Observe the lightness of the skirmishes over Dublin’s local property tax. For much of the year we note the quiet enrichment of homeowners as the great Dublin property balloon inflates while the public spotlight falls on hapless buyers. Then the near apathy as Dublin councillors vote for the maximum possible reduction in the LPT, while obsessing about the “unfairness” of the 20 per cent reallocation of their LPT to poorer local authorities, all against the background of Dublin local authority managements imploring them to look carefully, really carefully, at soaring budgets.
Dublin City councillors have opted for LPT reduction every year since the tax was introduced eight years ago. Last year just three local authorities reduced the rate, all in Dublin, two of them choosing the maximum reduction of 15 per cent, but, for the first time, Dún Laoghaire Rathdown councillors voted for no discount. This year they reverted to type.
If they went ahead with the proposed cut, the Dún Laoghaire Rathdown chief executive warned, there would be "a wide range of cuts to services in 2022". But the vote to cut went through by 24 votes to 16, supported by a coalition of Fianna Fáil, Fine Gael and – astonishingly – People Before Profit.
What makes the Dún Laoghaire-Rathdown case particularly striking is that it has the highest house values in the country. Last year, CSO figures showed a €650,000-plus average price paid for homes in the area.
But even that figure of €650,000 seems distinctly unambitious if the one 70sq m semi-detached house currently for sale at €400,000 in an old DLR local authority estate is any indicator. For that money, the vendor could snap up a fine, detached five-bedroom house more than double the size currently selling in Longford town – and have €205,000 to spare. It's a small snapshot of Dublin versus rural values. In a June CSO study based on rolling 12-month mean property prices, Cahir had the highest percentage rise in the country at more than 20 per cent. If it seems miraculous, that's because the average Cahir house is valued at about €165,000.
So what secret sauce makes the little south Dublin house worthy of a €400,000 tag?
Well, it just happens to be in a Dublin suburb that comes with excellent public transport and road links to schools, hospitals, third-level colleges, and coastal and city amenities. In other words, it has the luck of location, location, location, plus a cornucopia of public services and infrastructure. So in a Dublin councillor’s world, what rate of LPT should be levied on that little property ? Should the new owner be subjected to the same liability as the owner of a €400,000 property 70km away with no such services or dreams of a wild pay day in a soaring market? Or pay no LPT at all?
The LPT is important in terms of broadening the tax base
In 2020 amid signs that the usual councillors would vote for the usual reduction, Green Party city councillor Michael Pidgeon pointed out the obvious: that "the majority of homeowners will be saved €14-€48 – less than €1 a week", that if you were renting, living in a council house or your income has fallen below a certain threshold, you weren't liable for the LPT and therefore wouldn't benefit from any tax cut.
The real beneficiaries, he said, would be those who owned homes over, say €2 million and who would save several thousand. “What I don’t understand is why that logic hasn’t changed – and not just because of the deficit that’s set out. It’s also about a wider question: how do we look at 2020 and think, ‘less state’?”
The vote to cut was carried by 39 to 21, with Fine Gael, Sinn Féin, People Before Profit and Independent councillors voting to support a Fianna Fáil motion. They knew what side their bread was buttered. A public consultation (required under the 2014 regulations) had shown a near 100 per cent awareness that the LPT is used to fund essential services, yet 75 per cent of the respondents declared they wanted to retain the 15 per cent reduction.
No more equaliser
The LPT is important in terms of broadening the tax base, but as a share of total revenue for local councils it is a low revenue generator. At just 8 per cent it yielded only a quarter of commercial rates in 2018. But it adds up. In the four years between 2015 and 2019, revenue forgone by the Dublin local authorities' LPT cuts amounted to a pretty respectable €150 million; that's the equivalent of a full year's spending by all 31 local authorities on street cleaning and litter management, according to Dr Gerard Turley of NUIG.
The great news for Dublin, of course, is that with the new reforms, its councillors can drop the great “unfairness” routine because it gets to keep all its LPT revenue. No more equalisation. And despite soaring house prices and revaluations, most homeowners will be liable for negligible LPT increases. As the redistributive 20 per cent becomes the responsibility of central government again, let’s see it exercise this responsibility by ensuring poorer local authorities are adequately funded. LPT receipts still amount to only half the general purpose grants from central government, which peaked at €1 billion in 2008.