Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I thank the Deputies from the Social Democrats for raising this issue and tabling this motion. I reiterate that the Government wants to see vacant homes occupied. I agree with many of the points that have been made. These are properties that are already there and are fully serviced and habitable. If they are not habitable, they are derelict and do not fall under the vacant homes tax in any event, as Deputies will be aware. Bringing vacant stock back into use is a much faster way of increasing supply than turning a sod on a new development. In addition, we have an issue in Ireland with under-occupancy. There are many spare bedrooms here, which is why we have schemes like the rent-a-room relief scheme where individuals can receive up to €14,000 in rental income tax free when they rent out a room in their home. We need to do more to promote schemes like that. It may not suit everybody but for many individuals who have spare capacity in their home, it is a very effective way of making better use of the existing stock and, at the same time, receiving income that will be tax free. In addition, the Minister for Social Protection, Deputy Humphreys, has made changes for people who are on social welfare providing that they too can avail of the rent-a-room scheme without the money they receive impacting on their social welfare entitlements. That is an important reform.

The ongoing housing crisis poses many challenges. I acknowledge the real difficulties being faced by many individuals and families when it comes to securing and retaining affordable accommodation. The need to increase the supply of housing of all types is a top priority. My Government colleagues and I recognise and acknowledge this, as evidenced by the resources we have made available and will continue to make available. Funding will not be the constraint when it comes to meeting the housing challenge in this country.

Addressing vacancy and dereliction and maximising the use of the existing national housing stock is a central objective of the Government's housing policy. This is why pathway 4 of Housing for All sets out a blueprint to address vacancy and makes efficient use of our existing housing units. While the reasons for vacancy are often complex, the reuse of available vacant properties in cities, towns, villages and rural areas can go a long way to meeting the current unmet housing need. I do not believe we have different objectives. The Social Democrats have raised a specific issue about the nature of this tax, in particular the rate of the tax, and I will address that in a moment.

It is important to state that this is a new tax. It was announced in the budget last autumn. It follows from a commitment under Housing for All to collect data on vacancy with a view to introducing a vacant property tax. The Finance (Local Property Tax) (Amendment) Act 2021 facilitated the collection of data on vacant habitable property through the local property tax returns. That has not been referenced by the Social Democrats either in the motion or the contributions we have heard so far. A preliminary analysis of these vacancy data was published by Revenue in July last year, following the local property tax, LPT, revaluation in November of the previous year. The analysis indicates that there is a relatively small number of long-term vacant habitable properties across the State. We want to see these properties occupied again. The tax is one means of seeking to achieve that.

Many of the reasons given for leaving a property unoccupied are normal reasons for temporary vacancy such as when a property is being renovated or following the death of the occupant. The analysis indicates that the vacancy rates captured by local property tax returns are low across all counties, averaging nationally at 3%. This is within a range that is considered to be in line with a functioning housing market. It is important nonetheless that we act - and we are acting - to ensure that all viable housing stock is being used.

A residential property will be within the scope of the new tax if it has been occupied as a dwelling for less than 30 days in a chargeable period. Each chargeable period will commence on 1 November and end on 31 October of the following year. The first chargeable period commenced on 1 November 2022. The first self-assessed returns are due on 7 November this year and the tax will be payable on 1 January 2024. I reiterate that this is a new tax. We are in the first chargeable period, the returns are not yet due and the tax is not yet due in respect of these properties. The tax will be charged at a rate equal to three times the property's existing base local property tax liability and must be paid in addition to the LPT. The number of properties in scope and the amount of tax payable will depend on the self-assessed returns submitted by property owners, the number of properties declared as liable and the number of property owners entitled to claim available exemptions from the tax. A small number of narrow exemptions are available to ensure homeowners are not excessively penalised for normal temporary vacancy.

The motion put forward by the Deputies calls for the Government to significantly increase the rate of the tax on the basis that the current rate of tax will have minimal effect on the behaviour of those who own vacant property as annual property price inflation is currently in excess of the rate of tax charged. The aim of this tax is to increase the supply of properties in the market by encouraging behavioural change. Accordingly, the rate should be set at a level that will influence a property owner’s decision-making. We can have a debate about what the appropriate level of the tax is. Such a debate took place when the legislation was being passed and we have another opportunity to do so again today. I believe the tax as structured will help to incentivise property owners to bring such properties back into use.

In designing options for the new tax, a key consideration was simplicity. It is important to ensure that the taxation of vacant homes operates well alongside existing property taxation measures, and that it is easy to understand and easy to administer. That is why it was decided to base it on the LPT system, which is familiar to property owners and is well understood. They are requested to self-assess the value of their property for the purposes of LPT. As properties are recorded under valuation bands, a vacancy tax charged using another methodology, such as a percentage of a property's market value, would require property owners to self-assess the market value of the property precisely. Calibrating the tax to capture growth and the capital value of property would be administratively challenging and would place a significant burden on taxpayers beyond what is already expected of them from a local property tax compliance perspective. The vacant homes tax applies nationally without variation in the rate by the region.

I will touch on the issue of numbers because it is important given that there was not acknowledgement of the work the Revenue Commissioners did in 2021. In compiling data for the new round of the local property tax for 2022 to 2025, Revenue asked a number of questions about vacancy of existing properties. The data it got back are interesting and very different from the census data. They give us information in response to different questions, which I acknowledge. The census data cited, which indicate that more than 160,000 properties are vacant, are from a point-in-time assessment.

If a person was on holiday, for example, for a couple of weeks, in the census that property would be declared vacant. That is not an accurate representation of the position.

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