Irish vacant property levels ‘match how housing market works’, report says – The Irish Times

Vacancy levels in Irish property are low and “in line with a functioning housing market”, according to a report from the Department of Finance.

Although vacancy and abandonment of properties are often blamed for broader housing market failures, the analysis, released Wednesday as part of the Tax Strategy Group (TSG) papers, finds that vacancy is “ mainly in the short term, the most common reason being renovation”.

The report warns against conflating vacancy with abandonment, and does not focus on the latter issue.

The department has been tasked with reviewing vacancy in the state with a view to introducing a vacant property tax, as part of the government’s master plan for housing for all.

The report stresses that there may be “real and acceptable reasons for vacancy” and that “a solid justification for the intervention must be identified”. Using analysis produced earlier this year by Revenue, it finds that the overall nationwide vacancy rate is estimated at 3.2%, with a vacancy rate of between 2.5% and 6 % considered normal.

In Dublin, there were around 5,800 vacant properties – a vacancy rate of 2.6% – with “equally low rates” in other high demand areas such as Cork City (2.6% ), the city of Galway (2.4%) and the city of Limerick. and county (2.5 percent).

The highest vacancy rates were in popular holiday counties, with holiday homes often cited as the reason for vacancy in Donegal (40.6% of the time, with an overall vacancy rate of 6.7%) and in Kerry (with holiday vacancy reaching 39.9% and an overall rate of 6.4%).

The paper notes that preliminary results from the 2022 census estimated a higher vacancy rate of 7.8% when vacation homes were excluded, but urges caution in using this data.

It also appears to rule out geographically-targeted vacant housing tax rates, having reviewed other jurisdictions that targeted particular cities or areas, concluding that they are not “appropriate in the national context”. He argues that any tax should have “appropriate exemptions” in place, and says “a particular challenge will be identifying vacant properties”.

The document contains a review of previously suggested tax incentives for landlords, updating analysis carried out in 2017. It strikes a cautious tone, saying the rental sector “is just one of many other sectors that may need assistance. and intervention” and that any tax relief would lead to a narrowing of the tax base.

However, he finds that landlords are exiting the market at a significant rate, with new borrowing for rental properties plummeting compared to the boom years. He finds that there is probably no political solution that could deter so-called accidental owners from selling their properties.

Again, cautiously, he indicates that “any favorable treatment of passive personal income, such as rent, would raise legitimate questions about social equity.”

He warns that one option, allowing rental properties to be held via retirement vehicles, “does not appear to align with the contemporary policy environment”.

The document predicts that with activity in the broader housing market beginning to trickle down to housing starts, the target of 23,600 homes for all for this year will be met.

He discusses the future of the purchase assistance program, but notes that he is the subject of an unpublished review of the program by consulting firm Mazars, and asserts that the future beyond his current expiration date is a matter for the government based on that. report.