Property & construction

The property and construction sector remains both a key industry in Ireland’s economy, and a critical component in delivering much-needed infrastructure and solving our housing crisis. The sector faces a number of challenges, including the effects of rent caps, recent cost inflation, high costs of financing, and a complex and costly planning system, which inhibit the potential positive contribution that the industry can provide.

We welcome the minister seeking to address a number of the issues faced by participants in the sector – particularly in alleviating the financial burdens faced by tenants and homeowners (both existing and prospective). We are also keenly aware of the wide range of initiatives introduced and investments made by the Government in relation to housing in recent years – Housing for All, Croí Cónaithe, the Shared Equity Scheme, Cost-Rental Housing, and Project Tosaigh amongst others. This has continued with the allocation of an additional €1.25 billion to the Land Development Agency as part of Budget 2025. These are having a tangible impact on the housing sector, and we welcome further measures to positively tackle the challenges faced by all sector participants.

However, there are significant concerns around a number of measures that the Government has sought to introduce, including the changes to certain stamp duty rates on residential property, the Residential Zoned Land Tax and the draft Zoning Value Sharing Bill. There is a real risk that the implementation of such measures will introduce additional cost and uncertainty around the viability of housing developments and ultimately adversely affect the ability of the sector to support delivery of the infrastructure and housing investments that are urgently needed. We recommend that such measures are carefully considered, in consultation with the industry and practitioners, in order to mitigate against the risk of unintended and adverse consequences.

The measures announced in the Finance Bill in respect of the property and construction sector are set out below.

The rules which allow for a deduction for certain pre-letting expenses have been extended for a further three years to the end of 2027. These provisions allow for a deduction of certain ‘pre-letting’ expenses (up to a cap of €10,000 per property), which would not otherwise be allowable, incurred on a property that has been vacant for at least six months and which is subsequently let as a residential premises on or before 31 December 2027

In order to further alleviate the financial pressures on renters, the Bill provides for an increase to the annual rent tax credit from €750 to €1,000 (€2,000 for jointly assessed taxpayers). The credit is generally available to tenants in the private rental sector who are not in receipt of any other State housing support.

This increase will apply in respect of 2025, in addition to applying retrospectively for the 2024 tax year. The press release accompanying the Bill noted that where a taxpayer has already claimed the credit for 2024, they will still be able to get the benefit of this increase by submitting a claim in early 2025.

In acknowledgement of the role of small-scale landlords in the Irish private rental sector, Finance (No. 2) Act 2023 introduced a new income tax relief for non-corporate landlords. This was in the form of income tax relief at 20% of residential rental income up to €3,000 for 2024, €4,000 for 2025 and €5,000 for 2026 and 2027. This is equivalent to an annual tax credit for landlords of up to €600, €800 and €1,000 respectively.

The Bill introduces three amendments to this provision. First, the law has been amended to limit the credit to 20% of the overall rental income of a landlord in a year, including in relation to rental properties which are not ‘qualifying properties’ for the purposes of the residential premises rental income relief. This amendment ensures that the tax credit is not available where a landlord is in an overall rental loss position for income tax purposes for a particular year.

Second, an amendment is introduced that previous relief claims will not be clawed back in the event that the claimant dies within four years of making a claim.

Third, the manner in which relief is clawed back is amended to ensure the amount clawed back is the same as the amount of relief claimed. This amendment addresses an issue with current drafting whereby an additional tax liability in excess of the relief claimed could have arisen in certain cases in the event of a clawback.

The HTB scheme is being extended for a further four years until 31 December 2029. We believe this extension is both meaningful and helpful to the overall objective of facilitating housing supply.

The HTB scheme has been a significant support to first time buyers since its introduction in Budget 2017, with just over 50,000 homebuyers having been supported to buy their home under the scheme. The scheme was due to end in 2025 and this extension will be welcome for prospective first-time buyers and indeed registered builders who can continue to bring additional supply onto the market.

The Bill further includes an amendment to ensure that the purchase of a newly constructed property by a Local Authority for onward sale to an affordable purchaser (under the Local Authority Affordable Purchase Scheme) is eligible for the HTB scheme.

The temporary mortgage interest tax relief provision has been extended for one year. This was introduced in Finance (No.2) Act 2023 as a measure to offset the considerable financial burden faced by mortgage holders due to significant increases in interest rates.

