The Government’s Help-to-Buy Scheme is under review and could face being scrapped with Housing Minister Eoghan Murphy saying it is now under review.
The scheme was due to run until the end of 2019, having been launched in late 2016. It gives first-time buyers an income tax rebate of 5pc on houses up to €400,000 – with a maximum return of €20,000 allowed. There were a number of requirements to be met to qualify for the scheme which would not have appealed to all first time buyers.
I commented on the scheme when it was launched back in 2016, I stated that all it will do is help to increase price and is a PR exercise for the Government. While an increased price will help make more developments feasible, but the Help to Buy Scheme will not benefit the majority of first time buyers. This point seems to have been proven within the first 7 to 8 months of the scheme. While I believe it is a good thing for the Government to review schemes that are not working, scrapping the scheme premature may send the wrong message.
The real issue to address is supply and if the Government wish to make units more affordable for first time buyers they need to look at the design and the taxes applied to newly constructed homes.
The Government first need to look at densities and building heights in key location, they also need to review planning guidelines for apartment and not apply a one shoe fits all model that is currently in place. There needs to be different design standards for different requirements. The introduction of different design standards for student accommodation a few years ago has really promoted development in that area and the problem of student accommodation is being addressed.
The other key area the Government need to review to resolve the housing issue is the cost of production a house and the Tax and charges that make up that cost. A reduction in VAT applied would go a long way to increase development. Local council charges, ESB and Gas connection fees could all be reviewed by the Government. But the reason they won’t is due to the fact that it will be argued that the savings will go straight to the developer. While this is true, it may be the only way a developer will taking on the risk of a development. Once a development is feasible again, supply will return. If there is no reduction in costs the only way the majority of development schemes will become feasible is if prices rise.
The taxation on vacant sites will not lead to development if it is not feasible to begin with, it will only add to the delay. The costs of any such tax will be passed on the purchaser at the end of the day. Suggestion of taxing vacant homes to bring them back into use, may not have the desired effect as the market itself is the best method to regenerate homes in areas of high demands. Tax on vacant homes could have a negative effect on county town where demand is already low.
The goal for the Government should be to get developers to compete against each other to attract the buyers. The best way to do that is promote supply by changings in design and reducing taxes applied to new developments.