The minister acknowledged on Budget Day that housing is a core challenge the country needs to overcome now and in the immediate future. As part of its Housing for All Plan announced in September 2021, the Government outlined its determination to build more homes in order to address the current housing shortage and to introduce measures to alleviate the fact that housing has become increasingly unaffordable. 

In light of the Government’s plan to deliver an average of 33,000 new homes per annum out to 2030, it is expected that the Government will introduce measures which have the primary objective of increasing the supply of residential property on the market, rather than raising revenue for the Government. With that stated objective, a new Zoned Land Tax was announced on Budget Day. It is expected that further developments and measures will be introduced by the Government in line with its ambitious Housing for All Plan over the coming years. 

Zoned Land Tax

To encourage the use of land for building homes, thereby increasing the supply of residential accommodation to the market, a new Zoned Land Tax will be introduced, replacing the Vacant Site Levy. The replacement of the Vacant Site Levy is perhaps unsurprising, given the difficulties that have been encountered by Local Authorities in the administration of the levy and its low yield since it was introduced in January 2017. 

The Zoned Land Tax will apply to land which is serviced and zoned for residential development and also to mixed use land which includes an element of residential land (in circumstances where the land has not been used for the development of housing). A 3% rate of tax will be applied to the market value of the zoned residential land at the outset. 

The minister has not proposed any minimum size exclusion for small plots of land, but has noted that there will be several exclusions for dwelling houses and their gardens, amenities, and infrastructure. We await further details on the exact mechanics of the new tax and the specific exclusions which will be included in the Finance Bill. 

The minister proposed a two-year lead time for residential land that was zoned before January 2022, and a three-year lead time for land zoned after January 2022. Therefore, the new tax will likely start to be administered by January 2024. It will be paid on a selfassessment basis and managed by the Revenue Commissioners. 

Local Authorities will be charged with preparing and publishing an annual map to identify the land within scope of the new tax. A process will be established to allow landowners apply to have their zoning status amended by their Local Authority.

Help-to-Buy Scheme

As anticipated following the Housing for All Plan, the minister announced that the Help-to-Buy Scheme for first time buyers will be extended in its current enhanced form for a further year to the end of 2022. 

The current enhanced scheme provides for a refund of the lower of: 

  • 10% (previously 5%) of the cost of a new house, 
  • €30,000 (previously €20,000), or 
  • the income tax paid by the buyer for the previous four tax years.

To qualify for the relief, the value of the house must be no more than €500,000 and the mortgage on the property must amount to at least 70% of the value of the property. 

This extension aligns in broad terms with the Housing for All Plan and it is expected that other measures to aid first time buyers in accessing the housing market will be introduced over the coming years (for example, the Shared Equity Scheme). This extension is welcomed for prospective first-time buyers, many of whom continue to be locked out of the property market as a result of substantial delays in the supply of new housing. 

Pre-letting residential expenses

In a move to continue to encourage the current owners of vacant residential property to bring such property to the rental market, the minister on Budget Day announced that the rules which allow a deduction for certain ‘pre-letting’ expenses will be extended for a further three years. The relief was previously available for qualifying expenditure incurred up to the end of 2021 and has now been extended for qualifying expenditure incurred up to the end of 2024. 

The rules allow for ‘pre-letting’ expenses of a revenue nature (for example, routine repairs and maintenance costs) incurred on a property which has been vacant for a period of 12 months or more. The relief is subject to a cap of €5,000 per property and subject to a clawback if the person who incurred the expenses ceases to let the property as a residential premises within four years.