# The Government vs. the First Time Buyer



## Brendan Burgess (16 May 2021)

This is a piece I adapted for an article in tomorrow's Examiner:









						Brendan Burgess: How the State takes on first-time buyers in Ireland's costly housing market
					

If the government really wants to help first-time buyers, it could start by incentivising builders to build starter homes instead of building very expensive homes




					www.irishexaminer.com
				





The Government vs. the First Time Buyer 

You are a 30 year old teacher and your girlfriend is a nurse. You would like to get married, buy a house and start a family. Buying the house is your first priority . But it’s proving impossible. You both moved back in with your parents to save on rent and now you have a deposit of €50,000. The bank will lend you €300,000. You would like to buy within a bus journey of work. But you get frustrated at every turn. Newly built houses in your target area start at €600,000 and so first time buyers can’t afford them. You were bidding last year on a house and the auctioneer suddenly took it off the market with no explanation. You subsequently learned that the Council bought it for a social housing tenant. Earlier this year, you bid up to the very limit on a house but were outbid by a cash buyer who bought it as an investment. Cash buyers seem subject to no limits. Since then, the investor has let it to the local authority at a rent you could not afford.

You are getting desperate, so you drive to see a newly built housing estate fifty miles from where you work and where you grew up. You hum and haw but the auctioneer tells you that you have to move quickly. While they built 100 houses, only three are still available. The developer had to keep 10% of the estate for social housing and investors have bought most of the others. You ask why they are so expensive in such a remote location. The auctioneer explains that the developer bought the land 10 years ago and it took him 8 years to rezone it and get planning permission. He had to fund it all that time while putting up with attacks from politicians calling him a land hoarder. He would have built the houses 10 years ago if he could have. He had to sell 10% of the houses to the local authority at cost. He had to pay a development levy of €30k per house to the county council. And, when they were all built and ready to go, he had to charge VAT of 13.5% on top of the selling price. He reckons that the government intervention has added about €70,000 to the sales price.

You ask the auctioneer why they are not building any starter homes in the high demand areas – all the new houses and apartments seem to be around €600,000, way outside your limit. He explains that with the price of land, the difficulty in getting planning permission and the development levies, it’s just not profitable to build starter homes as the selling price would not recover the fixed costs.

You have plenty of time on the hour-long drive home to discuss matters. You appreciate that you are fortunate to be both working and able to buy a house yourselves. You agree that there is a need for social housing, especially for people working in low paid jobs who can never buy their own home. But you can’t understand why you are expected to commute two hours a day while social housing tenants are not required to do so. Why is the local authority directly and indirectly outbidding you on all houses near where you work and grew up? Why doesn’t the council buy or rent houses where they are cheapest? Why are they buying new houses and apartments for €600,000 each when they could house two families for the same money further out?

But isn’t the government introducing a shared equity scheme to help couples like you to get on the housing ladder? Bad news! This is not shared equity. This is just another mortgage on top of your €300,000 mortgage. So, you will be borrowing more money to buy the same house which will result in your repayments being higher again.

If the government really wants to help first time buyers, they could start by incentivising builders to build starter homes instead of building very expensive homes and by reversing the advantage that investors have over first time buyers.


Remove the 13.5% VAT on starter homes bought by owner occupiers.
Abolish development levies on starter homes.
Replace the tax incentives for investors in residential property.
Impose a temporary 10% stamp duty on all investors to give first time buyers a break.
Stop the councils buying and renting privately built housing in high demand areas. Instead provide housing for two families for the same money in lower demand areas.


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## The Horseman (16 May 2021)

Extend the rent a room scheme to private rented property. Pitch the top fig at 12k tax free to landlord. Anything above landlord pays tax on all it.

Alternative give tenants a tax credit that they can draw down from Govt as deposit on property purchase in the future.

Both of above give people hope of purchasing property in near future. Developers will see future demand and finance available to purchase property so more likely to build and less risk to banks.

House those in locations where they need to be rather than were they want to be. If you want to be housed in a particular area you pay a premium to be housed there.


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## Purple (17 May 2021)

The Horseman said:


> Alternative give tenants a tax credit that they can draw down from Govt as deposit on property purchase in the future.


That ideas been around for a while. I think it should include a right to buy the property you are in after 3 years, along with a minimum tenancy of 5 years but strong rules allowing eviction for anti-social behaviour or not paying rent. That would make the bulk buying of developments less attractive.


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## The Horseman (17 May 2021)

Purple said:


> That ideas been around for a while. I think it should include a right to buy the property you are in after 3 years, along with a minimum tenancy of 5 years but strong rules allowing eviction for anti-social behaviour or not paying rent. That would make the bulk buying of developments less attractive.


I disagree with the right to buy if landlord is an individual. I do however agree with min tenancy with penalty clause on both sides if either terminate contract early. 

Fully agree with strong rules re eviction but that will never happen. Look at council estates that are well known for anti social issues.


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## Purple (18 May 2021)

@Brendan Burgess I'd add that the Government has created the conditions where there are such relatively attractive returns by putting a very high floor in the rental market in the form of HAPS. Dublin City council are paying up to €2800 a month to house families. That's nearly €70,000 in gross income for a family who are fending for themselves.


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