Addressing Ireland’s Housing Crisis: A Call for Targeted Tax Incentives

As we all know, Ireland is facing a severe housing crisis that affects a broad cross-section of society and urgent action is required. Housing affordability and availability have reached unprecedented lows, impacting economic stability and the well-being of citizens. While the past government has taken commendable steps to address this issue, there is an urgent need to accelerate the improvement in housing supply.

We believe that the re-introduction of targeted tax incentives is a crucial step in addressing the critical housing shortages, particularly in the areas of apartments, student accommodation, nursing homes, and independent living facilities for older people. History shows that tax incentives can stimulate the supply of residential units where the market has failed to operate efficiently. However, careful controls and reviews should be implemented to avoid repeating past mistakes.

The current environment makes the cost of apartment builds prohibitively high versus the expected sales proceeds, making them unviable under the current model. Similarly, the cost of operating and providing residential care for the elderly has become unattractive, leading to a significant fall in the pipeline for this type of accommodation. The introduction of targeted schemes would incentivise the development of apartments, student accommodation, and age-related living facilities, thereby optimising the utilisation of existing housing stock.

Increasing the supply of such units will result in lower rents and better quality of life for individuals and families. It will also help address the issue of family homes being occupied by students, single people, and elderly individuals who no longer need a family home. By providing appropriate housing options for these groups, we can free up family homes for those who need them.

The effectiveness of tax incentives in increasing supply has been demonstrated in the past. The Indecon Report analysed 11 tax schemes and found that the vast majority had a positive impact on the supply of the types of projects incentivised. The Commission on Taxation & Welfare also noted that tax incentives could potentially lead to increased supply if the dominant factor is the cost of building.

In the apartment sector, the current cost of developing a two-bedroom urban apartment is €591,783, compared to the average price of €230,000 nationally and €345,000 in Dublin. This clearly demonstrates the lack of incentive for developers to undertake such projects. Similarly, the elderly care sector is facing a supply challenge with an aging population but a falling number of beds in the pipeline. The student accommodation sector also faces a significant shortfall in supply, with demand expected to reach over 115,000 beds by 2034/35, compared to the current supply of approximately 47,000.

We believe that the introduction of targeted and measured tax incentive schemes is appropriate to address these issues. However, there are risks associated with the introduction of tax incentives, such as oversupply, deadweight, and opportunity cost. These risks can be managed by implementing appropriate controls and regularly reviewing the schemes.

To maximise the impact of these tax incentives, we recommend implementing tax allowances and deductions specifically targeted at developers and investors who commit to building apartments, student housing, nursing homes, and independent living facilities. Clear eligibility criteria should be established to ensure that the benefits are directed towards projects that meet the most urgent needs. The schemes should be timebound and regularly reviewed, with extensions only considered after detailed analysis. A streamlined application and approval process should be developed to encourage swift uptake and implementation of these incentives.

In conclusion, we are of the opinion that the government should act swiftly and decisively to re-introduce these targeted tax incentives. By doing so, we can address the pressing housing needs of our communities and build a more inclusive and prosperous future for all.