Proposals in the third Bacon report on housing will fail as the previous two Bacon reports have failed and the Government's "misguided initiatives will make a bad situation worse", Fine Gael's Finance spokesman has claimed in the Dail.
Mr Michael Noonan, who described the Government's policy for the rental sector as "asinine", said the national housing crisis had arisen from a mismatch between supply and demand.
The only workable initiatives were those that increased the supply of houses. The current proposals moved in the opposite direction. "The Government has now turned full circle and their principal proposals this morning seek to reduce demand rather than increasing supply." Their "tampering in the market has exacerbated the problem and yet they continue to meddle while they refuse to take the measures which would increase the supply of houses".
He was speaking in the debate on the financial resolution introduced by the Minister for Finance, Mr McCreevy, following the publication of the third Bacon report on the housing crisis.
Mr Noonan said the Government's proposals to impose stamp duty at 9 per cent and 2 per cent property tax on newly acquired rental residential accommodation would chase investors out of the market.
"This will lead to a temporary increase in the supply of houses for purchase by owner occupiers. The market will quickly adjust, however, as it always does. The building industry will find a new equilibrium and the number of houses being built will drop significantly."
Cash demand would come down but the real demand based on the need for houses - about 55,000 a year - would not be reduced.
"In the medium term we will reap the whirlwind of this misguided policy, as the number of houses being built will drop significantly from the present 45,000. The gap between supply and real demand will widen and prices will be driven up. Today's misguided initiatives will make a bad situation worse."
He said the Government "should learn from its mistakes". When a previous Bacon recommendation was implemented to abolish tax relief on mortgages on rental accommodation, investors moved out of the market and for six months it was extremely difficult to get rental accommodation, particularly in Dublin.
"Then rents jumped and the investors came back in. The policy had no impact on the price of houses, it just made rental accommodation very expensive."
Mr Noonan noted Dr Bacon's recommendation of stamp duty on rental accommodation at 3.75 per cent. "Some genius in Government has decided that if the initiative is effective at 3.75 per cent it would be brilliant altogether at 9 per cent, especially when a 2 per cent property tax is added. Has anybody around the Cabinet table any idea of how the housing market works?"
Mr Noonan laid most of the blame for the crisis at the door of the Minister for the Environment, Mr Dempsey, "who has consistently failed to understand the fundamental analysis of the Bacon reports and to take appropriate action".
Mr Dempsey "has failed to implement the Bacon recommendations to increase the supply of houses" or to introduce an adequate public housing programme to meet the long waiting lists in every local authority.
Both he and Labour's Finance spokesman, Mr Derek McDowell, welcomed the proposal of no stamp duty for first-time buyers on houses costing up to £150,000.
Both pointed to opposition calls for abolishing stamp duty two years ago.
Mr McDowell believed the resolution was "an admission of defeat". He claimed the Minister for Finance was using Dr Bacon's reports as a "shield to hide the fact that the Government is completely devoid of any policy of its own.
"Worse than that, the Minister has used the Bacon reports in order to fend off any policy proposals which hadn't received the imprimatur of Dr Bacon."
Mr McDowell said he supported "without any real enthusiasm" the Government's 9 per cent stamp duty rate on investment properties . He believed this level was "not sustainable in the long term. We need to look at this as a short-term skewing of demand born out of crisis circumstances rather than something that is desirable in itself".
While the Labour Party was supporting the measures, Mr McDowell said "they must be accompanied by measures to counter speculation and profiteering and so far this Government has been very slow to do that".
The proposals were accepted by 78 to 40 votes. Labour, the four Independent TDs who have an arrangement with the Government and Mr Caoimhghin O Caolain (SF, Cavan-Monaghan) supported them while Fine Gael and the two Green Party TDs in the Dail voted against.
