Eoghan Murphy (Dublin South East, Fine Gael)
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I thank the Minister of State, Deputy Simon Harris, for being available to take this topic.

The proposal I am putting forward is related to the new Central Bank decision on mortgage rules. Clarity is welcome, although I am not sure why it took the bank so long to deliberate or why it went through the process at all. However, it is good that we now know what its proposals are. Of course, I am not entirely happy with the outcome, but perhaps I am not meant to be. It is incredibly unfair on people who are looking to move into their second home which may be their first family home. They are going to be penalised. While they may have thought that they had saved enough to buy a home, the figure has now doubled. The tiering is welcome in terms of the clear distinction between first-time buyers and those who are buying to let. Using the percentages to address it is a smart move, but the value at which people in Dublin will step from 10% to 20% in the loan-to-value ratio is too low. Nevertheless, we have a decision and must work with it. That is why I am putting the following proposal to the Minister of State.

The Central Bank has made its decision on loan-to-value ratios and it is up to us now to act on the supply side. If we do not, people who are renting in Dublin will find themselves as collateral damage in the moves by the Central Bank and the property market. We must see how we can help to free up supply. I appreciate that the Government is working on a number of strategies in relation to building and investment. Dublin City Council will begin this year the next phase of the Dublin city development plan in which it will be able to look at densities, height ratios and transport infrastructure. They will all play a part in increasing the supply of housing. We as legislators and those in the Department, where the skills set is, can also think of ways to use the taxation system to incentivise people to move home by changing their attitudes to the properties in which they live.

There is a great deal of underoccupied housing stock in Dublin. This issue is being considered in the United Kingdom where it is estimated that 47% of homes in England and Wales are underoccupied. We have a problem with underoccupation in Ireland also. The question is what we can do about it. One measure we could pursue is one that is being promoted by the Mayor of London, Mr. Boris Johnson. It is the introduction of a capital gains tax exemption or reduction for people over a certain age - perhaps 65 years - who downsize their properties. It has the potential to free up family homes, of which there is a shortage at suitable prices in Dublin. We have known about this problem for quite some time. Where one finds a lack of supply of suitable accommodation at the right price and an underoccuption of dwellings, this proposal has the potential to have a very positive impact.

In Dublin there is a great deal of potential housing stock that is not being used appropriately. I hear the same anecdotally about other towns. When one walks through the city and looks above the ground floors of buildings with a retail purpose, one sees boxes against windows. People are using for storage or other purposes accommodation which could be used much more appropriately for housing. This all builds into the idea of a cultural change in how we think about renting versus owning and about where we live and why we live there. I note that this is not for everyone and that it is not about forcing people to do anything. It is a way to incentivise a change of behaviour and attitude.

I will set out the benefits. If the seller is over 65 years, having raised his or her children who are living in their own homes, and wants to downsize, a capital gains tax exemption or reduction would have the potential to permit him or her to keep a further one third of the sale price. It would be a huge incentive to sell, as well as constituting extra protection for someone in his or her old age in addition to his or her pension. There would be a benefit for the housing stock where it was an underoccupied home. A person might be selling a four or five bedroom house near local schools and transport which would then be freed up for a family or other users to come in and use it in the best possible way.

It would also have a positive impact on rents and prices in the area, given that it would increase supply.

A further benefit would be that the resulting increase in demand for apartment spaces would motivate us to examine how we are using the buildings in the city centre and urban villages that are not being used properly above the ground floor. This is how the benefit would have a wider impact on how we view property across society. While it might have to be paired with other incentives, such as redevelopment incentives for such properties, this simple tax incentive alone, without having to build anything new, could be a very efficient way of freeing up housing stock for families who need it and ensuring those who want to move are not penalised for doing so because our CGT tax of one third is so excessive.

Simon Harris (Wicklow, Fine Gael)
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I thank the Deputy for raising this important matter. I note his comments on the Central Bank's decisions on mortgages. The Central Bank is independent and it, not the Government, has decided on these regulations. The Government accepts them. During the consultation period, the Central Bank took on the concerns of many people, including first-time buyers. The deposit required does not jump from 10% to 20% but increases on a sliding scale. A house priced at €440,000 requires a deposit of approximately 15% and a house must be priced at approximately €1 million to require a deposit of 18%.

The introduction of the Local Property Tax, LPT, is part of a broader approach to the taxation of property, which aims to replace some of the revenues from transaction based taxes, which have proved to be an unstable source of Government revenue, with an annual recurring property tax, which international experience has shown to be a stable source of funding. The Government decided that a liability to the LPT should apply to all owners of residential properties with a limited number of exemptions. This is consistent with the report of the inter-departmental group on the design of a local property tax, chaired by Dr. Don Thornhill, which concluded that a universal liability should apply to all owners of residential property with a limited number of exemptions. Even with the limited number of exemptions available under the legislation, I am advised by the Revenue Commissioners that, based on the most recent data available, exemptions have been claimed in respect of some 36,000 properties for the 2014 LPT. Reliefs and exemptions have costs which must be paid for and their introduction must be considered only where there is a clear economic and social policy need to be addressed.

