three years to certain residential properties other than principal private residences.

Exemptions will be provided in respect of qualifying residential investments under section 23, the town, rural and urban renewal schemes, section 50, which is student accommodation, the proposed living over the shop scheme and rented residential properties under the seaside resorts and the park and ride scheme. Exemptions will also be provided in respect of heritage homes and registered holiday homes. The tax will not apply to inheritance or to gifts of residential property where the property was acquired by the donor before 15 June 2000.

Exemptions will also be available for landlords who comply with the standards and requirements of a proposed new regime for the private rented sector to be determined, following consideration of the forthcoming report of the Commission on the Private Rented Residential Sector. In the meantime, exemptions will be provided for landlords who comply with the registration, rentbooks and standards regulations provided for under the Housing (Miscellaneous Provisions) Act, 1992.

The stamp duty measure is the subject of the financial resolution now being moved. I will be publishing a Finance Bill next week which I hope will be debated here in Dáil Éireann the week after next. The Bill will encompass the changes to the stamp duty regime as well as the anti-speculative annual 2% tax which will apply for three years to certain residential properties other than a principal private residence.

It is important to give assurance to those who are in the process of buying a home that the stamp duty changes are brought in with immediate effect from the time the Government announces its initiatives. On stamp duty, we propose to introduce a three tiered structure which will apply to first time buyers, owner-occupiers other than first time buyers and investors. The exemption threshold for first time buyers is being raised from £60,000 to £150,000 and for other owner-occupiers to £100,000. Rates for first time buyers at values up to £300,000 will now be 25% less than for other owner-occupiers. It is proposed to charge a flat 9% for all categories of investors buying new or second hand residential property.

The rates proposed for owner-occupiers and first time buyers are in line with the recommendations made by the consultants. In the case of investors, the consultants recommended no exemption threshold and rates 25% higher than the standard owner-occupier rate. The Government was very conscious of the continued price increases at the lower end of the market and the importance of ensuring that families on modest resources are not put in a position of being priced out of the market by competition from investors. It is considered that a graduated scale of tax for investors might not sufficiently discourage speculative investment in the lower end of the market to the detriment of owner-occupiers and first time purchasers. Having considered the issues involved, the Government has decided that a rate of 9% should apply to all purchases by investors of new and second hand residential property irrespective of value.

The proposed rates of stamp duty for housing are residential property purchased by first time buyers up to £150,000 will be exempt; for other owner-occupiers properties up to £100,000 will be exempt; owner-occupiers who are not first time buyers will be liable at 3% for properties in excess of £100,000 and up to £150,000; in the case of properties in excess of £150,000 and up to £200,000, first time buyers will be liable at 3% and other owner-occupiers at 4%; in the case of residential properties in excess of £200,000 and up to £250,000, first time buyers will be liable at 3.75% and other owner-occupiers at 5%; in the case of residential properties in excess of £250,000 and up to £300,000, first time buyers will be liable at 4.5% and other owner-occupiers at 6%; in the case of residential properties valued in excess of £300,000 and up to £500,000, first time buyers and other owner-occupiers will all be liable at 7.5% and other residential properties valued in excess of £500,000 are liable at 9%.

Transitional arrangements will apply up to 31 January 2001 similar to those applying when the previous stamp duty changes were made in 1998. This means that pipeline cases will be allowed to avail of existing rates where written contracts were entered into prior to today and provided the conveyance takes place before 31 January 2001.

The total cost of these changes is estimated at £5 million this year and £10 million in a full year with the additional cost of the reductions for first time buyers and owner-occupiers being partially offset by higher rates for investors. I am confident these revised stamp duty rates will help reduce the cost burden faced by low to middle-income home buyers and widen their options. They will provide a particular advantage to first-time buyers who face difficulties in the current market.

Mr. Noonan

The housing market is out of control and has been for some time. Since the Government came into office, house prices have increased enormously, and we have now reached the stage where young couples in what are considered to be good jobs can no longer afford to buy a home of their own. The problem is particularly acute in Dublin, and persons such as nurses, teachers and gardaí are reluctant to work in Dublin because they cannot afford a house and, when they settle down, they are faced with a long commute from midland towns.

This financial resolution arises from the third Bacon report. Since it is the third report and because the previous two Bacon initiatives failed, the Government is on very weak ground. Dr. Bacon's prescriptions failed in the past, and this third attempt to cure the ills of the housing market will also fail. This is not entirely Dr. Bacon's fault. It is principally the fault of the Government and, in particular, the fault of the Minister for the Environment and Local Government who has consistently failed to understand the fundamental analysis of the Bacon reports and take appropriate action.

