Focus Ireland calls for Approved Housing Bodies to be granted exemptions from the Local Property Tax Background: The Commission on Taxation (2009, Part 6) explored the issue of a residential property tax in some detail. While recommending a broadly based tax, the Commission clearly stipulated a number of justified exemptions, in line with those for the commercial tax base. Local authorities and other social housing providers, residential facilities providing care for elderly people or people with disabilities, as well as those provided for charitable purposes by registered charities such as Focus Ireland, should be exempt1. However, Minister Noonan appears to have disregarded this advice; while he promised exemptions to the property tax in his budget speech, when the legislation was published it took a much narrower view of exemptions, limiting them to “Residential properties that are owned by a charity or a public body and used to provide accommodation to persons with disabilities or the elderly to enable them to live in the community’’. Note that the Revenue Commissioners must grant an exemption for tax purposes for charities to avail of this exemption. This narrow definition of ‘special needs’ means that properties owned by special needs social housing providers dedicated to addressing homelessness, such as Focus Ireland, will not be exempt. Liability will rest with the social housing organisation as owner of the property. Approved Housing Bodies (AHBs), such as Focus Ireland, provide housing for people who, for a variety of reasons, are unable to afford to provide a home for themselves. They are not-forprofit organisations in which any surplus is reinvested in further provision. Their only sources of income are from the state and from the tenant’s rent contribution. The rent charged by the AHB is controlled by government; depending on whether the home was funded using CAS or CLSS capital grant schemes and the differential rent system in place in each local authority. Focus Ireland called for government to review the published legislation to bring it into line with the budget announcement and the proposals of the Thornhill Report, which was commissioned by government to prepare for the local property tax. The Thornhill Report clearly recommended that “where the owner is an approved charitable body* (including an educational provider) and the property is being used primarily for charitable purposes” that an exemption should be provided. We contacted the Ministers for Finance and Housing on this issue as the legislation was being considered. The Irish Council of Social Housing also made an official submission to government at that time2. A number of TD’s and Senators submitted amendments to the Bill calling for such an exemption during its passage through the Oireachtas. However, none of these amendments were accepted and incorporated into the Bill. The government published legislation that goes against all assurances given on this matter and all commissioned advice provided to government. The very narrow exemption in the final Bill 1
Part 6, 4.2 Exemptions (p.164) states: The only exceptions to the principle that all residential property be subject to the proposed annual property tax should be as follows: Local authorities and other social housing providers (such as Respond and Alone); Residential facilities provided solely for the purposes of caring for the elderly or for disabled persons (such as care facilities or nursing homes); Residential facilities provided for the exclusive purposes of the provision of education (such as boarding school accommodation); Residential facilities provided exclusively for charitable purposes by registered charities (for example, accommodation services provided by Focus Ireland or the Simon Community). These exemptions are similar to those provided for in the commercial rates base. 2 See http://www.icsh.ie/index.php/eng/news/icsh_submission_on_the_finance_local_property_tax_bill_2012
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excludes all housing which is provided for people simply because they are poor, or have ‘general support needs’. In the very long history of consideration of a property tax in Irish public policy it is impossible to find any case where it was recommended to extend property tax in this way. The Impact of the Local Property Tax on Approved Housing Bodies: The proposal to levy property tax on social housing has both immediate and long-term consequences. In the short-term it places a very substantial additional burden on our charitable work at a time of great need. Focus Ireland currently owns over 400 housing units which are provided as homes for people who were homeless. The current legislation would require us to pay in the region of €100,000 per annum to the exchequer. We cannot raise the differential rents of our vulnerable tenants (both because they do not have the income to pay higher rents, and because we are prohibited from doing so by government). We cannot campaign the public to donate money to us for this purpose. We cannot sell any of our homes; this is also prohibited by government, and would force some people back into homelessness. So we will have to apply for this money from Government. The direct impact of this loss of €100,000 would mean Focus Ireland would be able to support fewer people to move out of homelessness at the very time there is a rising demand for our services and housing. In the longer-term it draws into question our ability to gain access to private finance for social housing, which is the foundation of the current government’s social housing policy. Provision of social housing is very capital intensive and the state is currently incapable of providing adequate capital for provision of the social housing required. This situation is likely to prevail for a number of years and has already resulted in a very significant drop in the number of social housing units being provided. In response to this, government policy has shifted towards requiring AHBs to secure capital funding from the Housing Finance Agency or from private finance. While a number of AHBs, including Focus Ireland, have responded to this challenge, the long-term nature of social housing investment and other factors make it very difficult to attract private finance. Whatever progress has been made in this direction is totally undermined by the proposal to levy a property tax on any social housing purchased through such investments. The additional cost will significantly reduce the investment return. The lack of consultation and contradictory government policy in this area reduces investor confidence. The risk of the investment increases due to the cost volatility and unpredictability of government policy. In conclusion, the consequences of government proceeding with its current legislation will require statutory funding of AHBs to cover the taxation on their current homes and it will also close off any real prospect of attracting inward investment into social housing in Ireland. This is at the very time when many people are trapped as homeless in expensive emergency accommodation due to lack of access to housing. For these reasons, Focus Ireland is strongly urging the government to broaden the exemption provision in the Finance (Local Property Tax) Bill 2012, to bring into line with the recommendations of both the Commission on Taxation and the Thornhill Report, to exempt all social housing provided for charitable purposes. The need for social housing and the policies for financing social housing make a compelling case for an exemption.
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