Fine Gael has revealed that a tax break for would-be homebuyers may be among the new government’s measures to alleviate the housing crisis.
Michael Noonan, the finance minister, said the relief would be based on the Home Renovation Incentive scheme. Under this scheme, homeowners can claim tax back for up to €30,000 of home improvement works, an effective discount of up to €4,000.
Speaking before the Oireachtas housing and homelessness committee, Mr Noonan said: “If I could give a tax break which would put money in the pockets of purchasers rather than money in the pockets of builders I’d be more favourably disposed to it.”
“We are looking at a mechanism to direct money towards the purchaser. We are looking at the home extensions tax break scheme model. No decision has been made yet but it is under active consideration in the talks that are taking place but also under active consideration in my department,” he added.
The deal struck at the weekend with Fianna Fail, paving the way for a minority Fine Gael-led government, only referred to the need for an an affordable housing scheme, without going into further details.
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Mr Noonan revealed his plans when asked about requests from the construction industry for a cut in VAT on building materials. The acting finance minister said he was reluctant to extend benefits to developers rather than homeowners.
“We tried all that before and we got the activity and problems with it,” he said. “A lot of the submissions [from builders], with all due respect to the Construction Industry Federation, are in the interests of builders.
“That’s their job, they represent the industry, they don’t represent the purchaser — it’s important to remember that.”
Mr Noonan said a 13.5-per-cent to 9-per-cent VAT cut for builders would cost the public purse €210 million.
Spending this amount on social housing instead would “get a bigger bang for your buck”, he told the Dail committee.
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“We’ve made no decision on this,but I’m giving my thoughts as we are moving towards the budget where we probably will make a decision,” he added.
Mr Noonan said the state did have money available to spend on housing projects, but that the Department of the Environment had not proposed viable ways to keep such spending “off budget” to ensure that the state stayed within European fiscal rules.
He added that he would be in favour of selective interventions in the property market, if they were carefully targeted.
Mr Noonan is expected to be returned to the position of finance minister after Enda Kenny is re-elected taoiseach. Fianna Fail sources had said the finance minister had been crucial in securing an agreement between the two main parties which will allow Mr Kenny to lead a Fine Gael minority government.