The national housing crisis has arisen from a mismatch between supply and demand. For a variety of reasons demand is rising and will continue to rise, so the only initiatives which will bring the market into equilibrium are initiatives which will increase the supply of houses. The proposals move in the opposite direction. The Government has now turned full circle in policy terms and its principal proposals will reduce the demand for houses rather than increase the supply.

The principal culprit is the Minister for the Environment and Local Government, Deputy Dempsey. He has failed to implement the Bacon recommendations to increase the supply of houses. He has failed to mobilise his Department and local authorities to ensure there is a sufficient supply of serviced zoned building land. He has failed to reorganise the planning departments in local authorities or reorganise An Bord Pleanála to ensure major delays in planning do not continue to inhibit house building. He has failed to reconcile local authority practice with national policy. The Government is committed to increasing the supply of houses, yet everyone in the House knows, especially those who are local authority members, that every local authority in the country has moved in the opposite direction and will not even consider planning applications for sites where, until recently, people were free to build. The Minister has failed to introduce an adequate public housing programme to meet the long waiting lists in every local authority.

After presiding over a chaotic housing market for three years, the Minister for the Environment and Local Government will shortly face the wrath of the people. In a last throw of the gambler's dice, he has decided to reduce demand for houses rather than to increase supply by chasing investors out of the housing market. Dr. Bacon estimates that the supply of houses is about 10,000 units per annum short of demand. The Government's proposal to impose stamp duty at 9% on all newly acquired rental residential accommodation, together with the proposal of an annual property tax at 2% on such accommodation, will chase investors out of the market. This will lead to a temporary increase in the supply of houses for purchase by owner-occupiers.

However, as it always does, the market will quickly adjust. The building industry will find a new equilibrium and the number of houses being built will drop significantly. Cash demand will be reduced, but the real demand based on the need for houses, which, according to Dr. Bacon, is about 55,000 units per annum, will not be reduced. In the medium-term, we will reap the whirlwind of this misguided policy as the number of houses being built will reduce significantly from the current 45,000. The gap between supply and real demand will widen as a result of these proposals and, in the medium-term, because of the widening of that gap, prices will be driven up. Today's misguided initiatives will make a bad situation worse.

These penal taxes will also ensure that no new rental accommodation will become available in the foreseeable future. The supply of rental accommodation will remain static, demand will continue to rise and rents will jump. The rental market in Dublin is already chaotic. I would hate to be a returning emigrant, a student or a person on a local authority housing list looking for rented accommodation in Dublin next autumn.

The Government should learn from its mistakes. When it implemented the previous Bacon recommendations to abolish tax relief on interest on mortgages on rental accommodation, two things happened. The investors temporarily moved out of the market, and for six months it was extremely difficult to get any rental accommodation in Dublin. Then rents jumped and the investors came back in. The policy had no impact on the price of houses; it just made rental accommodation extremely expensive. Arising from this experience, what does the Government expect will happen in the rental market when these penal taxes drive out every investor? The new property tax will, according to the Government, apply for at least three years. Where will young single people and students live? Where will the young emigrants live who are being induced by the Government to return to Ireland? There is no consistency in Government policy, and the very initiatives it has taken to increase the supply of labour are now being negatived by the asinine policy being pursued for the rental sector. It is also worth noting that Dr. Bacon proposed that the stamp duty on rental accommodation would be imposed at 3.75%. Some genius in Government has decided that, if the initiative is effective at 3.75%, it will be brilliant at 9%, especially when a 2% annual property tax is added. Has anyone around the Cabinet table any idea of how the housing market works and how it is a seamless market between the owner-occupied side and the rental side?

Fine Gael welcomes the reduction in stamp duty for first-time buyers of second hand homes. The Minister must feel somewhat embarrassed in proposing this measure. When Fine Gael proposed a similar measure on a number of occasions in 1998, he argued strongly against it and, when it was put to a vote, the combined forces of the Progressive Democrats and Fianna Fáil voted against the proposal. The record of the House will show that the Minister for Finance believes reductions in stamp duty along the lines of his proposal will lead to an increase in house prices as the savings in stamp duty will enable the purchaser to pay more. These are the Minister's arguments and they are on the record of the House. We had at least three debates on it. The Minister does not believe in what he is doing.

The Government has failed to resolve the housing crisis. Its tampering in the market has exacerbated the problem, yet it continues to meddle while refusing to take the measures which would increase the supply of houses. This is a disastrous Government whose failures over three years were hidden by the booming economy but which is now being exposed in all its nakedness clutching a handful of threadbare, moth-eaten and failed initiatives.

Mr. McDowell

I move amendment No. 1:

In page 5, subsection (3)(a) of the proposed new section 92B, to delete “£150,000” where it firstly occurs and substitute “£200,000”.

