The scheme’s primary focus is to ease pressures being applied by the lack of available/inhabitable properties. But there are concerns that it will cost administrators more than what it will take in.
Vacant Homes Tax Aims to Increase Housing Availability
In an effort to increase housing availability, the government will implement a new tax on vacant homes starting in November. The tax will charge owners of unoccupied properties three times the amount of the base Local Property Tax (LPT). For example, a €300,000 house subject to the regular LPT would be charged €945 under the vacant homes tax if left empty. Revenue estimates the tax will apply to nearly 60,000 vacant properties nationwide.
The tax was outlined in a briefing document issued by Revenue this week. Homes vacant since November 1, 2022 that are not used as a dwelling for more than 30 days between then and the end of October 2023 will be subject to the new tax. The goal is to motivate owners to sell
How will it work?
The newly implemented vacant homes tax must be paid by January, though it is expected to generate only around €3 million annually. Marian Ryan of Taxback.com says the tax aims to increase housing supply but may yield little revenue due to exemptions.
Finance Minister Michael McGrath has said the tax is intended to “influence behavior,” leading owners to make better use of empty properties. A Taxback.com survey in May found mixed opinions – 40% support the tax, while 26% oppose it.
According to Revenue data, there are about 57,000 vacant properties in Ireland. Around 20% are holiday homes and another 20% are undergoing renovations, both exempt from the tax. Given the limited scope, Ryan questions whether the tax is warranted. With exemptions decreasing the number of applicable homes, the policy’s ability to incentivise owners and facilitate housing availability remains uncertain
What does this mean for landlords?
The implementation of the vacant homes tax has created some new considerations for landlords with unoccupied rental properties. While the aim of the tax is to incentivise owners to sell or rent out empty homes, landlords could face significant fees if their properties are left vacant for extended periods.
To avoid the tax, landlords will need to ensure rental homes are not vacant for more than 30 days between November 1, 2022 and October 31, 2023. This may require closely monitoring vacancy periods and taking proactive steps to prepare and advertise properties for new tenants. The tax will apply to both short and long-term rentals.
Landlords completing renovations or repairs on properties will need to document the work in order to claim exemption from the tax. Properties used as holiday or second homes will also be exempt if they meet certain usage requirements.
Overall, landlords will need to be more diligent in minimising vacancies in their portfolios. The vacant homes tax makes it more costly to leave properties sitting empty rather than working to fill them. With proper planning and management, landlords can avoid fees and continue making their assets available to renters
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