Tax breaks an option to tackle housing crisis

People struggling to buy a home could receive tax breaks from the next government in a bid to halt the escalating housing crisis.

Finance Minister Michael Noonan said the move is one of a number of options the department will consider if they are put forward by the housing committee over the coming weeks.

Speaking amid continuing concerns that some families are being priced out of the property market, the Fine Gael minister said while builders and developers are seeking Vat construction cost cuts, he may prefer to give tax breaks to those in need.

While no decision has been made and any moves are dependent on what the housing committee recommends, the Limerick TD said such a measure could be similar to a previous home-extensions initiative. He said it could help families meet strict Central Bank mortgage rules imposed last year which means anyone who did not have a deposit worth up to 20% is barred from securing a mortgage.

Asked about calls from the Construction Industry Federation and other building sector interest groups to reduce Vat on house builds from 13.5% to at least 9% to help kickstart the market, Mr Noonan said the move was “something we would look at”.

However, noting the €210m cost of a Vat reduction and the fact groups calling for it work “in the interest of builders”, Mr Noonan said: “If I could put a tax break and money in the pockets of purchasers rather than builds I would do that.

“We are looking at a model like that [tax breaks]. No decision has been made yet but it is under active consideration,” he said.

The potential measure was tempered by housing committee chair and Fianna Fáil TD John Lahart yesterday, who said the point of the committee was to “bring the cost [of mortgages] down to allow people to meet the Central Bank rules” and not keep the cost of homes artificially high.

However, if introduced the possible policy switch is likely to be widely welcomed by thousands of people struggling to afford a home due to rising prices and an ongoing rental bubble.

A housing committee meeting also heard Mr Noonan warn that unless the current housing and homelessness crisis is addressed immediately it will have a devastating impact on Ireland’s economy, competitiveness and social fabric.

While accepting there is no quick fix to the housing shortage and that the country “needs to be careful of the consequences of any intervention no matter how well intended”, he said now that Ireland was out of recession it was essential the next government spends any additional money on solving societal issues.

Facing criticism from Fine Gael colleague Bernard Durkan who said the housing crisis is a problem getting worse by the hour, Mr Noonan said building just under 1,000 new homes in Dublin “could address a lot of the issues” in the capital immediately.

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