That this debate is happening at this time and in these circumstances is little short of a disgrace. I was contacted yesterday evening and told the Government wanted to take these resolutions this morning. I was given the resolutions in confidence by the official who contacted me and that is fair enough. I asked for a copy of the report and was told I could not have it because it did not belong to the Department of Finance but to the Department of the Environment and Local Government. An approach seeking the report was made to that Department and was refused. The position which Deputy Noonan and myself are in is that we received a copy of the report one hour ago and were obliged to analyse and debate it in that short period, something which cannot be done properly. It is all the more outrageous when Dr. Bacon has been briefing journalists since 9 o'clock this morning. It is normal for the Opposition to complain about the Government treating the Dáil with contempt, but this takes the biscuit.

Beyond the contempt and discourtesy is a genuine and disturbing reality. The Government has effectively abdicated all responsibility for housing policy to Dr. Peter Bacon and his associates. I do not blame Dr. Bacon for that. It is a good and, no doubt, well paid job or well paid work if one can get it but I blame the Minister and, in particular, the Minister for the Environment and Local Government.

Dr. Bacon has served the Government well. His reports have prodded the Minister into doing some things which were certainly positive or would have been positive if they had been done properly and on time. More than that, the Minister has used Dr. Bacon's report as a shield to hide the fact that the Government is completely devoid of policy. Worse than that, the Minister has used Dr. Bacon's reports to fend off any policy proposals which had not received the imprimatur of Dr. Bacon. All the proposals before us fall into that category.

Two years ago I proposed that first time buyers should not have to pay stamp duty irrespective of the type of house they were buying. The logic was and is very simple. The traditional exemption from stamp duty for new houses only was intended first and foremost as a stimulus to the construction industry. It was intended to encourage first time buyers to buy new rather than second hand houses thereby creating greater demand for new houses, greater employment opportunities and so on. It has, however, been clear for quite some time that the construction industry does not need any stimulus of this kind – quite the contrary. There is a serious surplus of demand which the industry has been unable to meet. Equally, it has been clear for quite some time that first time buyers are the people who have suffered most in the current crisis.

My constituency illustrates this problem better than most. I represent what I suppose would be called a settled part of Dublin. It includes some old corporation estates in places like Donnycarney and Artane, a fierce wave of houses built on institutional land in the 1970s and, I suppose, the fairly affluent area of Clontarf. The bald fact is that it is no longer possible for any young person on average earnings growing up in my constituency to buy a house in the area in which he or she was brought up. It is scarcely possible for any young person or young couple in my constituency to buy a house in the constituency. Marino, for example, is a very desirable place to live but it is no longer possible to get a house there for less than £200,000 and when that happens, it is time to say loudly and clearly that this cannot be allowed to continue.

It goes without saying that the local authority schemes, such as the shared ownership scheme, are effectively inoperative because the maximum threshold would not permit the purchase of any house in the constituency. If our policy aim is to help first time buyers rather than the construction industry, then it makes no sense to impose stamp duty on the purchase of second hand houses by first time buyers. As I said earlier, I first proposed this when we debated the Finance No. 2 Bill two years ago. I proposed it again on the Finance Bill, 1999, and as recently as a few months ago when we debated the Finance Bill, 2000. On each of those occasions I failed to elicit a half decent response from the Minister. In so far as he said anything about it, he appeared to be opposed to the proposal. Needless to say, I am happy the Minister has come around to that view now but I find it truly amazing that he had to wait for a prompt from Dr. Bacon to do so.

The Labour Party will support these measures because we agree with the measures in themselves. We do not believe they constitute an adequate or complete response to the housing crisis – far from it. It is important to recognise the limitations of what we are doing this afternoon. In essence, this resolution is an admission of defeat. In proposing it, the Government is acknowledging that there are not enough houses to go around and that there are insufficient houses to meet the existing demand.

What we are doing this afternoon is seeking to confer a comparative advantage on first time buyers. It is unfortunate, to say the least, that in order to do that in current circumstances we have to take measures which may well have the effect of discouraging investment in the private rental sector. The Government proposes a 9% rate of stamp duty on all investment property where the contract is signed after today. I support that measure but without any real enthusiasm.

The country, let us be clear, needs a vibrant private rental sector. We all accept there is an insufficient number of units available for rent. The standard of some of the accommodation which is available is utterly unacceptable at the start of the 21st century. Many landlords are charging high rents and providing substandard accommodation and they still seem to believe they are entitled to raise their rent or eject their tenants at little or no notice. Our legislation, as my colleague, Deputy Gilmore, said yesterday, is in urgent need of reform. The existing regulations must be enforced and we have to bring more units on stream.

