Disagreements now appear to be emerging between Fine Gael and Fianna Fáil regarding policy proposals to incentivise a greater level of housing development. In response to the Central Statistics Office (CSO) reporting a significant shortfall in housing completions for 2024, Taoiseach Micheál Martin indicated that schemes will be put in place to attract substantial new private finance into the Irish housing market and that this will become a central pillar of government policy. This marks a relatively significant shift in the government rhetoric. In the lead up to last November’s general election, the majority of emphasis was on the need to build social and affordable housing. Now, freed from the constraints of immediate electoral considerations, the government appears willing to recognise the imperative to leverage private investments in order to meet the housing targets set out in the Programme for Government.
One approach that Fianna Fáil appears inclined to consider is to introduce some form of tax incentive scheme for property developers. Sources have emphasised that nothing has been agreed yet, and any such scheme is likely to be strictly timebound and limited in scope, perhaps to brownfield sites. It is also anticipated that this would be met with some resistance from the Department of Finance, which was badly scarred by property-based tax incentive schemes that fuelled the property boom of the 2000s and the subsequent financial crash.
For his part, Fine Gael Minister for Finance Paschal Donohoe has indicated that he would not support the reintroduction of tax schemes similar to those seen during the last property boom. He explicitly set out his opposition to “Section 23” tax breaks, which enabled investors to offset taxable rental income by buying a new property for rental purposes. Critics say that this policy led to homes being built in unsuitable areas and ramped up excessive lending. The scheme was abolished in the years after the financial crash. On the other hand, the newly appointed Fianna Fáil Minister for Housing said that “all options have to be on the table for discussion” for brownfield sites.
Micheál Martin also indicated that the government will review rules around rent pressure zones and examine options put forward by the Housing Commission, which contained a suggestion to align rent increases to “reference rents” for local dwellings of similar quality. When questioned by reporters about this while on a trip to Brussels, Martin was keen to emphasise that the government was not committing to “end” or “abolish” rent pressure zones, but rather to examine an “evidence based approach to reforming the rental market”, with a particular focus on the reference-pricing mechanism. While property developers and investors have been critical of rent controls for dampening interest in Ireland’s private rental sector, the response from industry has been mixed. While chief executive of the O’Flynn Group, Michael O’Flynn, stated that he is “very encouraged to hear the Taoiseach saying that he’s considering such a review”, Greg Kavanagh of Beakonshaw likened the prospect of getting rid of rent pressure zones to “taking aspirin for cancer”.
