by Frank Schnittger
Wed Oct 27th, 2021 at 10:49:54 AM EST
Tax on vacant properties could solve housing crisis
The news that Ireland has the 10th highest housing vacancy rate in the world makes for depressing reading. The 183,000 vacant homes (excluding holiday homes) could solve our homelessness problem 30 times over and dramatically reduce the price of houses on the open market for those who cannot currently afford to buy them.
Many of these vacant properties are owned by global property and hedge funds who seek to bid up rental and purchase prices by constricting supply. At least a third are owned by older people who can no longer live in them and who need to be incentivised to make them available on the open market.
The Government claims it needs more information on why these houses are vacant before it can introduce a vacant property tax.
This is a shallow excuse to continue to favour vacant and often absentee property owners over those who need homes to live in now. It's like saying they need more information on why people work before it can introduce an income tax.
If a vacant property tax brought even half these 183,000 properties to market, it could reduce house prices and solve our housing crisis almost overnight. It's time the Government showed some urgency on this issue and incentivised these homeowners to make their properties available to those who need them most.
It's not too late to include a vacant property tax in the Finance Bill for next year. If the Government fails to do so, it must be replaced by one that will. Our young people can wait no longer.
Taxing property is one of the great no nos in Irish politics. Income taxes are quite high and very progressive but any suggestion that wealth or property should be taxed is sure to raise of chorus of objections even from supposedly left wing parties like Sinn Fein.
The problem is, perhaps, that Ireland has a relatively high rate of home ownership (69%) compared to the European average which means there are always more votes in reducing property taxes than there are in increasing them. Fianna Fail won a landslide victory in 1977 on the promise of eliminating household rates, and a replacement Local Property Tax was only belated introduced in 2013.
Much of the surge in support for left wing parties at the last general election in 2019 was based on their opposition to the introduction of water charges levied on a per household consumption basis even though a number of exemptions for low income and low consumption households were proposed. As a result wealth in general, and property in particular, remains large untaxed in Ireland.
As well has increasing the dependence on income and corporate taxes in Ireland, this has helped to create an asset price boom which is pricing many younger people out of the property market. Rents are booming and foreign venture and property funds are buying up entire newly built housing estates to place on the rental market, further increasing the difficulty of saving for a deposit while paying high rents.
But as usual, there are blind spots in Government policy, and one of these is the very high number of unused vacant properties which could provide a home to homeless families or those who currently can't afford to buy one.
While the government has belatedly introduced a Zoned Land Tax in this year's budget on land that is zoned for housing but undeveloped, this will take some time to reduce building land prices, curb windfall cash gains for landowners whose land is re-zoned, and encourage the building of more affordable new housing. However, even with these measures, demand is predicted to continue to outstrip supply, leading to ever higher house prices.
But the solution is hiding in plain sight. Incentivise the owners of currently vacant houses to bring them to the rental and purchase markets thereby dramatically increasing supply and reducing rents and purchase prices to much more affordable levels. Doubling the current Local Property tax rates on vacant houses could suffice. Hence my letter to the paper (above) published by the Irish Independent as their lead and most read letter today.