A VACANT PROPERTY tax for investment fund landlords who own a large number of apartments that are lying empty is under “serious” consideration, it is understood.
Finance Minister Paschal Donohoe has been asked to consider whether a multiple of the Local Property Tax for apartments that are left vacant could be used to deter institutional landlords from leaving properties lying idle, senior sources confirmed.
Tánaiste Leo Varadkar confirmed that the Government may re-examine a vacant home tax and may increase the new stamp duty on bulk purchases if it does not prove effective.
In a letter to members of the Fine Gael parliamentary party, Varadkar said the government could “look again a vacant home tax and examine long-term lease arrangements where the asset does not revert to state or occupant at the end of the lease”.
The Business Post recently reported that hundreds of top-end apartments in Dublin are lying empty despite a chronic shortage of rental stock.
It found that a detailed analysis of the Residential Tenancies Board’s register shows that a number of recently developed apartment schemes – charging between €2,000 and €10,000 a month – have a large number of vacancies.
The newspaper also revealed that 100 of the 190 apartments in the 22-storey Capital Dock near Grand Canal are vacant.
It is understood that government is assessing if triple or quadruple levels of the Local Property Tax should kick in for apartments that have been vacant for more than six months.
Landlords would have to self declare their vacancies, it is believed. The aim is to bring the properties back into use, while possibly encouraging landlords to lower the rent asked for the apartments if they cannot get tenants for the price asked.
However, there are concerns from some that the system might be difficult to administer, with questions being asked about how properties that are left empty could be identified.
There would also be a number of exceptions, as some within government are wary of such a tax hitting property owners who might have their home vacant if they are abroad, or own holiday homes or other examples whereby the measure could hit non-investment fund property owners.
Concerns were also cited that funds could get around the measure through short-term let rules; however, the housing minister has recently stated that he plans to move on the regulation of short-term letting platforms.
Under plans announced yesterday, the purchase of more than ten residential houses by a buyer will see them face an increased stamp duty of 10%.
This higher charge, as well as applying to bulk purchases, will also apply to a situation where a person acquires 10 or more units on a cumulative basis over a 12-month period
Once triggered, the 10% rate will apply to all houses acquired in that 12 month period, including the first nine purchases.
However, the government has been criticised in many quarters for not applying the new measures to apartments.
An investment fund will be allowed to buy up to nine houses over a 12-month period without being hit with the higher rate.
While there are concerns being voiced about the ability for people to get the opportunity to buy an apartment to live in, there are also concerns that the new measures give the green light to investors to plough on and buy up apartment blocks.
Senior government sources state that it is understandable the concern being conveyed that apartments in cities shouldn’t only be for funds and renters that can afford the high rents.
They said that it is the only way apartments will get built, in their view, adding that there could be another solution in requiring some percentage of apartment blocks being set aside for owner-occupiers also.
While they said Tuesday’s announcement will not be the last policy intervention by the government on housing, a vacancy tax is definitely “in the mix”.
Indecon consultants – the same group that found that there was no need for a community banking system in Ireland given the variety in the Irish banking market – was also tasked by the Department of Finance in 2018 to conduct an examination of introducing a vacancy tax and the impact it might have in increasing the available housing stock on the market.
The report found that a vacant property tax would not be recommended at the time, however, it said a major programme of compulsory purchase orders of vacant properties should be urgently activated.
It found that if the government decide to introduce the vacancy tax, it should be levied on properties in rent pressure zones which have been vacant for a period of 12 months or more and it should be imposed in the form of a surcharge on the existing Local Property Tax.
In theory, the report states that a vacant property tax “could re-activate significant segments of the existing housing stock” but it found that the reasons for vacancy are wide-ranging.
“In practice the validity of such a tax will depend on the prevailing levels of vacancy and the reasons for vacancy,” stated the report.
While those in government circles cited the report, stating that the findings were negative against such a tax, they added that “maybe it was wrong”.
While there are some concerns that such a move could be ineffective, it is believed it might do “some good, and little harm”.
Paschal Donohoe said he maintains the view that there is a role for investment funds when it comes to apartment blocks, stating that as see more supply become available it will lead to changes in rent and the cost of homes.
The Rent Pressure Zone legislation, which is due to be revised, will be replaced in the autumn, the housing minister has also confirmed.
When asked for comment on the assessment, a spokesperson for the Department of Finance said the 2018 independent Indecon report suggests that the vacancy rate in areas where housing supply is most acute is significantly lower than the national average and has fallen in recent years.
“The report suggested that the vacancy rate within rent pressure zones, excluding holiday homes, was approximately 6% but that most of these vacancies were short and medium, with a low level of long term vacancies – the rate lying between 0 and 3% for Dublin for example.
“In addition many of these properties are vacant long term for reason of dilapidation or because the owner is in a nursing home. The report estimated the rate of properties which are vacant long term and habitable to be only 0.8% of properties in rent pressure zones. The report also suggests that the vacancy rate is likely to continue to fall due to market developments,” said he spokesperson.
The statement went on to say that the report found that there was very low vacancy rates in the areas of greatest demand for housing, particularly in terms of medium-term vacancy, which indicates “that the potential for a vacant property tax to increase housing supply is very limited and could represent a distraction from the need to significantly accelerate the building of new social housing, affordable housing and the facilitation of other housing supply”.
“It is of course necessary to monitor the position and in that regard we understand that the CSO plans to deploy an enhanced approach during the next Census to the collection of information in relation to residential properties that appear to be vacant,” said the spokesperson.
Labour housing spokesperson Rebecca Moynihan has said the failure to implement a vacant homes tax is “a wasted opportunity”.
“We know from analysis from the Business Post that large build to rent complexes such as Clancey Quay and Capital Dock are not fully occupied. This is a scandal and could be stopped if there was political will to change things,” she said.
“It is an absolute scandal that while thousands of people have no proper home, many properties continue to lie vacant. Home ownership should be a legitimate aspiration for people. It should not be seen as an investment opportunity for huge funds that only care about their bottom line. Government has wasted yet another opportunity to change people’s lives for the better,” she added.
O’Brien is understood to have given a commitment that he would continue to work with his Green Party colleagues in government, who voiced concerns about apartments being expempt from yesterday’s measures, on further measures to help those buyers wishing to purchase an apartment to do so.
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