REA calls for national development charge rebate system to ease housing crisis

Eamonn Spratt and Michael O'Connor

Eamonn Spratt and Michael O'Connor

The Government needs to impose the proposed local development charge rebate scheme on a nationwide basis in order to ease the current housing supply crisis, according to the Real Estate Alliance (REA ).

REA chairman Michael O’Connor said: "Although the Taoiseach has confirmed that the Government will introduce a local development charge rebate scheme for large housing projects in Dublin and Cork, they are failing to recognise the fundamental supply issues that exist in urban areas nationwide.

O'Connor said the problem associated with obtaining new housing is that there is little incentive for builders in the current economic circumstances: "The cause of this nationwide lack of suitable housing supply, especially in three-bedroomed semi-detached homes, is that builders cannot yet sell at a profit. The average price of a three-bed semi in our Q3 survey was €188,102, and in simple terms a builder needs to achieve €200,000 from the sale of a new home to cover the cost of construction.

“There is still a huge gap in the cost of building and bringing a house to the point of sale, and what it can achieve on the open market. In an environment where such a big gap exists, there is no incentive to start building, and the State must work to close this uneconomic gap."

The REA has called on the Government to abolish the 13.5 per cent VAT rate on new homes and to introduce the proposed local development charge rebate scheme on a nationwide basis, a combination of measures it feels will reduce the cost of a new house by €60,000 on average.

“Introducing a zero VAT rate on new homes would reduce a €250,000 property to €220,000," Mr O'Connor said. "The €30,000 presently charged on such a house is an inequitable burden on a young couple who are forced to borrow that sum over the life of a mortgage to pay tax. Coupled with the rebate on the local development charge [this] should bring a three-bedroomed family home priced at €250,000 down to something in the order of €190,000."

A well as this, the REA suggests raising the price ceiling for first-time buyers to €330,000 in line with the average values in Dublin, and also that second-time buyers should be assisted by allowing them to borrow 90 per cent of the cost of their mortgage.

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