New tax on land hoarding to replace Vacant Site levy

Updated / Tuesday, 12 Oct 2021 17:57

A review of the Help-to-Buy scheme will be conducted next year

By John Kilraine

A new tax on land hoarding to replace the Vacant Site levy is the biggest new housing measure announced in the Budget.

Overall housing gets a record €4 billion in capital funding - a 21% increase on last year - to help the Government achieve its goal of eradicating homeless by 2030.

The predicted tax on land hoarding known as the Zoned Land Tax will replace the Vacant Site Levy in two years' time.

Land zoned for housing that is not being developed will then be subject to a 3% levy for land zoned by January 2022.

Land zoned after that date will be liable after three years.

The current Vacant Site Levy which is administered by local authorities is currently 7%.

However, the Zoned Land Tax will be administered by the Revenue Commissioners and, making the announcement, Minister for Finance Paschal Donohoe said the 3% rate may be altered.

"I believe the introduction of this tax is a very important step forward in encouraging the release of land for building homes. Depending on its impact, I will be open to reviewing the rate in the future."

Funding for housing confirms announcements made at the launch of the Housing For All plan.

The capital budget is €2.6 billion from Government, which is a record amount and represents a 20% increase on last year. The remainder of the capital funding will come from the Land Development Agency and Housing Finance Agency.

Minister for Public Expenditure and Reform Michael McGrath said there will be 9,000 new social housing units and 4,000 affordable purchase and rental homes next year.

He said there will also be another 14,000 HAP tenancies, bringing the total to 66,000.

In the future, he said, there will be 15,500 new affordable purchase, affordable rental and social homes each year from 2025.

The Help-to-Buy scheme will continue at present rates next year and will be subject to a review while tax relief for pre-letting expenses for landlords will continue for three years.

Money for homeless services is expected to be €194 million, which is down €24 million on last year. However, there were increased measures due to Covid in 2021 and the funding is up by 16% on 2020.

Funding for Traveller accommodation is expected to be increased by €2.5 million to €18 million.

There is also expected to be €20 million more for retrofitting, bringing total funding available to €85 million and house adaption grants are up by €5 million to €65 million.

A core challenge facing the country is housing, says Paschal Donohoe. He says he will be introducing a zoned land tax, to encourage the use of land for building homes. The main objective is to increase the supply of homes, he says. | Live updates:

— RTÉ News (@rtenews) October 12, 2021

The Vacant Site Levy was not working, according to Minister for Housing Darragh O'Brien.

Explaining why the Zoned Land Tax has been introduced, he said that just €21,000 had been collected under the Vacant Site Levy despite demands of €11.8 million.

Mr O'Brien said there had been a lack of coordination between local authorities and different interpretations.

He said the Vacant Site Levy will remain in place until the land tax comes into force in two years' time.

And although the new tax will be 3%, there will be no reduction for those already assessed at 7%.

He said the 3% rate will be reviewed.

Estate agency Sherry FitzGerald said it welcomed the housing measures set out today in Budget 2022, but said the failure to introduce any serious policies to combat the systematic challenges in the rental sector was "disheartening".

"Budget 2022 represents another wasted opportunity to tackle the continued decline of the private investor from the Irish rental market," Sherry FitzGerald's managing director Marian Finnegan.

"The number of properties available to rent has fallen significantly in recent years with private investors abandoning the buy-to-let market. For much of the past decade, for every single investor buying into the market, two are exiting," she stated.

"There is nothing of note in today's Budget that addresses this situation," she added.

Brokers Ireland welcomed the new 3% Zoned Land Tax to encourage the use of land for building homes.

But it said it was disappointing that there will be a two-year lead-in time for land zoned before January 2022, and a three-year lead in time for land zoned after January 2022.

The organisation also welcomed the extension of the Help-to-Buy scheme into 2022.

But Rachel McGovern, Director of Financial Services at Brokers Ireland, said the Government missed the opportunity to not take as much as a single step in the direction of equalising the treatment of public and private sector pensions or the unequal tax treatment of insurance products.