The Government should introduce measures to help first-time buyers meet the cost of a deposit on a house, according to new recommendations being finalised by the National Economic and Social Council. It will also call for consideration of a new tax on second homes, writes Cliff Taylor, Economics Editor
The NESC report on the housing market, due to be published shortly, will carry considerable weight, as its recommendations are endorsed by the unions, employers, farmers, social groups and Government representatives who sit on the council.
However, the council has not been able to agree on recommending measures to address the availability of land or the profits accruing to developers when land is rezoned, according to a late draft of the forthcoming study. A recent report from the Joint Oireachtas Committee on the Constitution called for action in this area.
The NESC report concludes that there is not a general affordability problem in the housing market, but says that significant groups of lower income householders are finding it very difficult to get into the market. The key problem area is paying the deposit, it says, which is typically 10 per cent of the purchase price. For someone on the average industrial wage this now equals a year's earnings, compared to one third in 1989. The NESC says action is needed to address this, possibly through tax relief for those savings for a deposit.
The late draft of the report outlines one other possible approach, under which the State would extend the deposit in return for a small equity stake in the house. This would be repaid using an agreed mechanism. The report also calls for an increase in the provision of social housing. The NESC recommends the retention of mortgage interest tax relief, though it says this might need to be re-examined if a scheme is introduced to help those saving for a deposit. It also says stamp duty should be retained, though it suggests that the existing bands could be widened to lower the cost for those buying average homes.
The report concludes that a substantial number of new houses have been bought as second homes. It says measures are needed to ensure purchasers of second homes pay the full cost of supplying services and welcomes additional development contributions being imposed by some local authorities to achieve this. It adds that "the council believes that consideration should be given to a separate tax on second homes".
The NESC has also failed to agree on a recommendation in an earlier draft that a new tax should be imposed on land - levied on both owner occupiers and larger landowners. This was designed to encourage the development of land and pay the cost of local services.