Cut or axe to construction sector Vat to kickstart private house building

Michael O’Flynn, managing director of one of the largest private construction firms in the country, has called on the Government to reduce or scrap Vat in the construction sector to kickstart private house building.

Mr O’Flynn said without such drastic intervention, the country’s chronic housing shortage crisis will not be resolved.

He was speaking at the Irish Planning Institute’s annual conference in Cork, where Paudie Coffey, the housing minister, accepted that the State needs to double the rate of private house construction.

Mr O’Flynn said the “finance tap” to developers has been turned off, and if the housing shortage crisis facing the State today was mirrored in France, its government would have acted long ago to remove Vat.

“Almost 40% of the cost of building a private house today goes back to the Government in the form of one tax or another.

“Reducing or scrapping Vat as a short-term measure would go some way towards resolving the crisis,” he said.

A Vat reduction in the tourism sector has worked he said, and should be considered in the construction sector, as part of a wider package of measures.

However, he said the Government’s current proposals to kickstart the construction sector do not go far enough.

Mr Coffey accepted the State needs to at least double the private house building rate, and said rapidly enhancing housing supply and tackling the developer finance issue are among the biggest planning challenges facing the Government.

“There has been some proactive engagement with the Construction Industry Federation, the Department of Finance, and some equity funds, so that they can come up with a viable model of financing private construction again,” he said.

“We are seeing signs of growth in the area but we need to see more ambitious figures being delivered.”

He said he hopes to publish a planning bill before the summer recess which will facilitate a reduction in development charges, reform the Part V social housing provision system, and introduce a vacant site levy.

“It will give power to local authorities to reduce development charges where planning permissions exist and haven’t commenced, so that they can reduce those charges to make those developments more viable,” he said. “But that will only be in areas where local authorities have identified a huge need for housing.”

The bill will allow reduce the Part V social housing obligation from 20% to 10%, and remove from developers any flexibility on that target.

“They will have to deliver that 10% through the planning process, rather than after the event which was causing problems in the past,” he said.

Mr O’Flynn also called on planners to engage with developers and break down what he described as a “Berlin wall” of silence.

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