DNG BUDGET 2020 RECOMMENDATIONS

RECOMMENDATION 1:

Extend the Help to Buy Incentive Scheme beyond 31st December 2019

The Help to Buy Incentive Scheme is due to cease at the end of 2019 and DNG believes it is vital for this incentive scheme to be extended beyond its current end date in order to protect and sustain investment in housing delivery. This will help provide the construction industry with the certainty required to continue expanding new housing output which is specifically aimed at the starter home market. In a market where affordability is a key issue, the Help to Buy Incentive scheme is justified by the positive impact it is having in increasing new housing construction, and is an important measure in improving first-time buyer’s affordability, and for these reasons, DNG recommends the scheme should be extended for a minimum of three years to the 31st December 2022.

RECOMMENDATION 2:

Introduce a new affordable home purchase scheme to stimulate the construction of new homes

Whilst the government is in the process of introducing an Affordable Housing Scheme for
new home sales on state-owned land need to be made available for all first-time buyers in all new housing schemes.

Making homeownership more affordable for low to middle-income earners is a crucial step along the path to solving Ireland’s current housing crisis and is a key priority for the government. As such, DNG recommends that the government consider the implementation of an affordable home purchase scheme by way of a Government Equity Stake in properties purchased by approved first-time buyers in all designated developments.

The government equity charge will cover a percentage of the purchase price of a new home for approved first-time buyers, with the balance of the purchase price paid for by a regular mortgage taken out by the purchaser. A reduction in the amount the purchaser has to borrow improves affordability and will allow more first-time buyers to access homeownership. A second charge would be placed on the property, expressed as a percentage of the overall purchase price in favor of the government, and the equity charge can be repaid in full at any time during the life of the mortgage and in any event, by the end of the mortgage term or when the property is sold. The value of the second charge would increase should the property increase in value, and would decrease in line with any decrease in the value of the property from the time it was purchased to the time it was sold or the mortgage paid off.

RECOMMENDATION 3:

Alleviate pressure in the private rental market

Small private landlords continue to exit the rented sector, citing increased costs and more stringent regulatory requirements as the reason for doing so. Small landlords are a key component in the housing sector and Residential Tenancies Board research shows that 70% of private landlords own only one rental property. Taxation measures must be taken to prevent their exodus from the market. At present private landlords are taxed at a higher rate than corporate landlords and institutional investors, and DNG recommends that the taxation system for private landlords be adjusted to mirror the taxation system applicable to corporate landlords so as to encourage more private landlords to invest in the sector, and to retain those thinking of leaving.

The taxation system for commercial property is less punitive than for residential property. As an example, commercial rates are an allowable expenditure for taxation purposes whereas local property tax charged on residential property is not. DNG recommends that this anomaly is rectified in Budget 2020 and local property tax is allowable for the purposes of taxation.

Universal Social Charge (USC) is payable on all rental income earned by private landlords but does not apply to rental income received by corporate landlords. DNG is calling for an immediate exemption from the Universal Social Charge and PRSI for all rental income received in the private rented residential sector as well as a reduction in Capital Gains Tax applicable for long-term investment in housing.

RECOMMENDATION 4:

Review the Fair Deal Scheme

Under the current Fair Deal scheme, there is little or no incentive for persons entering a nursing home to make their existing home available to rent on the open market. As a result, the vast majority of homes vacated by persons going into care remain unoccupied for the duration of the nursing homestay. DNG strongly recommend that if a person offers their vacant home to the private rented sector then 50% of the rental income received be classed as an allowable deduction in the assessment of means for the Fair Deal Scheme. In addition, consideration should be given to the application of a reduced level of income tax on the rental income received. In the short term, this has the potential to introduce thousands of vacant properties to the rental sector in a market where more supply is urgently required and in the midst of the ongoing housing crisis, the current position of houses lying empty is not the most efficient use of the housing stock available.

RECOMMENDATION 5:

Encourage Home Ownership by the reintroduction of Mortgage Interest Relief

Homeownership is essential in Ireland and should be encouraged. At present, there is a worrying trend in the declining rate of homeownership across the state. Census results show that homeownership rates declined from 79.7% in 2002 to 67.6% in 2016 and the percentage of rented properties grew.

Policies need to be introduced to support homeownership as the cost of renting in Ireland for an average-priced property is nearly 40% higher than owning a property. Confining buyers to long-term rents is not advisable and when those who rent reach retirement age affordability will become impossible for most and the state will be required to assist.

To encourage homeownership, we are proposing that the government consider the reintroduction of mortgage interest relief for first-time buyers as an incentive for them to buy. In addition, this will also free up much-needed accommodation in the private rented sector.