There are no amendments to the qualifying criteria for the relief. Mortgage interest tax relief will be available at the 20% standard tax rate in respect of the increase in the interest paid in 2024 when compared to 2022, where the following conditions are met:

• The mortgage is in respect of a taxpayer’s principal private residence in Ireland
• The outstanding mortgage balance was between €80,000 and €500,000 on 31 December 2022
• The taxpayer is compliant with Local Property Tax requirements

The maximum value of the relief is €1,250 per property. In order to claim the mortgage interest tax relief, the taxpayer must file a personal tax return with Revenue.

The RZLT is an annual 3% tax on the market value of land that is both serviced and zoned as suitable for residential development, subject to a number of exclusions. This was originally introduced as part of Finance Act 2021, as part of a range of ‘Housing for All’ initiatives, specifically as a measure to activate land to increase housing supply. There have been a number of subsequent amendments and deferrals to the tax since its original introduction.

On 1 February 2024, local authorities published draft zoning maps highlighting lands they identified as within scope of RZLT, as well as land which was to be excluded. A revised and final RZLT map is to be published by 31 January 2025. The first RZLT liability date (and valuation date) is set to arise on 1 February 2025 and will apply to lands that first fell in scope of the tax on or before 31 December 2022.

The Finance Bill introduces additional amendments to the RZLT legislation including:

• A further opportunity for landowners to seek a change in zoning following publication of the revised maps on 31 January 2025 - the Bill includes a provision for an exemption from RZLT in 2025 where such a submission for rezoning is made and the land is not the subject of a planning application or extant planning permission in respect of residential development. While not addressed in the Finance Bill it is worth noting that the Budget 2024 materials confirmed that, to ensure local authorities appropriately consider requests, the Minister for Housing, Local Government and Heritage will issue guidelines to local authorities indicating that they should consider and accommodate rezoning requests where landowners seek to continue undertaking existing economic activity.
• ·An extension to the deferral period during appeals to An Bord Pleanála brought by an unconnected third-party – the Bill extends the deferral period to include the period from the grant of the planning permission which is subject to the appeal to the date on which the appeal is determined. Currently the deferral only applies from the date on which the appeal is made to the date the appeal is determined. Unfortunately, there are no improvements to the existing clawback/recapture provisions, or where the landowner initiates the appeals process.
• An exemption from RZLT where development cannot commence during judicial review proceedings brought by an unconnected third party – this exemption applies to the period between the grant of the planning permission which is subject to judicial review, and the date on which the judicial review (or appeal thereof) is determined. This exemption applies regardless of the outcome of proceedings.
• No clawback of deferrals on transfers intergroup provided certain conditions are met – essentially both companies need to be within a CGT group and within the charge to corporation tax, and the transferee becomes the liable person, but both companies remain jointly and severally liable for any deferred RZLT.
• The introduction of a “pre-development deferred residential zoned land tax” provision – this effectively provides that where an RZLT liability could otherwise arise there can be a deferral for up to 12-months from the date of planning being granted, subject to certain conditions. These conditions include that the land is not sold prior to the end of the 12-month period (similar intergroup transfer provisions to those mentioned above are permitted in certain cases). The legislation essentially allows a deferral during the period when a developer is preparing to commence on-site where the RZLT timelines would not otherwise allow a deferral. A pre-development deferred RZLT can become permanent where commercial development commences on the site or where residential development is commenced and then completed before the planning permission expires (i.e. in line with the existing rules).
• Other technical amendments – including expanded provisions where parts of a site are disposed of, as well as refinements of the provisions in relation to how the liability operates on a death and the interaction between personal representatives and beneficiaries and consequential amendments arising from all of the above changes.

While a step in the right direction, we believe the proposed amendments to RZLT are likely to fall short of the changes required to ensure the regime effectively meets its policy objectives of incentivising land activation and improving supply of quality affordable housing.  We believe additional changes should be considered to ensure RZLT is not inappropriately applied where, for example, genuine impediments to development exist. 

The Bill provides for an increase in the rate of stamp duty where 10 or more houses are acquired in any 12-month period, from the current rate of 10% to a higher rate of 15%. This increased rate is to apply from midnight on 2 October 2024, with transitional arrangements for transactions in progress which are completed before 1 January 2025.

