Verona Murphy (Wexford, Independent) | Oireachtas source

I hope the Taoiseach had the opportunity to read David McWilliams's article in Saturday's edition of The Irish Timesgiving his opinion on the budget with regard to housing. If the Taoiseach did not get a chance to read it, let me put some of the main points to him. He starts off by highlighting the folly of awarding a tax break on mortgages, which sounds nice in theory but in practice only helps to ensure that house prices remain higher than they need to be, a move, he argues, that will not lead to a single extra house being built. Indeed, he says that if tax breaks are given every time interest rates rise, house prices will rise regardless of whether interest rates rise or fall.

Mr. McWilliams then moved on to highlight the problem of the rental tax credit. It is not a long-term solution to any problem and is more likely to put a floor on rents, which could possibly drive up rental costs. His next target for criticism was the tax break for landlords. Yes, we need people to be landlords and we need conditions to encourage people to rent out property rather than having it lying idle but the tax break is hardly a necessary way to spend money. High rents and high demand should be enough of an incentive for landlords to rent out property. Making it more straightforward in terms of regulation and red tape would have been a better option. Landlords would be better served by a functioning Residential Tenancies Board where issues were dealt with in a timely manner. He also wrote “Instead of doing something that could boost building like, say, cutting development levies or funding them through higher local property tax or cutting VAT on new builds, parties of the centre have adopted the nonsensical policy option advocated by Sinn Féin,” and that the Government “should be confidently highlighting the ideological difference between themselves and Sinn Féin rather than robbing Sinn Féin’s clothes".

Prior to the budget I met both Ministers, Deputies Michael McGrath and Donohoe as part of the Regional Group delegation. Part of that discussion was on interest rate rises. Rates have risen by 4.25% since July last year, leaving first-time buyers stretched to their limits to purchase the most basic housing units in regional Ireland. Before interest rates started to rise, first-time buyers' inability to obtain sufficient mortgage approvals was a significant component of the housing crisis. As a result of higher interest rates, banks have changed their underwriting criteria, resulting in first-time buyers being able to borrow considerably less than a year ago, that is, by approximately €50,000 per couple. I put two proposals to the Ministers. One was a mortgage interest relief scheme granting tax relief to first-time buyers that would give banks more flexibility to underwrite larger mortgages for first-time buyers such that those on marginal incomes could get a mortgage sufficient to buy a home. The second was for the Government to rebate the VAT on new homes directly to first-time buyers, immediately after taking possession of their homes. On a sum of, say, €325,000 this would amount to €38,656. Will the Taoiseach now consider some of these proposals? The measures would be temporary and reviewed when Euribor rates reduce below 2%. They most certainly would increase the prospects of house building becoming viable and ensuring that buyers were in the market in the future.

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