Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

I thank Senator Fitzpatrick for raising this issue. It is a matter that everybody will understand and appreciate, especially in light of activities in the marketplace that we have seen in recent times. The Government is committed to improving the supply of housing and affordability for first-time buyers. It has already brought forward significant measures in the Affordable Housing Bill 2020 and the Land Development Agency Bill 2021. These measures stand as part of an overall housing strategy that provides the highest ever budget for housing in the history of the State of €3.3 billion to support the social housing needs of 28,500 additional households.

I am aware of the recent purchase of two housing estates by an institutional investor in an area that would normally have been appropriate to first-time or second-time individual purchasers. In the context of an unprecedented low-interest-rate environment globally, international investment in property is increasing. While this increased investment may benefit tenants through improved choice and price moderation, it is not intended that institutional purchasers should be in competition with ordinary households to purchase completed turnkey properties. This situation illustrates the complexity of the property market. Housing policy must balance the needs of all tenures - private ownership, affordable or cost-rental, social housing and the private rental sector.

Investment funds are a long-term presence in the Irish market as in all other property markets, which has been acknowledged by the Senator. In recent Finance Acts, the Minister for Finance has made significant changes to the taxation of institutional investors in Irish property to ensure that appropriate tax is collected. As with investment funds generally, tax occurs primarily at the level of the investor rather than in the fund. In the case of both Irish real estate funds, IREFs, and real estate investment trust companies, REITs, withholding taxes apply on distributions to investors to ensure collection of tax revenues. The tax treatment of these investment vehicles is kept under review, most recently in a 2019 analysis produced for the tax strategy group. This led to the introduction of additional anti-avoidance measures in Finance Act 2019, aimed at ensuring the regimes operate as intended and preventing the avoidance of tax on property profits.

The Minister for Finance, Deputy Donohoe, and the Minister for Housing, Local Government and Heritage, Deputy Darragh O'Brien, are currently working together to assess the role of institutional investors in the market and to identify targeted solutions to ensure such investment is directed at increasing overall supply within the housing market and reducing price pressures for tenants and owner-occupiers. As the Senator and most people will be aware, this topic is a major item for discussion at the Government meeting today. Both of the Ministers will have a discussion with all of their Cabinet colleagues with a view to making sure we come forward with proposals to deal with this matter in the immediate future.

As regards a vacant property tax, in 2018 an independent report was commissioned by the Department of Finance and laid before the Dáil to investigate vacancy levels in further detail. The report found that the vacancy rate within rent pressure zones, excluding holiday homes, was approximately 6% but that most of these were short-term and medium-term vacancies with a low level of long-term vacancies, which is normally under 3% for Dublin, for example. In addition, many of these properties are vacant in the long term for reason of dilapidation or because the owner is in a nursing home. The report estimated that habitable properties that are vacant in the long term account for approximately 1% of properties in rent pressure zones. On that basis, the consultants did not recommend the introduction of a residential vacant property tax as they did not believe it would be an effective response to deal with housing shortages.