Dáil Éireann Debate, Thursday - 18 December 2025
177. Deputy Cian O'Callaghan asked the Tánaiste and Minister for Finance the research carried out by his Department into the potential fiscal and housing market impacts of the new tax reliefs for property developers announced as part of budget 2026; and if he will make a statement on the matter. [73179/25]
Amharc ar fhreagra364. Deputy Cian O'Callaghan asked the Tánaiste and Minister for Finance the research carried out by his Department into the potential fiscal and housing market impacts of the new tax reliefs for property developers announced as part of budget 2026; and if he will make a statement on the matter. [69732/25]
Amharc ar fhreagraNow we have two grouped questions again – my favourite. Deputy Cian O'Callaghan has two different questions.
I thank the Chair. I have never been grouped with myself before.
Má chaitheann muid ár súil siar, we will recall that huge economic damage was done by property tax reliefs that were not well designed or indeed well researched.
In relation to recently introduced property tax relief measures, what research and analysis was done in advance? Will the Minister publish that research and analysis and share it with us?
I propose to take Questions Nos. 177 and 364 together.
The Deputy was determined to ask this question because it came in as a priority, regular oral and a written question. I am glad it got tabled because it is an important issue in relation to the expenditure of public money and the impact of that on the delivery of housing. A well-functioning housing market, we can all agree, is crucial to supporting labour mobility, improving competitiveness and ensuring that Ireland remains an attractive location for both domestic and foreign investment into the future. It is key for our people first and foremost.
The newly released national housing plan targets the delivery of 300,000 new homes from 2025 to 2030. High-density housing, such as apartments, will form a significant portion of these, in line with changing demographics and in order to achieve national policies on compact growth aimed at creating more sustainable communities.
The direct answer to the Deputy's question is that a number of reports have been published by my Department, most recently one in June 2024 that looked at the availability, composition and flow of finance for residential development. This report found that there is reasonable access to finance for viable residential developments. However, there are certain segments where viability is challenged and there is constrained access to finance, including funding apartment development for the private market. That was the 2024 anchor. I think that report was published.
The Deputy is also familiar with the recently published Society of Chartered Surveyors Ireland report "The Real Costs of New Apartment Delivery 2025", which came out post the budget. It found that State interventions are playing a critical role in closing the financial viability gap while also noting that affordability remains the key challenge. There is also a Department of housing total development cost survey. The direct straight answer to the Deputy's question is that the two principal reports from an official Department point of view are the Department of Finance report in June 2024 on availability, composition and flow of finance for residential development and the Department of housing total development cost survey.
The Society of Chartered Surveyors Ireland report reveals through detailed case studies that State interventions are helping to bridge the financial viability gap. The analysis shows that, without Government initiatives, just two out of six apartment types are viable, whereas with State interventions five out of six become viable.
Even with record levels of State spending allocated for housing, private capital will also be required to meet our housing needs. As such, it is important to create an environment where we can continue to attract private investment, both domestic and international.
For this reason, budget 2026 contained a number of measures to support the housing sector, and in particular the construction of apartment developments. These include the reduction in VAT on apartments, the enhanced corporation tax deduction for certain apartment construction costs and enhancements to the living city initiative, which encourages people to regenerate and live in historic buildings in the centre of Irish cities and now in five large towns under the national planning framework.
Apartment development at scale will play an important role in meeting our housing targets. However, in recent years we have seen a retrenchment of private capital from the funding and development of apartments because these developments are costly, capital intensive and higher risk. Investment in the private rental sector in Dublin is estimated to have fallen from €2 billion in 2019 to €166 million in 2024.
The measures introduced in budget 2026, in tandem with more structural measures related to areas such as planning, apartment design and infrastructure, are all elements of a whole-of-government approach aiming to improve viability, increase supply and help to create a long-term sustainable housing system that reflects our country's needs.
I am aware that there have been reports on housing, viability, financing and so forth and that there has been research in the area; that was not my question. My question was on the tax measures that were introduced by Government and by the Minister's predecessor as Minister for Finance in the budget on property. What research or analysis was done before those tax measures were decided on? The Parliamentary Budget Office, which is independent, has been highly critical of the Government for introducing measures like that and not producing any evidence, analysis or research to back them up, especially given the damage that has been done in the past with similar measures.
In other countries when there are such massive public subsidies put into different types of housing, it is linked specifically to affordability - it makes housing more affordable. The Government decided not to do that. One of the main reports the Minister cited was something that was published post budget. Did the Government carry out research about these tax measures and if so, will the Minister publish it and share it with us?
I am not aware of any research or information that is not already in the public domain but let me double check. I bring the Deputy back to the political decision we made - and it was a political decision - in relation to recognising that viability is a major issue when it comes to apartment construction. Only a month or two after the budget, and I do not want to reach too much into the data, the initial data is somewhat encouraging. The Society Chartered Surveyors in Ireland which has expertise and certainly independence in this pointed out that there are six categories of apartments and only two of them were viable before Government made a number of interventions and it now believes that five out of six are viable which is a good thing.
It is not just a measure that is going to benefit developers in the private sense - by the way there is nothing wrong with private development and we need a lot more of it - but it will also benefit AHBs. It will reduce the cost of apartments for approved housing bodies which is also a good thing. It will also benefit, for example, people building student accommodation which is also a good thing. I am out of time but I agree with the Deputy on the broader point about the importance of measures being targeted and carefully monitored and I hope I will have a chance to come back in.
As the Tánaiste has said, a political decision was made. We know that there was intense lobbying from the sector for that decision to be made. It appears that there was not any actual research or analysis done in advance on these tax measures by the Department. The Tánaiste is not aware of any and none has been published. The SCSI report that he referenced shows only the top 20% of earners can actually afford to rent an apartment. Not doing that analysis, not doing that research and not tying these measures in with affordability is an absolute flaw. We are surrounded by countries where when they make these kinds of investments and measures, they make housing more affordable. The Government is pursuing policies that increase supply but do not increase affordability. That is a major flaw in what it is doing. Not having researched or analysed it in advance is a major flaw and the Parliamentary Budget Office has called it out on that. Why did the Government not do that? When making these kinds of decisions in future, will the Government commit to do the proper analysis in advance and tie the measures in with affordability which is best practice in other European countries?
All the large building companies and AHBs appeared before the housing committee. They all welcomed the changes and improvements made on the viability of apartment building. Is there any timeline on the legal challenge being brought on the changes to apartment sizes which will affect the delivery of tens of thousands of apartments?
I have heard Deputy O'Callaghan make this point before and he holds a legitimate policy viewpoint on linking this to affordability. My predecessor was clear and I am clear too: this is a viability measure. While I do not have it in front of me, we have seen a very small example of where this measure has led to people building apartments to say that it has reduced the costs. However, it has not been introduced primarily as an affordability measures; it has been introduced primarily as a viability measure. There are other things we try to do on the viability side, such as cost rental, renter's tax credits, etc. That is a broader debate. I do not want to say, nor did I say, that no evidence-based research has been done. We have listened to the market, listened to industry and listened to the people who build apartments. That is an important thing to do in recognising there is a viability issue. There was also the June 2024 Department of Finance report which recognised challenges in this area and the Department of housing total development cost report.
I thank Deputy Carrigy for his question on apartments. I also followed that meeting and it was encouraging to hear many people, including the AHBs, saying this measure would help them. The Deputy is right in saying this is just one of a number of measures; there are also the apartment standards. I do not have a timeline on that but I will see if I can get it and revert to him. The apartment standard changes, the viability measures around the VAT and the clarity around rent protections are three key issues in trying to really stimulate apartment construction.