There is little doubt but that the 9% rate will discourage investors. It will hit people who are seeking to buy second homes or holiday homes and people who want to make a quick buck, and perhaps there is no harm in that. However, it will also hit people who are in the long-term business of letting property. This is, to say the least, unfortunate but it is an inevitable consequence of what we are doing today. Had the Government acted sooner and intervened earlier to ensure an adequate supply of houses, we would not have to make this choice. However, we are faced with the choice and make it we must. If we are serious about helping first time buyers – we, in the Labour Party, are – in the context of limited supply, we must also take action to discourage investors.

It is important to state that this position is not sustainable in the long-term and perhaps not even in the medium term. We need to look at this as a short-term skewing of demand borne out of crisis circumstances rather than something that is desirable in itself.

The Government proposal provides that second-hand houses should be exempt from stamp duty for first time buyers up to a limit of £150,000. The sad reality is that there are many first time buyers who will be obliged to spend more than £150,000 on their first house, whether second-hand or new. The amendment in my name proposes that we should extend that exemption from £150,000 to £200,000. I mentioned earlier the former corporation estate of Marino. One cannot get a house for under £200,000 in that estate. Any first time buyers seeking to buy into that estate are required, unfortunately, to pay more than the £150,000 which is provided for in the resolution. Unfortunately, the £150,000 is not enough. There would be a stimulus in increasing it beyond £150,000 and it is something we have to do if we are willing to grasp the nettle of assisting first time buyers, and that is the purpose of the amendment in my name.

I also tabled an amendment which provides that in the event the Government does not accept that, it might apply the new rates of stamp duty for first time buyers of second-hand houses only on the excess amount in excess of £150,000 so that somebody buying a house for £200,000, for example, would pay stamp duty at 3% on the £50,000 excess rather than on the full £200,000. The thrust of both amendments is an attempt to further assist first time buyers of second-hand houses.

The resolution before us also reduces the rates and changes the thresholds for people trading up. This is a logical and reasonable thing to do but I do not seriously believe it will have a significant effect on the market. I have argued for some time that we should index link the rates and, in particular, thresholds. It would make more sense to index it to the rate of increase in house price inflation. We should not look at stamp duty as simply a cash cow for Government and it is fair and reasonable that it should be index linked as the price of houses increases. Effectively, what Dr. Bacon suggested and what the Government is doing today does precisely that.

The measures before us this morning are only one side of the equation. The House debated a comprehensive Labour Party motion earlier this week which set out our approach, most particularly, on the supply side. I do not have the opportunity now to go into these issues but I will do so during the debate on the Finance Bill the week after next. We will support these measures today. They should have been taken years ago and would have been more effective if they had been. Make no mistake about this, taken in isolation, these measures will not work. They must be accompanied by measures to counter speculation and profiteering and, so far, this Government has been very slow to do that.

The Government has failed the very many young people who hold the simple ambition to own their own house and who cannot now realise that ambition. I have little faith the Government will get this right in the dying days of the Administration but, in so far as these specific stamp duty measures are concerned, we will do the right thing and support them.

Acting Chairman (Mr. Kirk)

Each speaker has a maximum of five minutes and Members may share time.

Mr. B. Lenihan

I welcome the Government's decision to recommission Dr. Bacon to examine this question and the resolution that is before us, the detail of which will have to be fleshed out in legislative form in the Finance Bill. I appeal to the Minister to re-examine the issue raised by Deputy McDowell of having some form of taper ing stamp duty relief for those who purchase houses in excess of £150,000. To my knowledge in the greater Dublin area, and no doubt in other areas, the firsttime buyer's house costs in excess of that figure.

Since my election, I have advocated that an exemption for the first – time buyer should be built into the stamp duty code. I welcome the fact that the Government has taken that decision and will implement that basic principle as a cornerstone of stamp duty legislation.

We can debate our responsibilities on this matter on all sides of the House but when we are discussing the wider question of how we tackle the problem of over-priced housing and the shortage of supply, we cannot evade them at local and national level. I listened to Deputy McDowell castigate this Government. Will the Labour Party intervene with their representatives at local level and instruct them to stop blocking developments and pandering to local interests where vital development must take place?

Supply and demand of serviced land enters the equation. I welcome the fact that the Minister has decided to introduce another measure I have advocated for some time, namely some form of unused site value tax on developers who do not develop lands designated for housing development. That is the most significant feature of what was announced this morning. The power of the Minister for the Environment and Local Government to designate strategic development zones for housing will be exercised under the new planning legislation and a levy on non-development of land within those strategic development zones will be introduced. Clearly that is moving the whole focus of planning for housing away from local authorities and towards central direction. That has had to happen because of misguided policies in certain local authorities regarding the development of land and the inability to strategically plan for development in the greater Dublin area. It is a significant decision that was announced a few moments ago.

