I am writing to you in relation to an article you published back in 2017 about people trying to buy a home with Help to Buy who found out their builder was not on the Revenue’s approved list.
We are currently in a similar situation, having found one of only two new-build homes on the market in my county. However, the builder is an individual and is not on the approved list of contractors for Help to Buy.
Would you have any advice or contacts to help us figure out where to go from here?
Ms M.McG.
You describe yourself as an increasingly desperate first-time buyer and I can well imagine the feeling. Buying a first home is a stressful exercise. Between gathering all the myriad documents required by your lender, dealing with solicitors, surveyors, builders and others – many for the first time in your lives, it can be a tough slog. And then there’s actually finding a home in your area that you can actually afford.
It seems so unfair, having gone through all that, to discover you are falling short again simply because bureaucracy will deny you the very incentive the Government has put in place to help people in your position buy a home.
But that’s where you are. And, to be fair, there are strong and understandable reasons why the Revenue has a list of qualified developers.
Help to Buy was introduced in 2017 – with homebuyers allowed to apply retrospectively to the previous July – to incentivise developers to build new homes for the first-time buyer market and help people work within tighter Central Bank mortgage lending rules.
As you know, it allowed first-time buyers to apply for a rebate of income tax and Dirt paid over the four years before the year in which they were buying the property.
Initially, it was seen as a short-term measure to kick-start the market and was intended to expire in 2019. Given the ongoing stresses in the market, it has extended several times since and is now due to run at least until 2029.
It has got more generous over time, too, unsurprisingly as property prices continue to climb.
Where, initially, the relief was granted as 5 per cent of the value of the property up to a maximum of €20,000, you can now claim back up to 10 per cent of the value of the property or €30,000 – whichever is the lower.
That effectively covers the deposit required of first-time buyers and is thus, for many, an essential element of making their figures stack up on buying a first home.
Understandably, most attention focuses on what financial support is available under Help to Buy but there are other rules.
You must be first-time buyers, the property must be your family home, not an investment property, it cannot be valued at more than €500,000 and it must be newly built – either by a developer or self-built by the applicants. Despite political and industry pressure to extend it to second-hand homes, which would significantly widen your choice, this has not happened.
You must have taken out a mortgage of not less than 70 per cent of the property’s value, though, after Budget 2024, you can qualify if your mortgage plus any affordable dwelling contribution available to you takes you to that 70 per cent threshold.
And, if you move on within five years of buying your home under the scheme, Revenue will come looking to claw back some of the relief granted.
According to Revenue figures from last November, there have been 120,149 applications made since the scheme first opened. Of these, 52,944 have proceeded to the claim stage – where people actually buy a home that qualifies under the scheme, with just under 52,000 of these approved.
Many people end up buying second-hand homes because, even with the incentive, it makes more sense financially: others simply find they cannot afford to buy at this time.
To date, it has cost the State €1.13 billion in tax refunds, with another €18 million of claims working their way through the system.
Given those sums, it is hardly surprising that there is a final set of criteria – you need to be tax compliant, as does the builder.
And from the builder’s side, this is proved by applying to Revenue to register as a qualifying contractor, filling out a two-page HTB 1 form.
In doing so, the contractor needs to confirm several issues. Primary among these is that their tax affairs are in order. They also need to provide details of planning permissions, development plans and land ownership in relation to the properties they are looking to make available under the scheme.
As you can see, Revenue wants to know both that the builder is tax compliant and so too is the development. That doesn’t seem too much of an ask. As it stands earlier this month, just shy of 1,500 builders/developers around the State have registered, so it is clearly standard practice.
You can hardly expect Revenue to sanction the payment of a State incentive of up to €30,000 per home to a builder whose tax affairs are not in order or who cannot show the homes are being built in line with planning law.
[ Property prices likely to rise by close to 10% again this year - IpavOpens in new window ]
So what now?
As it stands, there is no way Revenue will sanction a claim under Help to Buy unless the builder is registered as a qualifying contractor. There is no way around that. So you have only three choices really.
First, walk away from this purchase and wait until something becomes available to you in your price range and preferred location that is compliant. Given your note that only two such properties are currently available in your county, this could be a long or even fruitless wait.
Second, you can see whether second-hand properties that meet your criteria might be available for at least €30,000 less than this asking price, making access to Help to Buy redundant.
Finally, you can see if you can persuade this builder to go through the registration process to become a qualified contractor under the scheme. That should not be a complex process, assuming he and the development are compliant, though it might delay your purchase as it will take some time for Revenue to process their application.
My only concern on that front is, if both are compliant, why the builder has failed to register thus far.
From their point of view, it seems strange if they are targeting the first-time buyer market – as they appear to be doing – that they would then deliberately put himself in a position where they are excluding the majority of that market. But that is what they are doing.
Either they think there are plenty of potential buyers with deep enough pockets not to need access to Help to Buy or they are not really catering for the first-time buyer market.
Or maybe, as a small builder, they simply don’t know the rules, but that seems unlikely this many years into the programme. It certainly would not inspire confidence in their ability to run a business.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com with a contact phone number. This column is a reader service and is not intended to replace professional advice