While there is no specific exemption from LPT for those over 65, they may be exempt or eligible for relief from LPT for another reason, or may be entitled to avail of a deferral arrangement under the provisions contained in the legislation. Limiting the exemptions available allows the rate to be kept low for those liable persons who do not qualify for an exemption. When people downsize their residential properties, assuming they stay in a similar location to the properties they are selling, their LPT liability will, most likely, be less than the amount they were liable for on their original property.

Capital gains tax, CGT, and stamp duties might also be regarded as property related taxes. A CGT exemption is already available for the sale of a person's principal private residence. The exemption applies to any gains made on the disposal of an individual's dwelling house together with land occupied up to an area of one acre, excluding the site of the house. Full CGT relief applies when the period of occupation matches the period of ownership and partial relief applies where the house has not been occupied by the individual for the full period of ownership. The beneficiary of a gift or inheritance in the form of a residence or dwelling house is exempt from capital acquisitions tax, subject to certain conditions this might be of particular relevance to elderly parents who gift their residence to a child who does not own residence in his or her own right.

While there is no stamp duty exemption in place, a rate of 1% on the purchase of a property would not represent a serious disincentive to a property owner considering trading down. In the circumstances, the Minister for Finance, Deputy Noonan, has no plans to introduce an exemption along the lines suggested by the Deputy. However, I will relay the Deputy's views to the Minister and I might come back to him regarding how we can best deal with supply in the Dublin area.

Eoghan Murphy (Dublin South East, Fine Gael)
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Under-occupancy of homes in Dublin must be addressed. We need to find ways to incentivise people who are living in large homes which they no longer need to trade down and free up the house for a family or a number of people to live in. Thus we could use the property we have in Dublin and our urban regions in the most efficient way. While I understand the Minister of State's points regarding LPT, I will not speak on them because I was not thinking of this area. The significance of a full CGT exemption for a person aged over 65 trading down a house in Dublin would be enormous, representing one third of the sale price. The money could be of real benefit to such a person in terms of his or her pension and securing a certain standard of living for the future, as well as the other benefits of downsizing, such as lower utility costs.

The Minister of State referred to acquisitions tax. Perhaps the Department of Finance could embark upon a bigger piece of work in examining some of our taxes and their thresholds and entry points. In view of the supply issues in Dublin and the spike in property prices, parents are passing away while living in a home and their children are having to sell the home because they cannot afford to pay the capital acquisitions tax on it. That is not right, given that they might be renting and want to move into the homes. It is an unnecessary and unfair pressure, given the time at which the tax is levied, which affects people in all parts of Dublin because of the threshold entry point. The last review of our taxation system was done in 2009. I have read parts of it and spoken to people who were involved in the process. It was written in order to come up with certain results and conclusions. Now that we are moving to a sustainable taxation model for the economy and we have broadened tax base, there is a good opportunity to reconsider what are appropriate taxes and entry points and, if there are exemptions, what they are and to whom they should apply.

Simon Harris (Wicklow, Fine Gael)
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The Deputy's point on thresholds and entry points is valid and deserves significant consideration. The Minister, Deputy Noonan, and I debated it in this Chamber during the Finance Bill debate and the Minister is keeping the issue under review. I will relay the Deputy's views to the Minister. The Deputy pointed out that there is already an incentive in the form of lower LPT on a smaller property for a person who downsizes as well as reduced running costs and energy costs. The nub of the issue is supply. Recently, I saw startling figures regarding the four Dublin local authorities. They stated that sufficient planning permission has already been granted, with no insurmountable infrastructural deficit, to deliver more than 20,000 housing units in the four Dublin local authority areas while a further 25,000 new homes are considered permissible on existing land zoned for residential use if the landowners and developers wished to seek those permissions. The challenge for the Government and my colleagues at the Department of the Environment, Community and Local Government, is to unleash the potential. The Government's Construction 2020 strategy, along with the forthcoming Planning and Development (No. 1) Bill - which has been given priority and which will include revision of the Part 5 social housing obligations and the retrospective application of reduced development contributions - should, hopefully, result in an activation of the land that already has planning permission and is zoned and serviced. This could deliver up to 20,000 housing units in the four Dublin local authority areas.

Under the LPT legislation, the initial value of a property on 1 May 2013, assuming it was made in good faith, is valid until 31 October 2016. The next valuation date will be 1 November 2016. In advance of this, the Minister, Deputy Noonan has said a comprehensive review of the LPT and its impact on the liability due to increasing property prices will be undertaken. The review is under way, the Department is considering all pertinent matters and the Minister will report back to the Oireachtas well in advance of the next valuation date, 1 November 2016, to try to give certainty on this issue. Given that it is causing people significant concern, we would like to provide details on it.