Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I put it to the Deputy that market forces alone will not change the current position. I invite him to come to Limerick and walk through Newtown Pery, which is the city's recognised Georgian area. If he does, he will immediately grasp this concept. Individual Georgian buildings in the city do not take the form of four storeys over a basement. Some of them are two-storey buildings. The new local authority, following merger of the city and county councils, intends to develop these buildings as social housing and thereby bring those who have been consigned to the outer suburbs back to live in the city again. All the infrastructure - schools, churches, shops, cinemas and entertainment facilities - is in the city centre, but the people are missing because they have moved out. I do not know whether this will work. We would be doing well if six out of every ten policies we pursue worked. We have to keep trying. We cannot sit back and let the place fall down.

I have received representations in this regard from interested parties on the north side of Dublin city. There is an extensive Georgian area around Mountjoy Square. I know that if I were to extend this proposal to our capital city, it would be rejected in Europe. I think I will get it across the line in Europe by confining it to Limerick and Waterford on a pilot basis. We will see. If it is very successful, obviously it will become a model which can be applied everywhere. If it fails, there will be no loss of revenue. There might be some degree of embarrassment for the local Minister, but the Exchequer will not be hurt in any way. It is worth trying.

I have discussed the matter with the Minister, Deputy Deenihan, who has designated Limerick as the national cultural city for 2014. If we can get clearance for this in Europe, it will serve as a significant cultural project as well. I am interested in driving it forward on that basis because I know we would be shot down if we were to go to Europe to seek approval for a regeneration, development or incentive scheme on the sole basis that it will assist the building and development industry. We would not be allowed to pursue schemes like the old section 23 scheme that involve stuff like capital write-downs. The EU is very conscious of the long-standing culture of Europe. It is susceptible to supporting on cultural grounds projects which it would not be susceptible to supporting on other grounds. There are cultural, social and economic aspects to this proposal.

Deputy Doherty asked how it will work in practice. I will take him through a couple of examples that have been drawn up by my officials. If a person buys a derelict house and renovates it into a single residence for himself or herself, he or she will be eligible for the owner-occupier relief. That is a very small market because houses at the upper end of Newtown Pery in Limerick have three or four storeys over a basement. They have stairways rather than lifts or anything like that. As a result of the various incentives that were provided downtown under the section 23 scheme, it might be the case that a marginal business - a small restaurant or something like that - is being conducted in the basement, but it is likely that the upper floors will not have been occupied for a number of years. It could be laid out as unattractive office accommodation, for example. We are talking about the kinds of areas in old towns where solicitors and accountants used to have their offices. They are all gone to new accommodation that was supported by tax relief. As a result, there is a lack of occupancy in these buildings. We are trying to get people back into the town.

I will give a second example. If a person buys a building, renovates it into one or a number of units and sells them for owner-occupier purposes, each of the new owners will get the tax relief for that part of the purchase price attributable to the refurbishment. The site cost is excluded. There is no prohibition on the sale of units for rental purposes. This does not affect the entitlement of the owner-occupiers of the other units to their relief. However, no relief is available in respect of the unit which is let. Once it has been let, that unit can never revert to the owner-occupier in the future. In other words, absolutely no section 23 arrangements will be permissible. If somebody decides that a building of four storeys over a basement is suitable for two families in two residential units, with one unit comprising very extensive accommodation in square metre terms on the top two floors and the other unit comprising the first and second floors, only the owner-occupier will get relief. If the builder who developed it decides to rent one of the units out, that is his business, but he will not get the relief for the unit that is being rented out. It will have to be strictly owner-occupied. The purpose of this measure is to get families back living in the city. I was addled from trying to come up with measures that might influence behaviour. I do not know whether this will work. It is certainly receiving a great deal of support from the local authority in the city.

I will give a third example. If a person who buys a derelict building renovates the upper floors as a single unit or multiple units and refurbishes the ground and basement floors as retail premises, the residential relief will be available to him or her as already described. The capital allowances for the commercial element will not be available unless the upper floors have been refurbished and are either owner-occupied or capable of being owner-occupied. They could be still unsold at that point in time. However, if any of the residential units are actually rented out at the time that the accelerated capital allowances are claimed for the lower floors, those allowances will not be available. This is a stricter rule than in previous schemes. The reason is that the primary focus is to get families back into the city and let the commercial and retail activity follow them. It is not intended that ground and basement floors will be renovated for retail purposes with upper floors being left derelict. That answers one of the points the Deputy made. While the residential units must be owner-occupied, the retail units may be let. The lessor may be one of the occupants of the residential units or indeed may be somebody else. Changes to residential occupancy on the upper floors are irrelevant once the entitlement to a capital allowance has been established.

We are announcing it here and enacting it to give it a legal basis. The next step will be to undertake an ex ante evaluation of whether this meets the economic and social criteria we think it meets. We will report back to the committee on that. It will be brought in by means of ministerial order if it passes the European test, with a view to being enacted from 1 January 2014. I have described the Limerick situation. While there are not as many buildings that can be described in period architectural terms in Waterford, there are significant old historic and heritage buildings there. The retail sector is very important in Waterford. Those who know Waterford city will be aware that it has particular Waterford problems, just as Limerick city has particular Limerick problems. I would like to get the support of the committee to move on with this. As I have said, it might not work at all. I recommend this model on the basis that it is well worth trying. If it is an outstanding success, it can be used elsewhere.