Alice-Mary Higgins (Independent) | Oireachtas source

I move recommendation No. 8:

In page 56, between lines 2 and 3, to insert the following: “26. The Minister shall, within three months of the passing of this Act, prepare and lay before both House of the Oireachtas a report on—

(a) the introduction of Capital Gains Tax at a rate of 33 per cent where a REIT or a group of REIT disposes of a property of its property rental business,

(b) the introduction of a surcharge on REITs buying up residential properties, and

(c) the effect or otherwise of REITs on the supply of residential housing on the open market for private household purchase.”.

My recommendation follows our discussion on housing and the very real difficulties faced by first-time buyers in the housing market and, indeed, some of the systemic problems that go a lot deeper than simply the financial situation for first-time buyers but are around what we value and prioritise in the system. I do not suggest that real estate investment trusts, REITs, are the sole or main cause of our housing issues. There are other issues, as we have highlighted, such as the hoarding of land and planning permission. It is a fact that the opportunity to attach a use-it-or-lose-it clause in a more robust and stronger way to strategic housing developments was not taken at the time when it was suggested, and we again have the hoarding not only of land but of planning permission and situations where the Government somehow feels it has to coax builders and developers to build rather than leading out on building, as it should. Those are all of the wider issues.

I want to address here the issue of REITs. It was said again, I believe by a Government Senator, that there are stories of how these investment companies are buying up hundreds of housing units at a time. They are being bought before they have been built. They leave first-time buyers completely out of the market.They become a speculative investment to be leaked onto the market bit by bit and in a way that maximises profit by creating a scarcity and ensuring there is desperation, and there is desperation for some persons with regard to accessing houses at this point.

The Government gives generous tax terms to REITs and there is a question as to whether prioritising funding to these bodies and giving them tax breaks are a positive intervention in the market. I argue that it requires review. The review I am seeking from the Minister is to examine the introduction of a new capital gains tax at a rate of 33% where a REIT or a group of REITs is disposing of its property or property rental businesses. This is an important measure now because we know how many REITs and speculative funds operate. They look for the next big opportunity. There are going to be opportunities in the UK, for example, and we do not want to have a situation in which a number of large-scale owners of rental property or homes can put the Government in the position of being a hostage in the future. We do not want a situation whereby a REIT disposes of property rental businesses on a mass scale. If it does that, we want the State to recoup a decent amount of revenue which it can put towards the other measures it takes in respect of housing. It is appropriate to have a capital gains tax that recoups the very large profits that have been made, given that so much of that profit depended on the preferential tax treatment originally afforded.

In addition to examining the question of a capital gains tax at the rate of 33%, the report should examine the introduction of a surcharge for REITs that are buying residential property. Instead of the State having to add itself alongside first-time buyers, perhaps we could consider introducing a surcharge on the rival purchasers in this regard to ensure individuals and homeowners would be able to compete effectively. I also ask that the report examine the effect or otherwise of REITs generally on the supply of residential housing on the open market for private house purchase. Again, these measures have been in place for some time. There are strong individual and anecdotal examples of cases in which they have had a negative impact either in terms of rental security or in terms of access to home ownership.

I am asking the Minister of State to examine that and to consider the measures I have set out, or such other measures as he might find, that will ensure we do not have a set of negative and potentially avoidable consequences to the treatment of REITs in Ireland.