A decade long housing crisis is looming in Ireland unless the Government implements a range of radical and potentially unpalatable policies to boost the number of new homes being built, it is claimed.
According to the Society of Chartered Surveyors Ireland (SCSI) current new build projections at 17,000 for 2017, added to the cumulative undersupply of the past nine years means it will be 2026 before the country is building the 35,000 new houses per annum are needed to meet demand.
It says that action is needed and points out that taxes add up to €60,000 to the cost of new homes and it calling for VAT to be reduced to zero for new affordable homes in designated areas for a specified time to bring costs down.
A research report published by the SCSI showed the total cost of delivering a three bed semi-detached house amounted to €330,000 and less than half of that, 45%, was attributable to the bricks and mortar or hard costs of building the house.
The other 55% included soft costs such as VAT, levies, financing, profit, infrastructure and land. Taxes and levies alone can represent up to 18% of the purchase price. It says that this means that the cost for younger home buyers of financing the extra amount of a new home due to taxes can equal around €60,000 of their after tax
‘That is why we are calling for a reduction of VAT on new affordable properties in areas of high demand from 13.5% to zero for a limited time. Affordability is already a huge issue for buyers and renters, especially in Dublin and unless tough decisions are taken the situation will only get worse,’ said SCSI director general Áine Myler.
In its pre-Budget submission the SCSI also called for funding to be made available for accurate data collection for new housing as well as reform of Capital Gains Tax.
While it’s estimated that 15,000 houses were built last year, question marks remain over this figure with a recent report arguing that the true level could be just half this. The SCSI says the system of using the number of new electricity connections to calculate the number of new builds is flawed.
‘How can you hit a target if you can’t measure it properly? That is nearly always the starting point but even at this late stage we do not have access to reliable data on new house completions. Funding needs to be set aside immediately to establish a reliable measure for the supply of new homes locally and nationally. This is as necessary for the Government and local authorities as it is for the private sector to address the housing crisis,’ Myler pointed out.
She also pointed out that in 2012 the Irish Government granted a capital gains tax incentive to investors who bought commercial property and land and held it until 2019 and said that while the original aim of the relief was to stimulate sales activity in the commercial market, the move has now had the unintended consequence of creating a barrier to investment.
The SCSI believes that investors should be allowed to dispose of qualifying lands for affordable housing now, without the loss of the CGT exemption and that this would help to release development lands that are urgently needed.
‘Accurate data, targeted VAT cuts to reduce costs and an increase in the supply of developmental land would greatly assist the market supply situation. These are some of the radical measures which are required if we are to build affordable properties in the right locations and at scale,’ Myler explained.
‘Government in previous eras delivered large scale public housing projects and set up finance agencies like ACC. They were bold, ambitious undertakings of their time and we need the same approach today. The urgency of the situation cannot be overstated,’ she concluded.
