The level of vacancy in Irish property is low and “in line with a functioning housing market”, a report by the Department of Finance has found.
Despite property vacancy and dereliction often being blamed for wider housing market failures, the analysis, published as part of the Tax Strategy Group (TSG) papers on Wednesday, finds that vacancy is “predominantly short term, with the most common reason being refurbishment”.
The report cautions against conflating vacancy and dereliction, and does not focus on the latter issue.
The department was asked to examine vacancy in the State with a view to introducing a vacant property tax, under the Government’s Housing for All master plan.
The report outlines that there may be “genuine and acceptable reasons for vacancy” and that “a strong rationale for intervention must be identified”. Using an analysis produced earlier this year by Revenue, it finds that the overall vacancy rate nationwide is estimated to be 3.2 per cent, with a vacancy rate of between 2.5 per cent and 6 per cent considered normal.
In Dublin, there were about 5,800 vacant properties — a vacancy rate of 2.6 per cent — with “similarly low rates” in other areas of high demand such as Cork City (2.6 per cent), Galway city (2.4 per cent) and Limerick city and county (2.5 per cent).
The highest rates of vacancy were in counties popular for vacationing, with holiday homes frequently cited as the reason for vacancy in Donegal (40.6 per cent of the time, with an overall vacancy of 6.7 per cent) and Kerry (holiday vacancy coming in at 39.9 per cent, and an overall rate of 6.4 per cent).
The paper does note that Census 2022 preliminary results estimated a higher rate of vacancy of 7.8 per cent when holiday homes were excluded, but urges caution in using that data.
It also appears to rule out geographically targeted vacancy tax rates, having looked at other jurisdictions which targeted particular cities or areas, finding that they are not “appropriate in the domestic context”. It argues that any tax should have “appropriate exemptions” in place, and says “a particular challenge will be the identification of vacant properties”.
The paper contains a review of previously suggested tax incentives for landlords, updating analyses done in 2017. It strikes a cautious tone, arguing that the rental sector “is just one of many other sectors that may require assistance and intervention” and that any tax relief would lead to a narrowing of the tax base.
However, it finds that landlords are leaving the market at a significant rate, with new borrowing for rental properties collapsing relative to the boom years. It finds that there is likely no policy solution that could dissuade so-called accidental landlords from selling their properties.
Again striking a note of caution, it says that “any favourable treatment of passive personal income, such as rent, would raise legitimate questions around social equity”.
It warns that one option, allowing that rental properties be held via pension vehicles, “does not seem to align with the contemporary policy environment”.
The paper predicts that, with activity in the wider housing market beginning to feed through to housing commencements, the Housing for All target of 23,600 units for this year will be met.
It addresses the future of the Help to Buy scheme, but notes it is the subject of an unpublished review of the scheme by consultancy firm Mazars, and says the future beyond its current sunset date is a matter that falls to Government on the basis of that report.
