Department of Finance opposed Alan Kelly’s tax plan to freeze rents

Environment Minister Alan Kelly’s proposals to use the taxation system to solve the worsening housing crisis were met with fierce opposition from Department of Finance officials.

Documents seen by the Irish Examiner show Mr Kelly was anxious to use the tax system to “freeze rents”, and help alleviate what was becoming a major headache for his department.

The suggestion was met with fierce criticism when relayed to officials in the Department of Finance, who felt strongly that any such move would be misguided and could cause considerable problems.

Officials worried about a repeat of the “sobering” experiences they’d had when interfering with the property market in a similar way previously.

They also felt that Mr Kelly and Housing Minister Paudie Coffey may not have fully comprehended the impact of such a move.

Internal Department of Finance correspondence prior to a scheduled meeting with officials from the Department of the Environment in February last year, released under Freedom of Information, show the extent of the scepticism among staff in the finance department.

Department of Finance tax policy assistant general secretary, Gary Tobin, first raised concerns over the proposals, brought to him by Department of the Environment rental market principal officer, Damian Allen, which he felt could run into a number of difficulties.

“As part of their social housing strategy, [Mr Allen] indicated that Minister Kelly and Minister of State Paudie Coffey are anxious to see if the tax system can assist in any way to try and encourage landlords to freeze rents.

“I said that I was sceptical about whether the tax system was the best lever to use — our experience of tax interventions in the property market in the past was sobering.

"I also mentioned any tax incentive would be costly, may have unintended consequences, and would probably require state aid approval which could take a long time,” Mr Tobin wrote.

Mr Tobin also offered his view that there should be “absolutely no commitment that we would be willing to do anything” when the two sides met to discuss the ministers’ proposals.

Mr Kelly and Mr Coffey were described as seeing the rental market and social housing “as potentially a big political issue”.

In response to Mr Tobin’s correspondence, Finance Minister Michael Noonan’s special adviser, Paul Bolger, said he “strongly agreed” with his colleague’s assessment of Mr Kelly’s suggestion, and warned such measures should not be used.

Potential taxation measures in relation to landlords were described in previous internal correspondence between Mr Allen and Mr Tobin as a “carrot and stick” approach to solving the problem of rising rents which continued to climb last year.

Rents in November of last year were 10% higher than the same month in 2014.

Mr Kelly lobbied his ministerial colleagues during the year to introduce rent certainty measures that would cap the amount landlords could charge before being shot down by Mr Noonan.

Instead measures were introduced that limit landlords to increasing rents once every two years, as opposed to annual rent reviews.

The only tax measure signed off on was to offer landlords 100% mortgage interest relief in return for renting to tenants on social housing supports.


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