Lynn Ruane (Independent) | Oireachtas source

Recommendation No. 38 seeks a report on options for making the vacant homes tax more effective, including by increasing the rate of tax by making derelict properties subject to the tax and changing occupancy rules such as that any property unoccupied for up to 90 days of the year becomes subject to the tax. It is welcome that the vacant homes tax is being increased from three to five times the basic rate of local property tax. This is clearly in recognition of the fact that the current rate, which amounts to about 0.3% of the value of the property, is simply not a deterrent from property hoarding. For the past decade, it has not been uncommon to see double-digit house price inflation in a given year. According to the CSO, property prices increased by 14% from June 2021 to 2022. Such high levels of inflation mean that if you leave a property vacant, you can easily make an annual gain of more than 10% of the value of the property while only having to pay back 0.3% in the vacancy tax. This is an incentive for property hoarding, not a deterrent. Slower house price growth this year is an outlier. We cannot simply assume we will continue to see this lower house price growth in coming years. While I appreciate the Minister has increased the tax, this increase is still not likely to be sufficient. Our amendment requests an exploration of a vacant home tax set at ten times the basic rate of LPT, which would amount to around 1% of the value of the property. This would create a more significant deterrent to property hoarding, which is, after all, the stated purpose of the tax.

Moving on to the issue of derelict properties, our group made similar arguments last year but we will repeat them as the issue has not gone away. That the vacant homes tax leaves out derelict properties entirely has been an oversight since the beginning. When former CEG Senator Grace O'Sullivan first introduced legislation to address the issue in 2017, her vacant and derelict sites Bill rightly treated both vacant and derelict sites as connected parts of the same problem. This is what experts have repeatedly called for since. To decouple the issue is short-sighted. Currently, the measure supposedly addressing dereliction is the derelict sites levy administered by councils.To say this has been a failure is an understatement because we know that, in 2021, for example, only €1.1 million of the €4.5 million owed in derelict sites levies was actually collected by city and county councils. This was a collection rate of 23%. Eighteen councils failed to collect the levy at all. Therefore, we know the derelict sites levy is not working. What is going to be done to address the dereliction? In other countries, such as France, where vacant home taxes have been successfully introduced, derelict buildings have not been excluded or treated separately. It is essential that we treat dereliction and vacancy similarly. This is why our recommendation calls for a report on the potential to include derelict sites within the scope of the vacant home tax.

On occupancy rules, the threshold of only 30 days' annual occupancy for a property to be considered exempt from the proposed vacant property tax is extremely low by comparison with international norms. When the tax was first introduced, Dr. Gerard Turley, an economist at the University of Galway, writing for RTÉ, stated:

In other countries and cities around the world that have introduced a vacant property tax, the usual cut-off period is six months. In the Irish case it is one month, which is a very low bar or threshold to meet.

It is clear that the average holiday home will not be subject to the tax because the owner has only to spend a few weeks in it or let family or friends stay in it for a few weeks in the summer months and leave it empty for the rest of the year. This is sufficient to dodge the tax. This is surely not in the spirit of the tax, which is to bring vacant properties into use to address the devastating housing crisis, which is having such a negative effect on the lives of so many. Our recommendation calls for a review whereby the minimum occupancy period might be increased to 90 days. This would be closer to international norms and provide a stronger incentive to bring homes into use and provide rental accommodation to those who really need it.

In the past month, The Journalrevealed that only 3,000 of 50,000 identified vacant properties were found to be liable for the vacant property tax since it was introduced. This tax is failing. Its purpose is to bring homes back into use for many desperate families who need them, yet only 6% of homes identified as vacant in Ireland actually fall within the scope of the tax. Will we solve the housing crisis by returning just 6% of vacant homes to the market? It is clear that the answer is "No".

Recommendation No. 39 would require a report on the issue of derelict sites, the potential revenue raised and the benefits of including derelict sites within the scope of the vacant home tax. I outlined some damning statistics on the derelict sites levy when I spoke about recommendation No. 38. I highlighted that, in 2021, only €1.1 million out of the €4.5 million owed through the derelict sites levy was actually collected by city councils. This meant a collection rate of 23%. This problem continues. The most recent available statistics show a similarly poor trend for 2022. According to The Journal, 14 local authorities did not impose the levy on any owners of the 314 derelict sites in their jurisdictions. Over €16 million in outstanding levies from 2022 and previous years remains unpaid. Another report, produced just yesterday by RTÉ, reveals that 90% of derelict site levies issued to owners in Cork since January 2023 remain unpaid. How can anyone seriously claim this method of dealing with dereliction is working? Could the situation not be improved vastly by imposing an appropriate tax on vacant and derelict properties and enforcing its collection through Revenue?

Again, we are looking for transformative change in housing and meaningful action to provide houses to the countless people around the country who need them. How can we be content to let a shambolic system continue – a system that is completely non-functional and provides absolutely no deterrent to dereliction, as levies seem to be entirely voluntary or part of a regime that is never enforced? Recommendation No. 40 seeks a report on the potential to link the rate of vacant homes tax to property price inflation statistics. As we proposed last year, a variable rate of tax is the most sure and direct way to remove incentives to hoard property. It would wipe out some of the increase in a given property's value annually but in a more targeted and proportional way.The current system of a flat rate is ineffective because if property price inflation is way up at 14%, as it was in 2021 and 2022, then a tax of 0.5% of property value is no deterrent at all with regard to hoarding. If property price inflation was 5% in a given year, the tax should be in proportion to that 5%. This would have to be subject to a reasonable cap. Nobody would expect the tax and property price inflation to be directly linked, and nobody would expect owners to pay tax at 14% of the value of their property annually. However, there should be a relationship between the two figures, otherwise the tax fails to target the gains in property values and therefore fails to disincentivise hoarding. Higher gains in the value of a property in a given year should ensure higher taxes. It is a simple principle and the only one that makes sense.

Again, the key problem here is the scope of the tax and its enforcement. It will not matter how we set the rate of tax if a significant proportion of vacant or derelict properties are not captured within the scope of the tax. What is the purpose of this measure if only 6% of homes we know are vacant are brought back into use? This issue must be addressed first and foremost.