Small group of high earners share in €1.4bn urban renewal incentive

Urban renewal: The Urban Renewal Scheme will cost the exchequer up to €1.4 billion in taxes forgone and benefited a relatively small group of high-net-worth individuals, according to a report by Goodbody Economic Consultants.

"It is difficult to escape the conclusion that the scheme has had very negative equity impacts," according to the report.

Apart from pension relief, the urban renewal scheme led to by far the largest amount of taxes forgone of the schemes reviewed.

However, the scheme "has had very positive impacts on dereliction and has been reasonably successful in improving urban design," the report said.

The scheme began in 1999 and is due to end in July of this year. Up to 2004 half of the developments had been in Dublin and a further 12 per cent in Limerick. Just over half of all developments were commercial and just under half were residential.

The study found the "tax costs are high relative to the outputs achieved. For example the present value tax costs represent up to 43 per cent of the building cost associated with developments undertaken".

Expenditure on the scheme in the 2000-2004 period was given as €1.28 billion, creating an average annual demand for approximately 1,400 workers.

However, the intended community benefits that were to arise from the scheme, by way of levies to fund community facilities and the employment of local people, "appears to have been poorly implemented", according to the report.

The scheme was also to lead to social housing being built in the designated areas, but the majority of local authority officials surveyed said the scheme did not make a significant contribution in this area.

The designation of a limited number of sites conferred benefits on the owners of those sites.

Apartments built on such sites tended to be valued at €55,000- €70,000 more than apartments on non-designated sites.

"Our analysis has indicated that 90 per cent of residential units developed under the scheme have been sold to investors and rented out. The evidence . . . suggests that multiple purchase of tax-incentivised properties was commonplace."

Multiple purchase concentrated the tax benefits in the hands of an even smaller number of taxpayers, the report said.

For commercial properties the tax reliefs would be concentrated in a small number of companies and individuals, it added.