Paul Murphy (Dublin South West, Solidarity)

I will focus on the tax break for developers in the budget. The reason I want to focus on it is that it is outrageous. It is a transfer of wealth from the public to those who are profiteering from the housing crisis. I heard the Taoiseach say the day after the budget during Leaders' Questions that this was not a tax break for developers. His saying it was not a tax break for developers reminded me of being down in the convention centre and hearing him say we did not bail out the banks. The VAT cut for the sale of new apartments is a tax break for developers. I read the papers at the weekend and stored this away in my mind. I read in the Business Post the headline "James Browne’s budget win – Persuading Donohoe to back developer tax breaks". If the media describes it as a tax break, it is clearly a tax break for developers.

We can see the cost of this tax break for developers in the budget documents. It is worth €390 million, a cost paid for by the public into the pockets of developers. When we listen to the rationale for this tax cut, the argument is not being made by the Government that this is going to bring prices down - that it will reduce VAT and that will be reflected in lower prices. Instead, the argument is, according to the Minister for Finance, "This reduction will help address the viability gap in apartment construction as part of a social policy to deliver more and higher-density apartments". Interestingly, the Housing Agency defines a viability gap as "where the cost of building an apartment, or a house is higher than its market sale price." There is no viability gap according to that definition. The cost is lower than its sale price. A substantial profit is being made on each apartment sold by developers. We can go to the Department of housing's own document, the Total Development Cost Study, which demonstrates that, in 2024, the developer margin for a two-bedroom urban apartment - the developer profit - was €48,605, a profit margin of 8.9%. For a two-bedroom suburban apartment, there was a profit margin of €48,587, or 9.7%. According to its definition of a viability gap, there is none because a profit is being made. In reality, it is about juicing the profits of the developer further. Developers have come looking for another tax break and the Government has said it will hand it over.

Michael Taft, an economist, has done excellent work in pulling this together, drawing from the work of Orla Hegarty in particular. He brings it together in clear black-and-white figures that demonstrate that a robbery is taking place of the public. Fianna Fáil up to its old tricks again, together with Fine Gael.

The profit margin is very healthy for developers, including for the construction of apartments. That is reflected in the Department of housing's own figures. The Minister for housing previously stated that if there was even a small profit, people should be building apartments. As can be seen, there is more than a small profit for two-bedroom apartments, urban or suburban; there is a €50,000 profit. What way have profits been going for developers in this country over the past number of years? Are things becoming harder for them despite the fact that prices continue to rise and they therefore need a tax cut to keep operating? That is not what the figures indicate. Cairn Homes and Glenveagh are the two biggest Irish developers. In 2022, Cairn Homes made a profit of €81 million, at a profit margin of 13.1%. In 2023, that went up to €85.4 million and in 2024, it was up to €114.6 million, at a profit margin of 13.3%. There was a substantial increase in profits and a small increase in profit margin. Glenveagh's profit went from €52.6 million, at a profit margin of 8.1%, to €97.8 million in 2024, almost doubling its profits, with a profit margin of 11.2%. There was a substantial increase in profits. These people are making very substantial profits already. There is no viability gap. We already had the lowest VAT rate on construction work on new buildings, at 13.5%, and that is now going to drop to 9%. This is a massive giveaway to developers. That is all it is. It will have a distorting effect on land values. To quote Orla Hegarty, she stated:

The VAT cut adds €20,000 to this profit margin [of the developers] for every apartment. More government interventions that are inflationary, drive up land values, shore up dysfunction and worsen the housing crisis. A sweetener for developers that will be absorbed into margins and land values, worsening structural problems in the sector.

The CEO of Cairn Homes believes the benefit for it will be even higher. Michael Stanley said, "A suite of budget measures announced on Tuesday, together with new apartment construction guidelines unveiled during summer, are probably worth about €70,000-€80,000 per apartment." That is on top of the €50,000 per apartment profit it is currently making. All of this will lead to higher land prices as more profitable units are squeezed into a site. Land prices make up a significant portion of apartment costs, even more than developers' profits. The consequence will be inflating prices, which should be the last thing the Government seeks to do.

This illustrates a number of things. It illustrates who the Government represents. People always ask me why the Government cannot solve the housing crisis. It is because it represents those who are benefiting from the housing crisis. That is what this policy proves. During a housing crisis, and at a time when developers are making big profits already, the Government is giving a tax break to developers, as opposed to investing in public housing. That tells us who the Government represents and gives a hint of the alternative, which is to use the money to build homes.

If we look at what makes up the cost of an apartment, just over 50% is construction costs. Half the price of an apartment is the cost of building it, on average. The profit, land prices and developer's margin together make up 20% of the overall price. If you do the maths, public building on public land would cut prices by 20% because it would get rid of land costs since it is public land and you get rid of profit. Profit is not a necessary cost. We do not need to pay for these developers' substantial profits or give them even more profits, which is what is being done with this tax break. We need to use public money to build social and affordable homes on public land. That is the main intervention we need, as opposed to throwing more and more money at landlords, big developers and those profiteering from the housing crisis.

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