I welcome the revised stamp duty regime. I notice there is an element of transitional relief for those who have already entered into accrued transactions and that is dated from today. Clearly the contract must have been signed by yesterday and the transfer must be executed by the end of the year. I would like to see that clarified in legislative form. No doubt when the Finance Bill comes before the House we will have an opportunity to examine that aspect because individuals will have entered into commitments prior to the enactment of this measure and they may be prejudiced by it. Their position should be safeguarded. A fair point can be made on the cost of new housing that some form of tapering relief could be introduced above £150,000.

Mr. Deenihan

I welcome the proposed stamp duty changes introduced by the Minister for Finance. Like Deputy Noonan I hope they will not be added on to the price of a house as happened in the past when similar changes were made. We must be wary of that. I am disappointed we received the document from the Department of the Environment and Local Government late in the day and did not have much time to analyse it. However, the measures do not address the issue of supply as mentioned by previous speakers. The Minister will agree that the problem is that there are insufficient new houses to ensure a viable and competitive market. There is not enough developed land. For example, in Dublin 7,000 acres of land are zoned for housing and other purposes. That includes industrial land. Some 2,500 acres of serviced land is available for house building. When you take that in the context of the demand that exists we have a major problem. These proposals and the efforts made by the Minister in the past will not be sufficient to meet that.

Unless area action plans are in place, those who apply for planning are told their applications are premature. They are put on ice until such time as there are action plans. The planning department does not have the necessary staffing to draw up these plans. That is a major difficulty.

I welcome the announcement of 1,000 extra local authority houses per year. Last year we built 3,000 local authority houses. In the mid-eighties the Government was providing more than 5,000 houses. There is a commitment in the national development plan for 5,500 houses per year over the next six years and now we have this additional commitment. When one considers that there are 40,000 people on local authority waiting lists it would take seven years to clear that list. I understand about 10% of these people, 4,000 applicants, have an average wage. They will not be able to buy or build a private sector house as they will not get the required mortgage. There is not any provision in these measures for affordable housing that would help such people. We are not taking into consideration the number of those who will be on the local authority housing applicants' list over the next five years. That will be probably 50,000 people, especially with the prevalence of single parent families and so on. They will find it very difficult to buy their own houses.

Private public partnerships were not mentioned in the document "Action on Housing" that we received from the Department. Under a PPP, Fingal County Council built 800 houses. Six hundred of them went to local authority tenants and 200 to the private sector. This could be replicated throughout the country. Eight hundred houses were provided rapidly. Will the Minister clarify the situation regarding properties costing between £150,000 and £200,000? If people pay more than £150,000 they will pay the full 3% stamp duty on the total price of the house so there is a need for a tapering measure to change this provision.

The Bacon recommendations are very much geared towards the Dublin market and, perhaps, to centres such as Galway and Cork. There is a different type of problem in rural Ireland. The restrictions being imposed on investments should not apply to areas outside Dublin as the Bacon recommendations generally do not apply to many parts of the country. The Minister is aware there are different problems in these areas concerning the provision of services and other issues which restrict the market. However, we will have more time to dwell on these issues later.

Mr. P. Carey

I wish the share time with Deputy Roche.

Acting Chairman

Is that agreed? Agreed. I ask Deputies to be aware we are restricted on time.

Mr. P. Carey

I will comment on this and other measures the Government proposes to take in the area of housing. There is no doubt we have been trying to deal with housing and I would be the first to admit I am primarily concerned with how it impacts on the Dublin area. There has been a logjam, a fair amount of rezoned land but not enough serviced land. I am glad these initiatives will fast-track that process.

I welcome the idea of strategic development zones which will have an impact, provided local authorities get rid of some of the inertia with which they are burdened. At the risk of boring Deputies, Dublin Corporation designated two sites for affordable housing three years ago but not a sod has been turned. That is an unacceptable situation when people are looking to buy houses.

I welcome the measure concerning stamp duty which I have sought for a long time. This measure will have an impact on people in constituencies such as mine. There are parts of that constituency in which this measure will not have a significant impact but it will allow couples or individuals to buy a modest second-hand house as their first home. That is to be encouraged.

I also welcome the fact that the Department of the Environment and Local Government is increasing the income eligibility limit for shared ownership schemes from £20,000 to £25,000. I have been seeking such a change for a long time. Two constituents of mine, one of whom is a junior university lecturer whose wife works in administration, will be able to buy a second-hand home in the area of their choice in my constituency and I welcome that fact.

I also welcome the additional 1,000 houses. Some schemes are taking effect. In one such scheme on the fringe of my constituency, Fingal County Council and a private developer have come to an agreement whereby the 20% social housing initiative will begin immediately, resulting in a significant number of social housing units. I welcome these measures which will have a significant impact on house buyers.

