Pearse Doherty (Donegal, Sinn Fein)
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53. To ask the Minister for Finance the steps he will take to change the lucrative tax arrangements in place in order to disincentivise commercial investors from distorting the market for new housing in Dublin and nationally through the buy-to-rent model; and if he will make a statement on the matter. [17794/19]

Paschal Donohoe (Dublin Central, Fine Gael)
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I am aware of recently expressed concerns to which the Deputy refers, in relation to the potential effect investors adopting the 'buy to rent' model are having on the Irish property market.

I would like to advise the Deputy that my Department actively monitors developments in this sector on an ongoing basis, and has recently published a paper on Institutional Investment in the Housing Market. The paper is based on CSO data up to 2017, the latest year available.

While there is a perception that institutional investors are purchasing large amounts of housing stock, the data show that their activity has been limited in the context of the overall housing market.  In 2017 — the latest year for which we have data – firms in this category were net purchasers of just 1 per cent of residential sales, or just over 500 units. Furthermore, from 2010 to 2017, net purchases by Real Estate Investment Trusts (REITs), real estate funds and private equity firms were less than 0.01 per cent of available units, or just 380 units.

In relation to the tax treatment of such entities, the function of the REIT framework for example, is not to provide an overall tax exemption. It is to facilitate collective investment in rental property by removing a double layer of taxation which would otherwise apply on property investment via a corporate vehicle. REITs are required to distribute 85% of their property profits each year for taxation at the level of the shareholder and Dividend Withholding Tax is collected on the distributions. 

Additionally, the Irish Real Estate Fund (IREF) regime was introduced in Finance Act 2016 as a result of concerns raised in both the media and the Dáil regarding the activities of certain non-resident investors in the Irish property market. These provisions apply to certain investment funds deriving 25% or more of their value from Irish real estate assets and impose a Dividend Withholding Tax on distributions to non-resident investors.

I currently have no plans to change the aforementioned treatment of such entities, however, as the Deputy will be aware, as part of the 2018 Finance Bill process I committed that my officials would undertake a report of the impact of REITs, IREFs and Section 110 companies on the residential property market. This report to be presented to the Tax Strategy Group this summer, and work is ongoing in this regard.