Michael O’Flynn, the Cork-based property developer, has called on the government to slash VAT on new homes to stimulate housing supply.
Mr O’Flynn said that the only solution to Ireland’s housing crisis was to increase supply and that this would not be possible unless construction costs were reduced.
He called for VAT to be lowered, as it was for the hospitality industry in the wake of the financial crash, to make housebuilding economically viable.
In 2011 the government cut VAT from 13.5 per cent to 9 per cent to stimulate the country’s tourism industry.
Mr O’Flynn said that the cost of funding available to Irish developers and the cost of land were too high for developers to make the 15 per cent profit margin required for building new homes.
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Speaking on the Today With Sean O’Rourke show on RTE Radio, Mr O’Flynn said: “I will drop the price of my houses tomorrow if VAT comes down . . . and I’ll bring more housing into the market because I’ll have more houses that’ll be viable [to build]. If this was France they’d reduce VAT for two to three years; that’s what we should do.”
A representative from the Department of Housing did not reply to a request for comment.
Mr O’Flynn, who developed The Elysian, Ireland’s tallest apartment block, in Cork city, said that he and other developers could not compete with the National Asset Management Agency which the government has mandated to build 20,000 residential units by the end of 2020. He claimed that Nama-supported developers were at a significant advantage given the lower cost of funding that Nama could access.
Mr O’Flynn is one of five property developers who have lodged a joint complaint to the European Commission alleging that the lower cost of funding constitutes illegal state aid.
He said: “Nama were never set up to develop houses. Nama were never set up to do what they’re doing now. If Dail Eireann wants to pass legislation for Nama to do a different job, I’ll accept the democracy.
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“You can’t have a market that specially works for some and not for others and I would contend that that is state aid but leaving aside the 20,000 [units that Nama is to deliver], that’s stopping housing. We won’t compete where Nama has a scheme now.”
A spokeswoman for the Department of Finance said that Nama’s cost of funding differed from the rates offered to Nama debtors and receivers. “The rates offered to Nama debtors and receivers by Nama are unrelated to Nama’s own cost of funding. Where Nama provides funding to facilitate development by its debtors or receivers, it is provided at appropriate market rates of interest,” she said.
Mr O’Flynn said that Simon Coveney, the housing minister, “is trying” and has “done some positive things” but added that he was sure the Department of Finance was stopping the minister from introducing measures to further stimulate supply in the market. The Department of Finance denied this claim and added that Michael Noonan, the finance minister, had announced a package of ten measures worth about €100 million in support of Mr Coveney’s Rebuilding Ireland strategy as part of Budget 2017.