Mairead Farrell (Galway West, Sinn Fein) | Oireachtas source

I move amendment No. 31:

In page 36, between lines 29 and 30, to insert the following: “Report on the tax treatment and economic impact of institutional investment in the housing market

28.The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the tax treatment and economic impact of institutional investors and corporate landlords in the housing market, including their impact on tenure, affordability, property price and rental price dynamics.”.

These amendments call for reports on the tax treatment of REITs and IREFs and the broader economic impact of institutional investment in the housing market. I refer to the treatment of REITs and IREFs. My apologies; extra notes are being sent in to me. I have enough in front of me already. As the Minister is aware, these entities do not pay corporation tax on rental profits or capital gains tax on disposal of their assets. Those are tax advantages that domestic landlords and other companies do not enjoy. In May, an article in The Irish Timesreported that institutional property investors or IREFs paid an effective tax rate of 17.9% in 2020, based on taxable events in 2019. That figure was referenced by the Minister in his reply to a parliamentary question tabled by my colleague, Deputy Doherty, in June. Indeed, speaking on a radio programme this year, the Minister of State, Deputy Fleming, claimed that on any profits being made there is a tax of 20% or 25%, depending on the structure, and any profits they make are taxed at the higher rate, double the rate of corporation tax. However, I do not think that is the case. The figure of 17.9% related to the taxable event, meaning distributions to shareholders, and was not relative to rental profits. In 2019, tax paid by IREFs relating to pre-tax profits was 9.1%, less than the 25% paid by any other landlord or the 12.5% paid by any other company. Furthermore, they are exempt from capital gains tax entirely.

Sinn Féin disagrees with the Minister on this policy issue. We believe the tax advantages enjoyed by these funds are pricing struggling home buyers out of the market and simply driving up rents.

We also know that these funds, in the vast majority of cases, are buying up properties subject to forward purchase agreements, not forward funding agreements, despite the commentary. These amendments call for reports, as we in Sinn Féin have done every year. In a report published in February 2019 by the Department of Finance, entitled Institutional Investment in the Housing Market, it was noted:

There is a risk that, should BTR investment continue at current growth rates, market forces would over the long term create socio-economic polarisation in some urban areas. Under such a scenario average income earners would be priced out of purchasing or renting from the private market ...

... there is a risk that at sufficient scale an institutional investor or group of investors could, over time, develop monopolistic or oligopolistic pricing power.

The Minister may be of the view that the housing policy the Government has pursued over the past decade has been a roaring success but, as he will know from my earlier comments, I disagree with that not only on a philosophical basis but also on the basis of the record. The power of investment funds within the housing market has to be reigned in. This threat is being recognised elsewhere as well. We have seen the Liberal Party of Canada commit to measures to clamp down on the financialisation of the housing market in Canada. We in Sinn Féin have a very different view of the success of Government housing policy and its impact on affordability. I raised this earlier, but we need to look very clearly now. We are at a crisis point in respect of affordability of housing. We are all aware of that from our clinics and from talking to people in our neighbourhoods. We are very much aware of the huge impact this is having on people. Anything that can be done to try to assist with affordability really needs to be done.

This amendment just calls for a report. No matter where the suggestions come from, whether from us, although we are in opposition, or from others, they should be looked at seriously. Anything that can help to deal with the affordability crisis we see should be taken into consideration because we are at a crisis point.