Thursday, 8 October 2020
Nithe i dtosach suíonna - Commencement Matters
Living City Initiative
I thank the Minister of State for attending. This is my first time to speak in the Seanad Chamber. It is a great honour. Before the Minister of State came in, my colleagues very passionately articulated the stress and strain experienced by the hospitality and other sectors owing to the Covid-19 pandemic. I want to use my time to propose what might be part of a solution to a crisis faced by inner-city areas and rural towns. One element of that crisis that the Minister of State and anybody coming to Leinster House this morning will have noticed is the devastating impact of Covid-19 on footfall in Dublin city. The streets of the city and other cities around the country are devoid of human activity. Rural towns such as Strokestown, Ballinrobe and Youghal have far too many vacant commercial properties. Despite our having a new Minister responsible for housing who, to be fair to him, is moving heaven and earth to address the housing crisis, it will take time to make up for the ten years of home building that we have lost.
Covid-19 has had a very damaging impact on housing construction. The housing crisis has not gone away. Our SMEs, independent traders and hospitality sector are suffering greatly. I would like the Government to consider a creative solution to create footfall in inner cities and rural towns, create employment and sustainably redevelop vacant commercial properties. In a nutshell, it is a matter of expanding on the Living City initiative, which was launched in 2015 and applies only to the inner city. The initiative is based on a tax credit that has largely failed to stimulate regeneration and renovation so I would like the Government to consider amending it to turn it into a living city and rural town initiative. Instead of offering a tax credit, there should be a grant payment to property owners to allow them to renovate, regenerate or re-let vacant commercial properties, or to live again in residential properties. It will bring people back into our inner cities and rural towns to live. It will create immediate employment in the construction sector, generate footfall and, as a consequence, support independent SMEs and small traders. It will be a sustainable response.
To be fair to previous Governments, they have invested in this, including through the tax credit. Dublin City Council has a dedicated one-stop shop to provide planning advice, guidance on regulatory conformance and conservation matters. It relaunched the existing Living City initiative in 2018. However, despite the relaunch and further promotion, there have been only 59 applications processed for the entire city. Therefore, the numbers are far too small and the initiative has had too little an impact. When the city council consulted Irish property owners in respect of the initiative prior to their experiencing the negative financial impact of Covid, the feedback it received was that a grant initiative to support property owners to develop properties would be a greater stimulation. The property owners cited the experience in Amsterdam, where there was a grant of €25,000. This led to the conversion of 850 new homes. The Minister of State might ask how we can pay for what I propose. I ask him to examine the allocation of funds in the serviced sites fund. The Government has allocated over €300 million to provide a €50,000 subvention for the building of new affordable homes. The Government should be ambitious about this and create, with some of the funds that will not be used this year because of Covid-19, a grant of €25,000 that could be used for the renovation and reuse of any vacant property for residential purposes in an inner city area or rural town.
I thank the Senator for raising this issue. As a representative of the north inner city, she has first-hand experience. She probably does not have to walk too far from her own front door to see areas that might benefit from what she proposes. I appreciate and understand that she has first-hand knowledge because she was a representative at local level. She mentioned Dublin City Council. She has a lot of knowledge and experience of this area and that is why she is saying that the existing scheme, while good, is very narrow and restrictive and needs to be broadened.
I will first refer to the existing scheme and then revert to the Senator on the idea of an alternative. It might not fall within the remit of the Department of Finance because we deal only with tax. A grant system would be a different issue. The Senator's point has been made in many areas.
The Living City Initiative is a very specific tax incentive that has been cleared by the Department of Finance. It is so specific that it is not a suitable vehicle for broader application beyond its original goal. When it was being established, the local authorities were asked to exclude areas where there was no dereliction. The idea was really to develop older buildings in city centre areas with quite a bit of dereliction and where occupancy rates were very low, both commercially and residentially. Both homeowners and renters are eligible. The scheme covers specific areas in Dublin, Cork, Limerick, Galway, Waterford and Kilkenny. It was introduced in 2015 and reviewed in 2016. There were amendments to the Finance Act to account for some of the issues that arose.
