Mary Fitzpatrick (Fianna Fail)
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I thank the Cathaoirleach for giving time to the House to debate my Commencement matter that calls for action by the Minister for Finance to increase the affordability and supply of housing for our citizens by introducing tax measures that will address the activities of private investment funds in the housing market. I specifically call for the Minister for Finance to end tax incentives for investment funds to facilitate the wholesale purchase of first-time buyer's homes, and ask him to apply a financial penalty to properties that are left vacant for more than six months in areas of significant housing need.

As the Cathaoirleach will know, I have raised this issue in the Seanad previously. I have discussed it with the Minister for Housing, Local Government and Heritage and the Minister for Finance. What is required is an all-of-government response. Since this Government was formed there has been an historic housing budget approved of €3.3 billion. There is also historic legislation that will have the State take the lead in the provision of affordable housing on State-owned lands. There is affordable housing both to purchase and rent that will provide affordability and security of tenure for our citizens. This is all very welcome along with the banning of co-living and the commitment to end the strategic housing development, SHD, process and review the build-to-rent model.

At the same time as the Government is taking all of this action to increase the supply of affordable homes, and improve the affordability and security of tenure for citizens, we and the State are being undermined by the activity of private investment funds that spend tens of millions of euro a week outbidding, outspending and gazumping first-time buyers, families, single people, approved housing bodies and, indeed, the State. The private investment funds have very deep pockets. Of course there is room for private investment in every market but we have a housing crisis, of which the Minister of State, Deputy Fleming, and the Government are aware. All of the efforts that we are making are being undermined when private investment firms purchase wholesale new-build homes that were designed and intended for home owners. As the private investment funds follow the money, so too must the Government and I urge the Minister for Finance to take action. I urge him to place a significant tax on the bulk purchase of new-build homes and introduce a tax on homes that have been left vacant for more than six months in areas that have a high demand for housing. We need to go further. Some of these measures can be dealt with in planning and I know that the Minister for Housing, Local Government and Heritage has committed to do that but planning changes will only affect new developments. We also need to improve security of tenure for renters, review the rent pressure zones, which I know that the Minister and Government have agreed to do, strengthen rent pressure zones and leverage the State's ability to fund the provision of affordable homes, to purchase or rent, on State-owned lands. As a Government, we must prioritise the provision of affordable homes for citizens. We must also take action to stop the undermining of all of that investment by private investment funds that can outbid, outspend and gazump the State and would-be homeowners.

Seán Fleming (Laois-Offaly, Fianna Fail)
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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.

Mary Fitzpatrick (Fianna Fail)
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Gabhaim buíochas leis an Aire Stáit for his response. I acknowledge that Cabinet is meeting today and that this item is on the agenda and will be addressed. We all must remind ourselves, however, of what the purpose of tax is. The purpose of tax is to raise income to invest in essential community services and supports. In this instance, the tax system is undermining the State's investment. It is encouraging activity that undermines the State's investment in the provision of secure and affordable homes. I urge the Minister of State to urge all members of the Government to review the tax arrangements for private investment firms which are encouraging them to purchase wholesale new-build homes that should have been intended for homeowners.

With regard to the tax on vacancies, I accept the Minister of State's response and that a review took place but what I am calling for specifically is a tax on new-build properties left vacant in high-pressure zones. I am not suggesting we tax families and elderly people in nursing homes. There is a significant issue in this regard, particularly here in Dublin city and actually right here in the docklands. New-build properties are lying vacant when they should be available to people who are desperately in need of housing. I thank the Minister of State for coming to the House today to address this issue but urgent action is required. People younger than 35 have been impacted most by the pandemic from a financial perspective and they are also those oppressed most by the housing crisis. They deserve a home, just as the Minister of State and I did. They deserve an opportunity and they need to believe the Government is committed to tackling this challenge and to supporting them in getting a secure and affordable home.

Seán Fleming (Laois-Offaly, Fianna Fail)
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I will deal very briefly with the taxation situation because it has been mentioned. Real estate investment trusts, REITs, which I mentioned earlier, are companies and are obliged under the legislation to distribute 85% of their earnings every year. A standard 25% withholding tax is levied on that. That is twice the rate of corporation tax which companies pay. Some people believe these companies should be paying corporation tax but, in fact, the investor pays tax at a rate of 25%, which is twice that of corporation tax.

Irish real estate funds, IREFs, are funds rather than limited companies. We changed the rules regarding their tax situation in 2019. As a result, in the 2020 findings of the Revenue Commissioners, it was shown that tax was collected at a rate of 18.5%, which is very close to the standard rate of withholding tax, 25%.

I take on board everything the Senator has said with regard to vacant properties and organisations which have no role in funding projects coming in at the end of the day, when the development is fully built, and gazumping families who wish to purchase the houses they need.