The 10% rate of stamp duty was introduced in May 2021 in order to mitigate against the bulk purchase of houses in Ireland, in response to reports regarding the purchase by institutional investors of all, or a significant proportion, of residential housing estates, particularly close to the time of completion. There are some specific exemptions in the legislation, including for the acquisition of apartments and for multiple house purchases by Local Authorities and Approved Housing Bodies.

In his Budget speech, Minister Chambers noted that the increased rate is being introduced to “discourage significant purchases of houses by investment funds” as the “bulk acquisition of houses impacts on the number of houses made available for purchase”. While the intention of this amendment is acknowledged, we believe that the original 10% rate has already been effective so further increasing the rate is unlikely to have a material impact on transactions, and instead will negatively impact on valuations and investor sentiment.  

The Bill implements the announced increase in the rate of stamp duty for residential property valued above €1.5 million to 6%, with effect from midnight on 2 October with transitional reliefs for transactions in progress which are completed before 1 January 2025.  The Bill clarifies that this measure is aimed at individual properties, rather than blocks of apartments and does this by relieving blocks of three or more units from the increased charge.

As such, the existing rates of 1% up to €1 million, and 2% on any consideration in excess of €1 million will continue to apply to the acquisition of apartment blocks.

The existing rates of 1% up to €1 million, and 2% up to the new €1.5 million threshold will apply to acquisitions of all other residential properties, with the new 6% rate applying on the consideration in excess of €1.5 million. This is provided the transaction is not specifically caught by increased stamp duty rates under other provisions (e.g. the increased 15% rate on 'bulk purchases' of residential properties).

The Bill contains some technical measures dealing with repayment of stamp duty on transactions which have not completed within four years.

The rate of the Vacant Homes Tax is to be increased from five times to seven times a property’s existing base Local Property Tax liability. This increase will take effect from the next chargeable period, commencing 1 November 2024.

The Vacant Homes Tax was introduced in 2023 with the stated aim of maximising the use of existing housing stock, by increasing the supply of homes available for rent or purchase. It applies to residential properties which are in use as a dwelling for fewer than 30 days in a 12-month chargeable period, and there are a number of exemptions to ensure owners are not unfairly taxed where properties may be vacant for genuine reasons.

While ZVS is a planning levy, rather than a tax measure announced within the provisions of Budget 2025, readers may wish to know that the Government published the draft Land (Zoning Value Sharing) Bill 2024 on 12 September 2024.

The ZVS Bill is the latest iteration of ”land-value sharing” (LVS) proposals, originally outlined in December 2021, with a revised scheme published on 14 April 2023. The original proposed legislation provided for a contribution of 30% on the uplift in value of land arising from a change in zoning for residential development (and, in time, for industrial and commercial development). This contribution would effectively form a charge on the land and would be payable as a condition of planning permission.

The new draft ZVS Bill is largely aligned with the previously-published proposals, with some key considerations set out below:

• The rate has reduced from 30% to 25%.
• The rate will apply to the difference between the “zoning date use value” and the “zoning date market value” on “relevant land”.
• Relevant land is widely defined and includes land zoned (wholly or partly) for residential development, land within a strategic development zone (SDZ), and certain land zoned for commercial or industrial uses.
• The process for identifying relevant land will yield a map by 1 October 2025. 
• Certain transitional measures are included within the provisions of the draft ZVS Bill. As currently drafted, a ZVS charge may apply where:
  • Planning permission granted on or after 1 December 2026: On land that is not relevant land prior to 1 December 2024, but subsequently becomes relevant land by 1 December 2026 i.e. on “newly-zoned land”.
  • Planning permission granted on or after 1 December 2028: All other relevant land.

There are a number of concerns with the draft ZVS Bill as currently envisaged, and we would welcome the engagement by the Minister for Housing, Local Government and Heritage with industry groups to ensure that the impact of ZVS on the viability of developments and housing supply is being sufficiently considered.

When the continued delays with the planning system, the increasing costs of development due to new penal measures like the ZVS and the increased rate of stamp duty, and the continuing rent caps are taken into account, there remain very significant challenges for property development of much-needed residential stock.

We would welcome the engagement of both representatives from the Department of Housing, Local Government and Heritage and the Department of Finance with industry groups to ensure the combined impact of all these measures on the viability of residential supply is appropriately considered.