Mr. Roche

I compliment the Minister and all concerned with this report. There are two worth while aspects to the report as it includes recommendations and policy responses which go further than many people would have predicted some months ago. I welcome the changes to stamp duty for first time buyers but a tapering rate should apply beyond £150,000 as, certainly in my constituency, few second-hand properties sell for less than that figure.

I will comment on the demand side measures in general. In addition to the specifics on stamp duty I particularly welcome the anti-speculation measures. It is astonishing that it has recently become obvious in the greater Dublin area that people are buying multiple houses because they realise there is a significant capital investment to be made. The anti-speculation tax measures may be transitory but they are welcome.

I also welcome the extension of income limits for shared ownership schemes but question whether £25,000 is a level which will allow one to buy a house in the greater Dublin area. However, in conjunction with measures on affordable housing and the 1,000 additional housing starts, this initiative is a welcome development.

As regards the strategic development zones, I agree there has been a problem, there is a logjam and rezoned land has not been coming on stream. The variety of measures being introduced, together with capital injections, will greatly help to speed up the market. I compliment the Minister. There are difficulties but when considering the legislation I would ask him to examine the tapering measures I suggested.

Mr. Hayes

The Government was wrong to re-appoint Dr. Bacon to examine the housing market given that his recommendations were part of the first and second Bacon reports. The process undertaken by the Department of the Environment and Local Government which awarded the contract to Dr. Bacon was flawed. There was not a tendering process and that is in conflict with the public procurement document submitted by the Department of Finance to other Departments. No other economic consultant was asked to tender for this work and I want to know why. Given that the first two Bacon reports have not solved the crisis it seems ludicrous to ask the same person to again consider the changes which have occurred over the past two years.

I am glad the Government has performed a somersault and accepted Fine Gael's position that stamp duty should not apply to first time buyers buying second-hand houses. However, the resolution's niggardly proposal of a maximum of £150,000 will do little for first time buyers. Once the price is more than £150,000 the full stamp duty will apply to first time buyers. If anything, this measure will further increase prices in the Dublin market where very few houses sell for £150,000 or less. The vast majority of houses, particularly second-hand houses, sell for much higher than £150,000 and there is no evidence that this measure will result in a reduction or stabilisation in house prices.

This morning an auctioneer told a first time buyer who wishes to buy a second-hand house to bid an additional £5,000 as a result of the changes to be implemented. As a result of bidding, this will mean the price of the house will rise by £5,000 or more. Where are we going?

Will the additional 2% tax charges on investors in the private rented sector apply to existing dwellings or will it be a new charge? Less that 10% of landlords are registered with local authorities and the Minister hopes to induce them by exempting them from this 2% charge. However, he has not had much success to date, nor has the Department of the Environment and Local Government. Less than 10% of landlords are registered with local authorities and they are flouting the law passed by this House. This law is not being applied because the vast majority of people are in the black economy.

Deputy Noonan rightly stated that tax changes concerning investors will further squeeze the market and tenants will have to pick up the 2% charge and the 9% stamp duty. These charges will be passed on to tenants so the measure will not make a material difference.

There is ample evidence to prove that the Minister for the Environment and Local Government, Deputy Dempsey, and his colleague, the Minister of State, Deputy Molloy, should consider their positions. They have been in charge of this matter for the past three years during which time the position has deteriorated. House prices and rents have doubled and there are now 120,000 people on the local authority housing list. As Deputy Carey said, this is about the Government taking responsibility. We have witnessed a deterioration in the housing market, particularly in Dublin. Density proposals and the serviced land initiative have not been enforced, yet the Minister and the Minister of State with responsibility for housing blame everyone but themselves. They say it is the responsibility of the local authorities and the regional authorities. The buck must stop here. Ultimately, the Government should take responsibility for this matter.

The proposals contained in this resolution will do nothing to assist first time buyers. This is not a systematic comprehensive package of measures to provide for first time buyers. If anything, it will further bid up prices. As many commentators have said, this crisis in the housing market is the real Achilles heel of the Government and, ultimately, it will bring down the Government.

Acting Chairman

I call Deputy Ó Caoláin. I expect the Minister will need some time to reply to the debate.

Caoimhghín Ó Caoláin

I hope the Acting Chairman is not using up some of my very limited time. I wish to share my time with Deputy Sargent.

Acting Chairman

That is agreeable once the sharing arrangement does not exceed five minutes.

Caoimhghín Ó Caoláin

That is understood.

Speaking in this House last night, the Minister of State with responsibility for housing, Deputy Molloy, poured scorn on the idea that we need control and regulation in housing. Deputy Lenihan told us the market will provide that. Yet today we are presented with measures that completely contradict those assertions. By presenting them, the Government acknowledges that it must control and regulate the housing market.

