Dáil Éireann Debate, Thursday - 4 April 2019
64. Deputy Mattie McGrath asked the Minister for Finance if his attention has been drawn to the recent report of the UN special rapporteur (details supplied) on the right to adequate housing and the financialisation of housing through preferential tax laws; and if he will make a statement on the matter. [15771/19]
Amharc ar fhreagraI am aware of the recent report concerning the Irish housing market by the UN special rapporteur on the right to adequate housing.
The Irish Government recognises the International Covenant on Economic, Social and Cultural Rights to which the Ireland has been a party since 8 December 1989. Article 11.1 of this Covenant recognises the right of everyone to an adequate standard of living for himself and his family, including adequate food, clothing and housing, and to the continuous improvement of living conditions.
Given the important implications which developments in the property market can have for the economy, my Department actively monitors developments in this sector on an ongoing basis, and published a paper on Institutional Investment in the Housing Market in February this year. The paper is based on CSO data up to 2017, the latest year available.
While there may be a perception that institutional investors are purchasing large amounts of housing stock, the data show that their activity has been limited in the context of the overall housing market. In 2017 — the latest year for which we have data – firms in this category were net purchasers of just 1 per cent of residential sales, or just over 500 units. Furthermore, from 2010 to 2017, net purchases by Real Estate Investment Trusts (REITs), real estate funds and private equity firms were less than 0.01 per cent of available units, or just 380 units.
On a national level, institutional investors remain a small minority of landlords. However, such investors do play an increasingly important role in the private rented sector.
Institutional investment in apartments is likely to be the driving force behind a significant recent increase in the number of apartment units granted planning permission in Dublin. In the first nine months of 2018, 57 per cent of units that were granted planning permission in Dublin were apartments, or just over 4,000 units. As a comparison, in the three year period between 2015 and 2017 the same amount were completed nationally.
Increased apartment building is a very positive development, both in terms of boosting overall supply and in relation to the National Planning Framework, which specifically targets more compact growth.
Recognising the importance of investment in the property sector, tax rules have been introduced to facilitate collective investment and to ensure that tax is imposed on funds deriving value from Irish property. For example, the function of the Real Estate Investment Trusts (REIT) framework is not to provide an overall tax exemption but rather to facilitate collective investment in rental property by removing a double layer of taxation which would otherwise apply on property investment via a corporate vehicle. REITs are required to distribute 85% of their property profits each year and Dividend Withholding Tax is collected on the distributions. In Finance Act 2016, Irish Real Estate Fund (IREF) provisions were introduced for certain investment funds deriving 25% or more of their value from Irish real estate assets, imposing a Dividend Withholding Tax on distributions to non-resident investors.
However, as Rebuilding Ireland makes clear, such investment can only be one aspect of a multi-pronged response to addressing current issues in the market. This is why the Government has provided record funding for social and affordable housing, to improve housing infrastructure and to address homelessness. Such funding has been accompanied by a range of regulatory and policy changes that facilitate increased supply of both owner occupier and rental housing, and policy measures to help contain rental price inflation such as Rent Pressure Zones.
