After much debate, speculation and disagreement over recent months, the Irish government finally unveiled its policies to deal with problems in the Irish housing market yesterday. See our summary and views below, while the full document is here.
The measures can be divided into two distinct categories: (i) supply incentives, and; (ii) rental sector policies.
Rebate on development contributions – The headline measure will be a targeted scheme for Dublin and Cork that will see builders given a rebate of development contributions for homes provided to the market for under €300,000 (€250,000 for Cork). This cost will be met by the Government and will apply to developments of over 50 units. This is with a view to incentivising large-scale development in the main urban centres in Ireland. The size of rebates will depend on the development contributions charged by the relevant local authority.
Reduction in planning standards – To support the delivery of apartments, it has been announced that building standards will be on a uniform basis across the country, rather than the current practice of individual councils setting their own (higher) standards.
Infrastructure delivery – A programme of support for delivery of essential infrastructure will be introduced. This is seen as one of the constraints on new housing delivery.
Strategic Development Zones (SDZs) – Changes will be made to facilitate fast-track changes to SDZs where there is no change to the overall objective of the scheme.
NAMA delivery – In line with announcements made at the time of Budget 2016, NAMA is tasked with delivering 20,000 units by the end of 2020.
Two-year rent freeze – The well-flagged two-year rent freeze will be introduced. There will be a sunset clause included, with the current 12-month rent review period returning in 2019. Landlords will have to give 90 days’ notice of a rent increase and provide information on “market” rates in the property’s vicinity.
Strengthen tenant rights – Increased notice periods will be required for tenancy terminations and stricter enforcement of exceptional terminations. A deposit protection scheme will also be introduced.
Tax incentives for landlords – For the landlord, tax incentives will be offered to those who rent their properties to tenants in receipt of housing assistance payments. Tax relief at 100% on interest will be introduced, as opposed to the current practice of 75%.
The housing package announced yesterday is the product of protracted discussions over recent months, with compromises having to be reached by the two parties in government. While we believe that a two-year rent freeze will disincentivise new entrants, this should be offset by the announced supply measures. This is by no means a silver bullet but should help kick-start housing development at the margin.