I welcome the measure on stamp duty, as far as it goes. I also welcome the tax, limited though it is, on investors buying residential properties for non-owner occupation. To present these measures as the solution to the housing crisis is a travesty. It has taken three years for the Government to come up with these proposals. Quite simply, it is too little too late.

Last night the Minister of State, Deputy Molloy, told us there have been moderating house price trends since house price inflation peaked in 1998. Yet we know the reality is that house prices have risen by more than 70% since the Government took office. The gross inequality in our society is seen as multi-millionaires compete at the top end of the market for so-called prestige properties while people on average incomes are crippled with huge mortgages, cannot afford a mortgage or, if they qualify, join the ever growing local authority waiting list.

Those on low incomes are in dire housing need. There is little or nothing for them in these measures. Local authorities should lead the attack on the housing crisis. It must be taken on board in a straightforward manner that the provision of an extra 1,000 local authority housing units for the next six years is simply not enough.

Mr. Sargent

Ba mhaith liom buíochas a ghabháil leis an Teachta O Caoláin as ucht a chuid ama a roinnt liom. Although the Minister claims this measure will help owner occupiers, it is not significant, but I would like to be proven wrong because the housing crisis is extremely serious.

The Green Party proposed the taxing of second homes some years ago when it published a housing policy; it is disappointing it has taken so long to bring this about. The links between Fianna Fáil and the developers about which we have heard in the media may explain why such a policy has been introduced very reluctantly.

We have yet to see a proper windfall tax on land zoned for residential development, which will also be critical to tackling this issue. The Planning Institute tell us there is plenty of rezoned land if it could be used. If these measures were introduced, they would hit the benefactors of the two largest parties in their fundraising drives, but I hope that will not prevent their introduction.

If a 2% tax were imposed on second homes for three years, how would that prevent landlords increasing rents to offset the cost of the tax? The rental sector would suffer from such a measure. How will the proposed reduction in stamp duty prevent the price of houses remaining as high as the forces of supply and demand dictate?

We had a debate in this House on ticket touts and cracking down on their modus operandi, as they pitched their price at whatever they could get. If a ticket tout's modus operandi is so offensive, why is profiteering in housing not all the more offensive?

We often hear that the protection afforded to property owners under the Constitution prevents us from doing much about this. If the Constitution prevents us from introducing measures to serve the common good, will the Minister propose a referendum on the matter so we can deal with the housing crisis in a comprehensive way?

It is vital that essential services are provided in a co-ordinated manner for the homeless. The demand for such services increased by 40% last year. As well as local authority and social housing, student accommodation is also needed. It should be provided by the State. Other countries have plenty of student accommodation provided by the State, yet we are reluctant to do so.

Rent controls will have to be introduced. The position in the rental sector would put to shame the worst practices of rack-renting and absentee landlords in pre-Famine Ireland. The position is as bad today for many tenants in that sector.

Minister for Finance (Mr. McCreevy)

It will not be possible to deal with all the issues raised by the Deputies in the few minutes I have to contribute, but a Finance Bill dealing with the stamp duty regulations and the other matter to which I referred will be introduced, at which time this whole issue can be debated further.

Deputy Noonan stated that the Government had not addressed the supply side. The Bacon report makes it clear that the rates of increase incurred in the past two years have been equal to or greater in magnitude than the predictions made two years ago on the level of supply that would be required to achieve stability in the housing market. The level of completions is the highest recorded in one year.

The Deputy also raised the effect of the anti-speculative tax on rental accommodation, and Deputy Sargent also referred to that matter. Deputies will note from my speech and the response from the Department of the Environment and Local Government that if a person becomes a registered landlord and complies with the new rules and regulations, the 2% anti-speculative tax will not apply. That will be covered in more detail in the forthcoming Finance Bill.

Deputy Noonan also referred to student accommodation. A special relief for the provision of rented accommodation for students was introduced in the Finance Act, 1999. This has already resulted in the provision of up to date and specially designed accommodation and more such projects will come on stream in the next 12 months. Student accommodation is also exempt from the 2% anti-speculative tax. We can debate that further during the forthcoming Finance Bill.

Deputies McDowell, Brian Lenihan, Deenihan and Roche referred to the stamp duty regulations. Deputy McDowell suggested that if his amendment providing for a £200,000 provision was not accepted, the 3% rate should apply only to the balance between £150,000 and £200,000 and not to the entire consideration. More or less the same point was made by some of the other Deputies, that the rate should apply to a step provision, so to speak, and then to the level above that. The whole structure of stamp duty is based on a slap system rather than a step system. Once the threshold is exceeded, the rates apply to the entire consideration. This has always been the case with stamp duty. Any change to apply a rate to an excess amount only would require a complete restructuring of the stamp duty system. If such a step system were in place, I could envisage rates of 45% or 50% being introduced to collect the same amount of revenue. That is the reason such a step system has not been introduced in the various changes that have been made in the area of stamp duty.

