FINANCE MINISTER PASCHAL Donohoe has said the government’s housing plan unveiled yesterday will act as a “strong deterrent” to the activities of cuckoo funds.
Speaking on the Pat Kenny Show on Newstalk this morning, Donohoe said that companies who try to “get around” the measures being introduced “will be caught” and prevented from doing so.
However, the government has been criticsed in many quarters for not applying the new measures to apartments.
Under the plans, the purchase of more than 10 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.
An investment fund will be allowed to buy up to nine houses over a 12 month period without being hit with the higher rate.
Another measure will see up to 50% of future housing estates set aside for owner-occupiers.
Donohoe said: “It is worth saying that if you buy 10 or more houses, you pay 10% on all of the houses you have purchased.
“It applies to any property in Ireland purchased by any kind of purchaser; it is ten times our normal rate of stamp duty in relation to residential properties and it is a third higher than the stamp duty in relation to commercial property. So, yes, I think it is a strong deterrent.”
The measures will be introduced in the Dáil this evening.
The Finance Minister said that mechanisms would be in place to “minimise opportunities for tax avoidance” or “aggressive tax planning” to undermine the plans.
He said: “When I introduce the financial resolution on this in the Dáil tonight, we will be bringing in further measures of definition to ensure that companies, if they are created with the sole purposes of trying to get around this measure will also be caught by it.”
In a statement today, the Irish Property Owners’ Association – which represents landlords – said the new measures fail to address the beneficial tax treatment already enjoyed by the cuckoo funds.
Its finance committee chairman Tom O’Brien said: “In fact, the proposals ignored the fact that these funds are paying no income tax on sizeable rental portfolios whilst private landlords pay income tax at 51% and cannot get the government to agree to allowing basic deductions for standard business expenses such as LPT.
The measures introduced last night will have very little impact on the REITs [cuckoo funds] as the vast majority of their investments are in the apartment market which is exempt from the stamp duty measures announced last night.
Ahead of tonight’s vote, the opposition has also been sharply critical of the government’s record and future plans on housing.
Sinn Féin’s housing spokesperson Eoin Ó Broin said the planning changes won’t apply to existing permissions or to future apartments.
“Bulk buying and sky high rents will continue,” he tweeted.
What a cop out. Govt plan will do nothing to stop investment funds from bulk buying family homes.
— Eoin Ó Broin (@EOBroin) May 18, 2021
🚨Planning changes won’t apply to existing permissions or to future apartments.
🚨Tax changes are minimal & won’t apply to apartments.
🚨Bulk buying & sky high rents will continue. pic.twitter.com/rP7Ru9M89p
Labour’s housing spokesperson Senator Rebecca Moynihan accused the government of “putting window dressing” on investor funds continuing to buy up housing with the plans.
She said: “The response from Government today will just push the investor funding towards providing Build To Rent where they can apply lower apartment standards, continuing to lock a generation into unaffordable rents. The response to supply issues isn’t a Government ramping up of housing provision but providing carrots to investors.
“The owner-occupier measures are totally laughable, leaving the situation unchanged as local authorities will have the option to ringfence zero homes for this cohort of people.”
Social Democrat TD Cian O’Callaghan said this morning: “The decision to leave cuckoo funds ravage our cities, and the abandonment of any attempt to build sustainable communities in these areas, will have a long-term debilitating societal impact. It is also a further crushing blow to urban centres, which have already been decimated due to the prolonged closure of retail and offices caused by the pandemic.
“This government has washed its hands of its responsibility to provide secure, long-term housing and has instead focused its efforts on boosting the profits of cuckoo funds.”
Solidarity TD Mick Barry, meanwhile, described the measures for “clipping the wings of the vulture funds” as “too little, too late.”
To embed this post, copy the code below on your site
have your say