Introducing a zero Vat rate on new home builds would help solve the country’s chronic housing shortage and support economic development, according to the lord mayor of Cork.
The measure would reduce the cost of construction, which has been repeatedly cited as being too high, and make it viable for development to begin in areas in dire need of housing.
Fine Gael councillor Des Cahill called for the introduction of the 0% rate for three years at a Housing Action Plan workshop this week.
The proposal received support from senior civil servants in the Department of Housing, he said.
“Nobody can argue that the cost of building is too high so that has to be addressed. The second thing is, what we don’t want is that because of cost being too high and the eagerness to get jobs built that they wouldn’t be built properly,” said Mr Cahill.
Asked if it would be correct to offer tax breaks to developers, the lord mayor said the state doesn’t receive any tax income anyway if homes aren’t being built, adding “what tax take we may lose on one hand we’ll get back many folds over on the other”.
With the IDA looking to inward investment from large multinationals in the wake of the UK’s decision to leave the EU, it is imperative that sufficient levels of accommodation are available in towns and cities to house extra workers.
A number of multinationals already based here are “in expansion mode” but won’t continue to add to headcounts if the accommodation shortage doesn’t improve, he added.
Hubert Fitzpatrick, director of the Irish Home Builders Association — an arm of the Construction Industry Federation (CIF) — didn’t go as far as recommending a 0% Vat rate but reiterated his desire to see a reduction to stimulate the market.
“The CIF has strongly advocated for a reduction in the Vat rate from 13.5% to 9% as a temporary measure for a number of years now. This initiative can be focused so as to make housebuilding viable while meeting the need for affordable homes particularly for the first time buyer,” said Mr Fitzpatrick.
“It’s estimated by the [Society of Chartered Surveyors] and our own analysis that this reduction could take €23,000 of the cost of a new home. From a government exchequer perspective, a Vat reduction to 9% would be offset by an increase of house-building activity of 16%.”
A spokesperson for the Department of Housing said any variation in Vat would ultimately be a matter for the Department of Finance but added that housing “is an absolute priority” for the Government.
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