The special regeneration areas for the Living City initiative were designated following consultation with the relevant city councils and an independent review by a third-party adviser before being submitted to the Department. Specific criteria were required to be taken into account by the relevant city councils when putting forward the proposed special regeneration areas for each city. It is important to state the initiative mainly covered dwellings built before 1915, or over 100 years old. These are the types of properties we are talking about.
The scheme offers relief from income or corporation tax for qualifying expenditure incurred on the refurbishment or conversion of qualifying buildings located within the special regeneration areas designated by the local authorities in the cities I have mentioned. There are three types of reliefs: owner-occupier relief; rented residential relief; and commercial relief. The rented residential and commercial elements provide for tax relief over a seven-year period. A person living in a property can get tax relief over a ten-year period. The maximum relief that a taxpayer can obtain through the scheme is €200,000, which is quite substantial. The scheme is still open for applications. It is one way of addressing the issue. The use of grants probably comprises a broader approach.A grant scheme through the Department of Housing, Local Government and Heritage might be a better proposal because most owners of a derelict building need cash flow to do the renovation. They cannot be asked to wait for seven years to get the cost back in tax relief, and they might not have a big taxable income to start with. The idea is that when they have the work done they can be sure of getting a grant. They can go to the bank with their letter of grant approval before the works begin and the banks know that when the works are completed there is a grant on its way. That does help the cash flow. Anybody who has spoken to me about this issue highlighted the need for a grant to get the job done rather than being told they have to finance the work themselves and claim tax back over the following seven years. There is a big issue in that regard. This is the kernel of the scheme. The Senator had mentioned that a grant scheme might be more effective than a tax incentive scheme or could complement the existing scheme, which remains open. In my second reply I will give some financial information as to the cost of the scheme to date.
I thank the Minister of State for his response and I appreciate that his remit is on the financial and the tax side. However, the Government needs to recognise and accept that as well as dealing with Covid-19 we have a massive housing crisis. It has not gone away. We need to respond to that housing crisis and to the crisis faced by our independent small traders and inner city and rural town commercial operators. The Minister of State said the issue is the cash flow and having the money to undertake the work. I have spoken to the Minister for Housing, Local Government and Heritage about a grant scheme. He is a pragmatic man who is ambitious and energetic about solving our housing crisis. I am hopeful that he will see merit in using half of the serviced site fund money, which is currently giving €50,000 to subvent new builds, to support the renovation of existing builds. The serviced site fund is for sites where there are no roads, sewerage or electricity. I am talking about roads and streets in the heart of our cities such as Dorset Street, here in Dublin, and the main streets of the small towns I mentioned such as Strokestown, Youghal and the like, which already have sewerage, electricity and roads. What is needed is a bit of cash to help the owners turn those properties into viable properties that people can live in to allow them live in those communities, shop in the local shops and regenerate those local economies. I welcome the Minister of State's response and if he can use his offices to impress upon the rest of the Government the need to support a grant I would appreciate it.
I thank the Senator. The essence of her point is well made and I will come back to it when concluding. I want to put some information on the public record. This is information based on the revenue at the end of last year. Of the number of applications received up to last year, only 92 were from Dublin. Cork had 71, Limerick had 19, Waterford had 32, Kilkenny had 11 and Galway city had three, making a total of 228. However, during the years 2016 to 2018, inclusive, only 65 of those applicants received tax benefit. It might mean that many people made applications and were not able to proceed. We have not-----
I would have said the 228 figure was low to start with but in terms of the number that successfully came out the far end and got some tax back, it was only 65. The scheme is generous in that those 65 applicants will get tax relief, on average, of approximately €7,500 for the next seven years. They get back approximately €50,000. That is not the way the scheme was designed but that is the average amount those who have come through the scheme have got. It is an average of €50,000 for those who have been approved but that is over a seven-year period, and most people cannot wait that long. I am giving the Senator that information but would it not be great if that €50,000 was front-loaded?
People could do miraculous work. Ultimately, it will not cost the Exchequer much more. If all those 228 applications did go into the system, although not all of them came out of it, the cost would be €10 million or €12 million; I am only extrapolating the potential figure. I support the call for the grant system and I will speak directly with the Minister involved in that.