I announced in the Budget that the amount of interest that may be deducted by landlords in respect of loans used to purchase, improve or repair a residential property will be restored to 100% from 1 January 2019 at an estimated cost of €10 million in the first year and €18 million in a full year.
It is not a new initiative but rather an acceleration of the rate of the restoration of the full value of this relief which was already scheduled to increase to 100% by 2021.
In 2009, the interest deduction for landlords of residential property was restricted in the context of the financial crisis.
In 2018, it is my view that it is timely, given the demand for housing across all sectors, to lift this restriction on the private residential landlords who are an essential feature of a functioning housing market.
Interest payments are generally considered to be legitimate business expenses and by restoring this relief to 100% deductibility on interest payments, it is hoped that the change will discourage private landlords from exiting the rental market as house prices increase.
Further, it has been argued that the existence of a restriction on the profit-making capacity of a business incentivises them to increase income streams - for landlords, this means increasing rent. I am taking action now to remove at least one incentive to increase rents that is within my direct control, at a relatively modest cost of €10 million in 2019 in the interests of all parties in the rented residential market.
Regarding direct investment in public housing, the Government is allocating Exchequer funding of €2.3 billion to housing in Budget 2019. This investment will see the housing needs of almost 27,400 households being met in 2019. An additional 17,600 units will be provided through the Housing Assistance Payment (HAP) and the Rental Accommodation Scheme (RAS).
Beyond 2019, each year will see the housing needs of more households met through build programmes (over 7,000 units in 2020 and almost 9,000 in 2021) and less through the HAP, with published targets decreasing from a peak of 17,000 new units this year to 10,000 in 2021.
This changing mix of social housing support out to 2021 reflects the increase in direct build social housing as the construction sector continues to recover, while also allowing the State to accelerate the delivery of social housing in the short term and grow the long-term social housing stock in a sustainable manner.