A vacant property tax falls into the category of something that sounds good, something that will play well politically, but ultimately something that will pay next to nothing.

Don’t get me wrong, it’s maddening to have so many empty houses in the midst of such a chronic housing shortage. But vacancy is a complex phenomenon, which will not simply be enchanted by a tax.

As the Central Bureau of Statistics (CSO) notes, many of the 183,312 dwellings recorded as vacant in the 2016 census were either for sale; were rental properties; had a deceased owner; or were under renovation. Overall, these are not big buy-and-go investors or foreign funds sitting in half-empty buildings, legitimate targets for most people.

The CSO figures result in a vacancy rate – the number of empty properties relative to the total housing stock – of 9.1 percent, which is high by international standards, the 10th highest in the world.

Geodirectory – which takes a narrower definition of vacancy and uses electronic codes to identify empty homes – estimates that there were 92,135 vacant homes (4.5%) in the second quarter of 2021. But even that could overestimate .

In a note to the Oireachtas Housing Committee, a senior official in the tax policy division of the Department of Finance Minister Paschal Donohoe said that a recent sample analysis, carried out on the number of vacant properties in 16 rental pressure areas of the state, showed that the “Urban areas of Cork and Dublin continued to have very low vacancy rates”.

North Dublin city center had a vacancy rate of 0.86% while Clontarf’s rate was only 0.24%. In southeast Cork City, the rate was 0.77%, he said.

The CSO figure of 183,312 contains several categories of vacancies. Some could be considered legitimate to tax, others less. Drawing a line between them will not be easy. Nor navigate Ireland’s contentious culture. The tax on vacant sites, which will soon be halted, has sparked several legal cases.

Nonetheless, Donohoe has indicated that he intends to introduce a tax on empty housing “as soon as possible”. He said vacancy information included in local property tax (LPT) returns would be analyzed by the finance ministry to inform the design of the tax.

“Before introducing such a tax, it is essential to have a good understanding of the quantity, locations and characteristics of long-term vacant properties and the reasons why they are vacant,” he said on the occasion. of a committee hearing of the finance bill last week.

“There may be genuine and acceptable reasons for the vacancy, such as renovation work, the temporary absence of the owner for medical reasons or the waiting for the probate of the estate of a deceased person”, a- he declared.

LPT supplement possible

Sinn Féin finance spokesman Pearse Doherty questioned whether vacant housing in Donegal’s small villages would be hit by the same tax rate as vacant housing in places like Dublin, where the need for housing is larger. Should abandoned cabins, for example, be taxed? This is another potential anomaly that will need to be corrected.

Given the emphasis on the LPT, the government might consider some sort of LPT surtax on vacant properties, similar to what has been put in place in the UK.

Such a measure would impose a higher rate – potentially 300 to 400% higher – on houses or apartments that have been vacant for more than six or twelve months.

However, there are fears that a general tax will hit homeowners who may be abroad or own vacation homes, when the intended target is wealthy investors or those who preside over vacant apartments. Kennedy Wilson’s 22-story Capital Dock apartment program in South Dublin’s docks was – earlier this year – reported to be half empty.

A tax on vacant homes, if directed at foreign funds, enjoying high rental yields, will play well here – Fine Gael party leader Leo Varadkar has been pushing for it – but whether it will measure up in terms of supply – the ultimate goal – is another question. And applying it to a larger pool of vacancies can be controversial.

Other countries

Vancouver introduced one in 2017 amid declining supply rates and following a study suggesting there were more than 10,000 vacant homes in the city. However, the first tax implementation report in 2018 found that the tariff only applied to 2,538 units.

That number fell to 1,893 units in 2019 and in a city that would need 72,000 new homes to meet demand over the next decade.

Even so, the concept of taxing empty homes – as a partial solution to the housing problem – is picked up by policy makers around the world.

Los Angeles plans to vote on a vacant housing tax in 2022 amid an upsurge in homelessness there. Hong Kong, one of the most expensive real estate markets in the world, is considering taxing apartment developers to deter them from hoarding. Barcelona went further by telling landlords to rent their vacant homes within 30 days or risk getting them back for half of their market value.

Governments are struggling to contain housing costs and fight politically accordingly and taxing empty homes is the latest in a long line of solutions that unfortunately haven’t made a blind difference.

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