Wednesday, 08 November 2023.

Our second Home Truths paper, Vacant Homes in Cork analyses Census 2022 to explore the issue of vacant homes - particularly long-term vacancy, in Cork. The paper explores measures some other jurisdictions have implemented to encourage the return of vacant properties to tight housing markets.

Vacant Homes Tax still too low in Ireland.

The government introduced the Vacant Homes Tax (VHT) in 2023 and increased it, marginally, in Budget 2024. For the majority of homes, the VHT rate increased from 0.3% to just 0.5% of the property’s value. Taking the most recent national average house sale price at €320,000, that’s a current average annual VHT of €1,646.

The purpose of a vacant homes tax is to increase the supply of homes for sale or rent by encouraging the owners of vacant properties to bring these properties back into use. However, such a low rate of tax is unlikely to incentivise action. This is especially the case when annual house price inflation, which stood at 7.8% in 2022, outstrips the VHT multiple times.

Vacant Homes Tax internationally.

There are plenty of international examples where governments have introduced higher rates of VHT than we have here at home. For example, in Melbourne, Australia the VHT is double what it is in Ireland; in Leuven in Belgium it’s more than double and in Vancouver, Canada it is six times the Irish rate. The objective of the tax in each of these cities is to return vacant homes to a market where rental property is in short supply.

Vancouver was the first city in North America to introduce a vacant homes tax in 2017. At its introduction, homeowners paid 1% tax on homes vacant for six months or more in a calendar year. The tax has been increased incrementally and now stands at 3% - almost six times the average VHT here in Ireland and six times our minimum rate of occupancy of just 30 days. A report on the effects of the implementation of the tax in Vancouver showed that the number of vacant homes fell by 26% between 2017 and 2020. In addition to the success of the tax in returning homes to the market, tax revenue is reinvested into affordable housing initiatives, helping to further increase housing stock across the city.

Mandatory rental initiatives internationally.

In addressing vacancy, some cities have taken the additional step of introducing mandatory rental when homes remain vacant. Earlier this year, Portugal introduced compulsory rental in the case of flats in high density areas which remain vacant for more than two years. Homeowners in Amsterdam are obliged to register their vacant property if it is empty for more than six months, and the council has powers to provide a tenant if a property remains empty for more than 12 months. In Denmark, the time period is just six weeks, after which a vacant property that the owner does not intend to sell, must be reported to the municipal authority, which then seeks to provide tenants that the owner must accept.

A more ambitious approach to vacancy in Ireland is needed.

Given our enduring housing and homelessness crisis, chronically low rental supply and ever-increasing rents, coupled with our rate of housing vacancy, should a more impactful vacant homes tax and condition of occupancy be applied? Should mandatory rental for vacant homes, especially long-term vacant homes, be considered? A more ambitious approach to addressing housing vacancy would align with international comparisons and could form a stronger, more impactful, fast-acting, part of the solution to our housing and homelessness crisis.

Our Home Truths series aims to offer insights into different aspects and experiences of homelessness in the Southwest, drawing on publicly available data and supported by the personal experiences of Cork Simon service users.