Jennifer Carroll MacNeill (Dún Laoghaire, Fine Gael) | Oireachtas source

I will take this opportunity to reflect on vacancy. I acknowledge the great difficulties faced by many people and families at this moment. The need to address vacancy and the housing crisis is a priority objective of the Government. Senators are aware that in Housing for All the Government has set out a suite of incentives to try to encourage the reuse of properties and increase the supply of housing.

Following a commitment made in Housing for All, a new vacant homes tax was announced in the budget and legislated for in the Finance Act 2022. Residential property is within the scope of the vacant homes tax if it has been occupied as a dwelling for fewer than 30 days in a chargeable period. The first chargeable period commenced on 1 November 2022. The first self-assessed returns are due on 7 November 2023 and the tax will be payable on 1 January 2024. The vacant homes tax will be charged, as Senators are aware, at a rate equal to three times the property's existing base local property tax liability and must be paid in addition to local property tax. A small number of narrow exemptions are available to ensure that homeowners are not excessively penalised for normal temporary vacancy, which is a normal part of any housing market.

Senators have made recommendations for reports on a number of aspects of the tax, including the rate at which it is charged and options to include derelict properties. As the Minister, Deputy Michael McGrath, has said on a number of occasions, this is a new tax and it is important to allow the tax to be implemented and to monitor and review the tax as to its effectiveness. There are a couple of principles involved in making it likely to work the best it can. In developing a new tax the most important consideration in many respects is the simplicity of being able to administer it so we can collect the revenue. The tax should be easy to understand, can be administered in a straightforward way and is capable of being collected. This is why the vacant home tax is based on the local property tax charge. It is set as a multiple of the property's base local property tax as this tax system is well understood at this point.

The purpose of the vacant home tax is to encourage behavioural change as much as possible to get the properties back into use. It should be set at a level that will influence the decision-making of property owners. It is meant to be a behavioural tax. A tax charge at three times the local property tax represents a considerable financial penalty to those who leave properties vacant and will incentivise property owners to bring such properties back into use. Senators have said this may pale into insignificance with the uplift value that may be incurred but, at the same time, people still have to pay out the tax as it accrues.The owner of a property valued a €500,000 would face an annual vacant homes tax charge of €1,485 in addition to their local property tax charge of €495. While a higher rate would mean a greater yield initially, the policy is to try to get as many homes back into use as possible, and to achieve that balance as quickly as may be. It is really important, in that context, to look at the vacancy data from the local property tax returns, on which this tax is based. We are clear, based on that analysis, that there are 57,000 properties reported as vacant by their owners. When we look at the reasons for that, 22% of them are holiday homes, 20% are undergoing refurbishment, 13% are for sale, 7% are under probate applications, 7% have owners in long-term care, and 4% are between lettings. Around 80% of them are accounted for in a reasonable way, having regard to the construction of the local property tax, LPT. We consider holiday homes as part of that. Looking around cities and towns, it is very frustrating to see any property vacant. However, it is important to be aware of the breakdown of that. Not all vacant homes are coming from the same basis.

It is also very clear that 61% of the properties were reported as vacant for less than 12 months, and in all but one of the local authority areas, at least 50% of vacant properties were reported as vacant for less than 12 months. Preliminary analysis indicates that levels of vacancy among LPT-liable properties are low across all counties and are considered, counterintuitively, at levels that are consistent with normal turn in a property market. In terms of the location of properties reported vacant, 2.6% of properties in the Dublin city local authority area were reported as vacant, which is very low, having regard to the normal turn in the market. Similar low rates existed in particularly high areas of demand, such as Cork city with 2.6%; Dún Laoghaire-Rathdown with 2%; Fingal with 1.7%; Galway city with 2.4%; and Limerick city and county with 2.5%. They are lower than what a market should be.

In respect of derelict properties, as the Senator said, that is dealt with differently. However, I wish to highlight the compulsory purchase activation programme that was recently launched, which sets clear targets for each local authority to bring properties back into use. That is a hugely significant project. The councils that have already used CPOs effectively, either by using the process itself or using the threat of the process to bring properties back into use, have found it to be a very effective tool. I do not think that councils should be afraid of CPOs. Of course, they need the appropriate legal support, but the very existence of it is effective. Louth County Council has done it very well, as has Dublin City Council, to an extent. They have used the tool well to try to identify vacant properties and encourage people to bring them back into use without having to go down a CPO route.

The CPO activation programme is a really important tool for the State to be able to use. It is very important that each local authority has very clear targets about identifying derelict properties and bringing them back into use as a matter of urgency.