John Deasy (Waterford, Fine Gael) | Oireachtas source

I propose to discuss the Living City initiative in the Finance Bill, which was initially introduced in concept and in a limited form earlier this year. The initiative was billed as a pilot project for urban regeneration in Limerick and Waterford. It is a targeted pilot tax incentive to encourage people to return to the centre of cities to live in older, historical buildings and to encourage the regeneration of the retail heartland of central business districts. Under the residential part of the initiative, residents can claim tax relief for the costs of refurbishing a house at a rate of 10% per annum for ten years against their income if it is their private residence. This is a significant relief. Retailers will be entitled to relief on works undertaken to upgrade or refit their shops under the accelerated capital allowances scheme over a period of seven years, at a rate of 15% for the first six years and 10% for the final year.

When I spoke on this initiative in February, during the debate on the previous Finance Bill, I pointed out that Waterford, my constituency, would not benefit greatly from the initiative as drafted, and that tweaking would be necessary before the commencement order was signed. The date range for buildings coming within the scope of the legislation was too narrow and the application of a strict definition of what constitutes a Georgian building would have resulted in Waterford city centre gaining little from the initiative. I appreciate that the Minister and his officials heeded the points I made and the necessary changes were recommended and implemented on foot of a cost-benefit analysis of the project. These changes have the potential to assist the process of rejuvenating Waterford city centre.

I am working with Waterford City Council, which is compiling a comprehensive inventory of pre-1915 residences in the city. Now that the measure has been broadened, it is important that the city gains maximum benefit from it. In that regard, I have some further questions and suggestions which could be considered as the initiative is rolled out to other urban areas, including Cork, Dublin and Kilkenny. The ex ante evaluation conducted by Indecon makes for interesting reading, particularly in respect of the different attitudes towards the initiative in different cities. Professional and business people in Waterford are, in some cases, much more sceptical about this tax incentive scheme than their counterparts in Dublin.

The report refers to the merit of small-scale construction refurbishments, in addition to the wider renewal and conservation objectives. It is worth recalling what has been taking place in the area of State-funded conservation and the importance of this initiative as a consequence. The national conservation grant, which funded up to 50% of the cost of repairs and conservation measures for buildings on the record of protected structures, was abolished in 2011. In 2010, €3.74 million was provided under this scheme, which was replaced in 2011 by the Structures at Risk fund, with a total national allocation of only €650,000. These facts accentuate the importance of the Living City initiative in conservation terms. The report suggests that Waterford and Limerick would benefit from significant tourist numbers and spending as a result of the scheme. The increase in tourist visitors estimated following research among architects and quantity surveyors suggests a potential increase in tourist numbers of the order of 11.4% in the two cities.

I will now address the nub of the issue, namely, the impact on urban renewal and conservation and the hope that the initiative will result in a reversal in the trend of depopulation of city centres. In the case of Waterford's old city centre, 2,242 buildings, or 25.8% of the total number, are unoccupied. Of this figure, 983 are pre-1919 constructions located in what is regarded as the old city centre. The report estimates that of these 983 buildings, approximately 180 premises will eventually be part of the take-up of the scheme. While this is a conservative and relatively small figure in the context of 2,242 empty buildings, it is still significant. If 180 residences successfully avail of this initiative over the next five years, it will provide a significant boost for tradesmen such as carpenters and plumbers and those operating specialised conservation businesses. Moreover, given that Cork and Kilkenny are to be included in the initiative, it offers significant prospects to tradesmen in the wider region. For example, a tradesman in my home town of Dungarvan will be within one hour from Cork and Kilkenny city centres and 35 or 40 minutes from Waterford city centre. The benefits of the scheme will therefore transfer to tradesmen across the region.

As the report states, refurbishment of old buildings is labour-intensive. Estimates suggest that labour costs will account for 56% of capital expenditure under the initiative. This, the study suggests, would amount to approximately 718 man-years of employment, or 144 jobs for each of the next five years in Waterford and Limerick alone. When one reads through the criteria in place for the scheme one quickly realises, however, that there are a number of barriers to take-up of the initiative, including difficulties in obtaining funds to finance the cost of refurbishment. The authors of the report stress that unless the adjustments they recommend are adopted, the level of take-up will be minimal and the full potential of the initiative will not be achieved. When one deciphers the survey results on likely take-up it becomes clear that the highest level of indifference registered was in Waterford city, where only 28.2% of those surveyed stated there would be a high level of interest in the initiative in the city. In contrast, 61.9% of respondents in Dublin expressed the view that there would be a high level of interest in the capital. I note that Deputy Eoghan Murphy is present.

The question, if I were Deputy Eoghan Murphy, I would be asking in his constituency is, whether places such as Ringsend and Irishtown would be included because the survey indicates that there is a very high level of interest in Dublin as opposed to some other parts of the country.

More than twice as many householders in Dublin were very enthusiastic about the initiative than were in Waterford and one of the reasons might be that there is a two-tier economy operating in Ireland - Dublin and outside of Dublin. It probably has a great deal to do as well with the fact that householders do not believe that they will get credit from the banks to carry out these extensions or renovations, which brings me to where the Department should consider some further changes or initiatives around the scheme.

In many cases, individuals who have very low incomes and who pay little or no tax, such as social welfare recipients, will be instantly excluded from this scheme. They can apply for funding under the home renovation scheme recently announced in the budget but they will be effectively shut out of the living city initiative. If somebody, for example, in Waterford, had a house worth €200,000, he or she would need to spend €20,000 to avail of the grant, if he or she managed to get a loan from the banks. However, in many cases, such a person's income would be so low that he or she would not come near to paying €2,000 in tax a year to avail of the tax relief incentives. Unfortunately, that particular individual profile is what makes up a large part of urban city centre populations. There is a gap here. In the scheme, the cost of refurbishment needs to be at least 10% of the pre-works value of the residence. To accommodate householders on lower incomes, that 10% threshold needs to be lowered to at least 5% or 7.5%.

The Department should also contact the banks and make arrangements to educate them as to the ins and outs of this scheme. Once the banks realise that this is State-backed and guaranteed, they will be far more willing to release funding, even to those who have large debts. What we have seen so far from the home renovation scheme announced in the budget is the banks are advertising to get their hands on that scheme and to start loaning money to householders to fund renovations because they realise it is State-backed and guaranteed.

As much flexibility as possible needs to be given as well to the individual local authorities to define where their respective city centres start and finish to ensure this has as much impact as possible. I work with Waterford City Council. We will be working with the Department officials to include as many parts of Waterford city centre and to define that as broadly as we possibly can over the next few months before the application is made and EU state-aid approval is sought.

I also have a question with regard to how local service providers will be defined under the scheme. The Indecon report suggested that any definition should be broadened as far as possible to heighten the impact of the scheme.

I thank the Minister and his officials for listening and making changes to the scheme. The living city initiative will prove to be a substantial economic stimulus for the urban areas involved and I look forward to working with the Minister, as the application is made and EU state aid for the scheme is sought.

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