CUCKOO FUNDS ARE squeezing first-time buyers out of the housing market and must be urgently reviewed, according to Fianna Fáil Spokesperson on Housing, Darragh O’Brien.
Corporate investors known as so-called ‘cuckoo funds’ have spent over €1.1 billion on nearly 3,000 residential properties in Ireland last year, smashing previous records, according to striking figures revealed in a new report from Savills yesterday.
The major funds hoovered up five times more housing units in 2018 than the previous year.
The huge spike accounted for almost 30% of last year’s total property investment, which has raised concerns that the corporations are squeezing first time buyers out of the housing market and making rents unaffordable.
Speaking to reporters today, O’Brien said the government must urgently review the tax breaks these funds are able to avail of in Ireland.
He said government has allowed a situation where almost 3,000 homes have been purchased by these funds in 2018.
The Green Party and the Social Democrats have raised similar concerns about the funds.
“These institutional investors are undoubtedly drawn to Ireland by the large rents and the favourable tax environment. Every indication points towards soaring rents in the coming years. Builders also are attracted by the large funds as they only have to negotiate one deal rather than a multitude if they were to negotiate with individual purchasers.
“The government have allowed this situation to develop on their watch and they have done precious little to stop it,” said O’Brien.
Tax-free
Today, Fianna Fáil is calling for an urgent review of the tax treatment of these funds, said O’Brien, who added that these agencies are effectively operating tax-free in Ireland and charging rent of between €2,000 – €2,400, which is “distorting” the market and driving up rents.
He said the effect of these funds operating in Ireland “has been quite profound” and has resulted in potential first time buyers not getting a look in for many properties.
O’Brien said a “full, open review” is needed urgently needed.
When pointed out to O’Brien that the Taoiseach previously was looking into shutting down any tax loopholes in operation, though later he said any changes wouldn’t be rolled out until the Budget, Fianna Fáil’s housing spokesperson said Varadkar is “not looking hard enough”.
The Fianna Fáil housing spokesperson said waiting until the Budget in October too long a wait, and said a time-bound review of the tax rules governing these funds should not take that long.
“These loopholes are resulting in there being an unlevel playing field,” he added.
Reluctance by government in tackling foreign funds
Fianna Fáil’s Stephen Donnelly said there appears to be a “reluctance” on the government to “look under the bonnet” of these funds.
He said there were major tax law changes to shut down Section 110 funds who were found to be in Ireland fax-free. However, Donnelly said the government was warned that other loopholes were being identified after the Section 110 shutdown.
Donnelly said the government gave a firm commitment at the time that other loopholes being used would be looked at if they were being abused.
In the last quarter of last year, €55 billion was moved from Section 110 status to other vehicles, which are operating tax-free and “sucking profits out of this country”, said the Wicklow TD.
He said Fianna Fáil wrote to Finance Minister Paschal Donohoe last week seeking a review, in which the minister replied that he was happy that his officials were “keeping an eye” on it.
“We are not happy they are keeping an eye on it,” said Donnelly, stating that “hot foreign money” operating in Ireland tax-free means there is less money going to the Exchequer for schools, hospitals and other resources.
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