One of the current biggest issues in our society is the availability of housing, particularly affordable housing. For too long demand has outstripped supply and the number of residential units being built each year is not where it needs to be. The reasons for this are varied and include some of the following:
- A protracted and difficult planning process system;
- A lack of zoned development land;
- A lack of public/private partnerships to promote and foster investment in the industry;
- A lack of funding for builders and developers from the traditional banks;
- Materials inflation which increased costs to a level where pricing became increasingly difficult resulting in inadequate returns for the builder/developer and simply pricing many prospective buyers out of the market;
- Lack of labour in the construction industry especially after Covid;
- Higher interest rates and tighter credit conditions which impacted the capacity of buyers to access affordable funding.
It is now widely accepted that we need to deliver annually in excess of 50,000 residential units over the coming years just to catch up. Along with a growing population, the requirements for sustainability and climate targets it is more important than ever that we as a nation are at least hitting these annual unit targets as the requirements are only going to increase into the future.
A shortage of residential housing capacity and an underdeveloped infrastructure system can have a negative impact on the country’s growth and economic success. How often have we heard quotes from foreign direct investment quarters about the lack of residential capacity being a limiting factor for Ireland? Similarly within our own circles of friends and family we have all heard the stories of how difficult it is to find accommodation and the cost of accommodation in the larger cities in Ireland when it comes to going to college, starting a job or trying to get onto the property ladder. The country is at full employment, yet people are struggling to find accommodation.
The impending budget and whomever is in government next will need to address these serious societal and economic issues. They will need to find ways to unlock the planning process and to deliver minimum targets of affordable residential units in a sustainable and affordable way.
The Government has stated that it is not open to reducing the VAT rate for the sector so other possible ways to stimulate growth could include:
- More investment in the government bodies dealing with planning;
- Extend the help to buy scheme and other schemes to make funding available to buyers;
- Tax incentive schemes to encourage development;
- More public/private partnerships to increase momentum in delivering much needed projects;
- Tax credits for R&D and for sustainable methods of delivering projects;
- Apply the standard rate of tax to rental income for small scale and accidental landlords which may assist in keeping them in the market;
- Allocate part of the Apple back taxes fund of €13billion to delivering important construction and infrastructure projects.
This is an important and emotive topic that is intrinsically linked to our society, our economic growth, our educational journey and our planet. The ability to successfully grasp the residential housing crisis and to be seen to have solutions will be vitally important in the context of the pending general election.
Over the next few weeks in the lead up to Budget 2025 #RBKTax will look at potential tax measures that the Government could consider and provide insights into Budget 2025.
Budget Briefing Hybrid Event
RBK will be holding its annual Breakfast Budget Briefing as a hybrid event in person at the Athlone Springs Hotel in Athlone and streaming live online on Wednesday, 2nd October. Mike Scanlan, Tax Director, RBK will be analysing the tax measures announced in Budget 2025 and David McNamara, Chief Economist with AIB will look at the economic outlook.
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