The Government has been urged to reintroduce Section 23 tax breaks for builders and developers in the upcoming budget in a bid to boost the supply of rental properties.
Under the original tax relief scheme, which was discontinued after the crash, investors were allowed generous tax breaks for renovating or buying properties (mainly in inner city areas) for the rental market.
Ipav, the Institute of Professional Auctioneers and Valuers, said the relief would enable an investor to offset taxable rental income for buying a new property for rental purposes.
Under the original provision full rental relief was generally contingent upon the property being let for 10 years, it noted.
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Ipav’s chief executive Pat Davitt said improving the pace and scale of housing delivery is critical, for citizens, for the economy and for social cohesion within our society.
“The severe shortage of homes is universally accepted but debated primarily in political and ideological terms without sufficient attention being paid to market realities of what actually works to deliver homes, and at affordable prices,” he said.
A number of measures should now be initiated to stimulate investment, particularly by SMEs, he said.
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“Such a proposal may be greeted with scepticism by officialdom,” he said. “However, not considering it would be folly, because it did work in the past,” Mr Davitt said.
Critics of the original tax incentive scheme say it went too far, leading to unsuitable and inappropriate developments in many areas while driving excessive lending.
“Any fair analysis of the previous Section 23 tax incentive scheme would conclude that it was a resounding success in terms of stimulating building,” he said. “It could be again, with more tapering to ensure it delivers towards more specific needs,” Mr Davitt said.
He insisted positive incentives work, “more carrot than the stick of rent controls which disincentivises investment.”
Mr Davitt cited the recent development levy waivers and the refunding of Uisce Éireann water and wastewater connection charges.
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