Charlie Weston: ‘FG is living in cloud cuckoo land if it thinks it won’t pay the price over housing crisis’
People planning to buy a home have every right to feel furious about the activities of cuckoo funds snapping new developments en masse.
And the controversy has the potential to become a new scandal to match the mess created by the tracker theft debacle.
Having done all the right things, potential new buyers are now finding themselves shut out of the market by cash-rich institutional investors snapping up whole blocks of housing units.
These are the young, and not so young, buyers who have been struggling to save a deposit with rents at wallet-sapping levels.
Some buyers have had their deposits handed back to them as institutional investors buying in bulk are a more attractive proposition for developers.
Those saving for a deposit may have had to move a number of times, as renting is a precarious business in this country. Some will have been forced to move back in with their parents to help them save.
Strict Central Bank lending rules are already restricting what they can borrow.
Then just when housing supply starts to pick up, they find they are being elbowed out of the market by big funds buying 150 to 200 units at a time, before the builder has even finished constructing them.
These lightly taxed big buyers then plan to rent them back to people at sky-high rates. Hardly a situation that suits anyone, apart from those who have put money into the funds.
It is a mess, and Fine Gael will reap the wrath of voters in the local elections over it.
Having invited big funds in here to help restore our broken housing market, the mega investors are now a major problem.
No wonder the United Nations special rapporteur on housing wrote to the Government recently complaining about preferential tax laws for large investors in housing here, and complained about the “financialisation of housing”.
Cuckoo funds are effectively telling hard-working families trying to buy their own homes: go off and rent somewhere else as I want this nest, and I am getting it at a knock-down price and will pay little tax on it.
The funds are snapping up thousands of homes, yet they pay no corporation tax, no income tax and no capital gains tax.
Both Tánaiste Simon Coveney and Finance Minister Paschal Donohoe found themselves being forced to defend the funds this week.
They claim many apartment and housing units would not be built without the cash these funds are bringing to the market.
Mr Donohoe said only a small number of housing units are being bought by investor funds.
All of this forced Fine Gael to insist it is on the side of homebuyers, something which should be taken as a given for a party like it.
Now the Government has been bounced into saying it is considering putting more tax on cuckoo funds as the heat from the housing crisis threatens to burn it up.
And so it should. Why should a big fund, which already has an advantage as it is cash-rich and buying in bulk, also enjoy what the UN called “preferential tax laws”?
The Government will have to bite the bullet and consider levelling the playing field for first-time buyers.
There are any number of tax actions it could take.
It could increase the stamp duty on commercial residential block purchases, or apply an increased property levy or registration charges to large block landlords.
Alternatively, it could introduce fiscal measures to encourage cuckoo funds, such as real estate investment trusts (Reits), to sell early to individual buyers.
One way or the other, the Government needs to act on cuckoo funds.
It will find itself shoved out of its “nest” in Government Buildings if it does not.