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

Before addressing this group of recommendations, I join the Cathaoirleach and Senators in offering my sympathies to the family of the late former Deputy, Bobby Aylward, some of whom were in the Gallery a short while ago. I spoke to Helena outside and explained that I am in the Seanad for this debate and will not be in the Dáil Chamber for the expressions of sympathy.

I turn now to recommendations Nos. 11 to 16, inclusive, which are being discussed together. Addressing vacancy and maximising the use of existing housing stock is a priority for the Government. In its Housing for All strategy, the Government set out a suite of incentives to encourage the reuse of properties and increase the supply of housing. In addition, the Government is committed to exploring options around sanctions for non-use of residential property and ensuring there is some penalty for leaving a home vacant for a prolonged period without genuine cause. To that end, the Minister announced the introduction of a vacant homes tax in budget 2023.

Senators Higgins and Ruane have made a number of recommendations for reports on various aspects of the new tax, including the duration of vacancy, the rate at which it is charged, options to include derelict properties and a definition of "market rent". As with all new tax measures introduced, the Department will monitor the vacant homes tax and if it is not considered to be effective in bringing more properties into use, the Minister will have no hesitation in reviewing how it operates. It is a new tax being introduced, with arrangements being put in place for it to be paid in the coming year and the years to come. We will have to see how it works. If it needs improvement, if the rates at which the tax can be levied or if the definitions or method of collection need to change, that all can be considered, but we need some information as a base for drawing any conclusion. That can only happen after the legislation takes effect and we see how it works for a period. The Bill certainly can be revisited at that stage.

Regarding the duration of vacancy, a minimum threshold of residential occupancy aims to strike the appropriate balance between incentivising owners of vacant homes to bring their properties back into use without penalising homeowners for normal, temporary vacancy. The Finance Bill sets out a threshold of 30 days. Senator Higgins proposes that my Department compile a report on setting the minimum occupancy threshold at either 90 or 180 days, based on the recommendations submitted. The latter would mean any property that is not occupied for more than half the year would be liable for the vacant homes tax. In that scenario, many instances of infrequent occupancy of a property would be subject to the tax. This would unfairly penalise property owners who have understandable reasons for not occupying their homes on a full-time basis. These include situations such as where people are working away from their homes.We all know people who may have to take the first flight out on a Monday morning because they are working in London or elsewhere in the UK and come back on a Friday evening. Their properties would fall under that definition. We all know sales reps who are on the road and leave on a Monday and get back on a Thursday night or Friday. Their properties would also fall within that situation. Some people have caring responsibilities for an individual who is not well and during the course of a year they may stay a number of nights in the other person's house. Their home may not be occupied in that situation. Therefore, it would be wrong to introduce a tax on people when they stay with an elderly relative, neighbour or a person for whom they have a caring duty.

In addition to penalising vacancy with understandable reasons, taxing vacancy at this level would not support the tax policy rationale of increasing housing supply. Such properties are not the intended target of the new tax as they are not likely to be made available for sale or rent. The purpose of the tax is not to raise revenue or penalise owning additional properties but to incentivise bringing such properties that are genuinely unoccupied back into use. By contrast, where a property is in use as a dwelling for less than 30 days in a 12-month period, consideration should be given to whether the property could be put to greater use. It is appropriate to apply a tax on vacancy as a means to encourage owners to bring such properties into residential use.

Regarding derelict properties, the vacant homes tax seeks to target properties that are habitable and ready to be occupied quickly. Accordingly, VHT would be applied to properties that are residential properties for the purposes of local property tax, that is properties that are suitable for use as a dwelling. In this way, the tax targets properties that could be put to greater use with immediate effect as well as allowing for simpler administration and for the tax to be implemented quickly by Revenue. A site may be deemed not liable for local property tax due to being unsuitable for use as a dwelling, or uninhabitable as the case may be. Revenue has a clear definition of what it deems "habitable" to be.

In developing a new tax, an important consideration is simplicity. It is important to ensure the tax is easy to understand and administer. This is why the Minister chose to set the rate of the vacant homes tax at a multiple of a property’s base local property tax charge, as the LPT system is well understood at this stage. Everybody understands it and they know, in relation to this particular tax, they can multiple the charge by three. While Senators Higgins and Ruane recommend the Department considers a variable rate of vacant homes tax, price growth and rent increases do not take place evenly nationwide. We could have variations from county to county, between regions within counties, or urban areas versus rural areas within counties. That would make the whole situation difficult to manage and would not achieve the effect of collecting the tax as an incentive to encourage people to make sure their house is not left vacant when it could otherwise be made habitable.

With regard to the definition of "market rent" for the purposes of this tax, section 96 of the Bill refers to the definition provided in section 24 of the Residential Tenancies Act. In short, "market rent" in this context means the rent that a new, willing tenant would give and that which a willing landlord would accept for the occupation of a vacant dwelling. The Senator has referred to this specifically. The decision to use the definition of "market rent" in the Residential Tenancies Act 2004 for VHT purposes was deliberate. A clear and consistent understanding of the term avoids confusion. It would not be right to have one definition in the Residential Tenancies Act 2004 and to have a different definition in the Finance Bill. That is one of the reasons we want to ensure the tax is easily understood so people can, on a self-assessment basis, work out what is due without having to get professional advice.

For the variety of reasons I have mentioned, I do not intend to accept the recommendation proposed by the Senators.