The Bacon report refers to the question of supply and it makes recommendations regarding stamp duty. I do not want to advise Deputy Hayes about debating points, but the debating point he made on foot of a conversation he had with an auctioneer this morning contradicts the point he made about making a change to the stamp duty regime, in that, the auctioneer pointed out that such increases would be passed on and would simply bid up the supply. If the Deputy read my contribution on this matter over a period, he would see I made similar points, but Dr. Bacon recommends these changes. The Deputy should not make points which contradict what he said. I give that friendly word of advice.

Acting Chairman

As 60 minutes have elapsed I must bring the proceedings to a conclusion in accordance with the Order of the House today.

Question, "That the figure proposed to be deleted stand", put and declared carried.

Amendment declared lost.

Amendment No. 2 not moved.

Mr. McDowell

I intend to resubmit those amendments on the Finance Bill.

Acting Chairman

There will be an opportunity to do so at that stage.

Mr. McDowell

I move amendment No. 3:

In page 5, subsection (3) (b) of the proposed new section 92B, to delete “£150,000” where it firstly occurs and substitute “£200,000”.

Question, "That the figure proposed to be deleted stand", put and declared carried.

Amendment declared lost.

Amendment No. 4 not moved.

Question put: "That the Financial Resolution be agreed to."

Tá

Ahern, Dermot.Ahern, Michael.Ahern, Noel.Ardagh, Seán.Aylward, Liam.Blaney, Harry.Brady, Johnny.Brady, Martin.Brennan, Matt.Brennan, Séamus.Briscoe, Ben.Broughan, Thomas.Browne, John (Wexford).Callely, Ivor.Carey, Pat.Collins, Michael.Cooper-Flynn, Beverley.Coughlan, Mary.Cowen, Brian.Cullen, Martin.de Valera, Síle.Dennehy, John.Doherty, Seán.Ellis, John.Fahey, Frank.Fleming, Seán.Flood, Chris.Fox, Mildred.

Gildea, Thomas.Gilmore, Éamon.Hanafin, Mary.Harney, Mary.Haughey, Seán.Healy-Rae, Jackie.Higgins, Michael.Jacob, Joe.Keaveney, Cecilia.Kelleher, Billy.Kenneally, Brendan.Killeen, Tony.Kirk, Séamus.Kitt, Michael.Lenihan, Brian.Lenihan, Conor.McCreevy, Charlie.McDaid, James.McDowell, Derek.McGennis, Marian.McGuinness, John.McManus, Liz.Moffatt, Thomas.Molloy, Robert.Moloney, John.Moynihan, Donal.Moynihan, Michael. Moynihan-Cronin, Breeda.

Tá–continued

Ó Caoláin, Caoimhghín.Ó Cuív, Éamon.O'Dea, Willie.O'Donoghue, John.O'Flynn, Noel.O'Hanlon, Rory.O'Keeffe, Batt.O'Malley, Desmond.O'Rourke, Mary.O'Sullivan, Jan.Penrose, William.

Quinn, Ruairí.Roche, Dick.Ryan, Seán.Smith, Brendan.Smith, Michael.Wade, Eddie.Wall, Jack.Wallace, Dan.Wallace, Mary.Walsh, Joe.Woods, Michael.

Níl

Barnes, Monica.Barrett, Seán.Browne, John (Carlow-Kilkenny).Bruton, John.Bruton, Richard.Burke, Ulick.Carey, Donal.Coveney, Simon.Crawford, Seymour.Deasy, Austin.Deenihan, Jimmy.Dukes, Alan.Durkan, Bernard.Enright, Thomas.Farrelly, John.Finucane, Michael.Gormley, John.Hayes, Brian.Higgins, Jim.Kenny, Enda.

Lowry, Michael.McGahon, Brendan.McGinley, Dinny.McGrath, Paul.Mitchell, Gay.Mitchell, Olivia.Naughten, Denis.Neville, Dan.Noonan, Michael.O'Keeffe, Jim.Owen, Nora.Perry, John.Reynolds, Gerard.Ring, Michael.Sargent, Trevor.Shatter, Alan.Sheehan, Patrick.Stanton, David.Timmins, Billy.Yates, Ivan.

Tellers: Tá, Deputies S. Brennan and Callely; Níl, Deputies Barrett and Sheehan.

Question declared carried.

Dáil Éireann díospóireacht - Thursday, 15 Jun 2000