Four stumbling blocks for Harris's Derelict Property Tax

 The Housing Essay is a weekly deep dive from a rotating variety of voices into issues impacting the property crisis in Ireland. Are there potential solutions that may be currently overlooked or traditionally ignored by policymakers?  

THIRTY-SIX YEARS of failed levy collection but will the new Derelict Property Tax be worth the wait? We don’t think so.

In the first part of our deep dive into the new Derelict Property Tax, we explored how the failure of the 1990 Derelict Site Levy has led to Revenue taking responsibility for this new tax. This second part will delve into four key ways we believe this new tax has been designed to fail.

Less geographical coverage

“This tax will help revive many of our villages, towns and cities,” according to Simon Harris in his budget speech a few weeks ago.

Unfortunately, the Tánaiste was mistaken. The new Derelict Property Tax will only apply to large towns and cities with populations over 4,000 (107 settlements) in its first year and 2,000 (171 settlements) in its second year.

Currently the Derelict Site Levy covers all urban areas, of which there are 867 across Ireland. This means that the new tax will only cover 12% of urban areas in its first year and 19% in its second.

This leaves rural Ireland with still no financial penalty to discourage owners from leaving buildings go derelict.

Given the Tánaiste’s inaccurate statements, it’s no surprise that councillors have been given false hope that the new tax will discourage dereliction in small towns like Ballisodare in Sligo. With a population of just 1,747, Ballisodare will fall under the threshold. Shockingly, Sligo town is the only urban area in the whole county that has a population larger than the threshold and so the only area in Co Sligo covered by the new Derelict Property Tax.

Another incomplete definition

The current broad definition for dereliction has often been cited as a key barrier to the full enforcement of the Derelict Site Levy. To solve this problem the Department of Finance has created yet another definition that is different to the already existing three definitions which we reported on earlier this year.

In an informal meeting in May, which was requested by the Department of Finance, we warned the Finance Team that they will never have a singular definition for dereliction that will be 100% applicable to all derelict buildings. We advised that all buildings should fall into one of three classifications, ‘In use’, ‘Not used but usable’, ‘Not usable’, with an appropriate scaling tax. Otherwise we will continue to have empty and derelict properties excluded from the Local Property tax, the Vacant Home Tax and the Derelict Property Tax.

Unfortunately, the Department did not take this more holistic approach and instead created a definition that describes how usable a building looks and if any materials are likely to fall from its walls or roof. In some ways the new tax definition is more restrictive. For instance, the existing definition for the levy defines a whole site, while the new tax only focuses on a building or structure.

To quickly test the new definition we took a walk to look at some derelict properties in Cork city, ones both on and off the current register.

While the new specific and descriptive definition may provide additional clarity to councils, it could result in fewer derelict properties being registered.

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We quickly discovered that some glaringly obvious derelict properties not currently registered do meet the criteria for the new tax, which is good news. However, we also found properties currently registered as derelict which could be excluded from the new tax, because they have intact walls, roof and windows with no entrance boarded up.

There are also derelict buildings that could easily avoid the tax by replacing a wooden board with a fake window. Alternatively, we fear that owners will avoid the tax by simply claiming their building is in use by placing some boxes in it, or by parking a few cars around it.

One thing we’ve learned over the last six years of the #DerelictIreland movement is that owners can be very creative when keeping their properties off the current derelict site register. No doubt we will see the same levels of creativity focused on avoiding the Derelict Property Tax.

Lack of resources

Having failed to register all the derelict properties over the last 36 years, councils will now have just six months to do it. This time they will be covering less area and will have more descriptive specifications to guide them. But now they will be legally obliged to keep two separate dereliction registrations using two different definitions.

In last year’s budget the government said that the new Derelict Property Tax would replace the Derelict Sites Levy, but this promised replacement is missing from this  Budget. It was unclear to us what this meant until John Cummins, Minister of State at the Department of Housing, Local Government and Heritage, confirmed on RTÉ Radio 1 Drive Time last week that the new Derelict Property Tax will run alongside the Derelict Sites Levy.

Without any clarity on where the new taxes will go, and without any new resources allocated to councils it’s unclear how they can suddenly successfully run two derelict registers. The creation of this new tax confirms the utter failure of the Derelict Site Levy, making it even more unlikely that owners will ever pay it. This will again reinforce the council’s reluctance to allocate precious resources to enforce a failed levy.

Lack of urgency

If it was too complex for Fine Gael to introduce a dereliction tax in 1986, it seems they are still struggling with these complexities 40 years later. Just last year Simon Harris defended delaying the new Derelict Property Tax with the statement that “replacing the current levy with a new tax is a complex process”.

However, after researching into the proposed tax it’s unclear where this complexity lies.

The existing Derelict Site Act 1990 could easily have been updated to include the new dereliction definition decades ago, potentially reducing the workload for councils, especially when it comes to dealing with appeals. Likewise, this new tax could just as easily have been brought into existence once it was proven that councils couldn’t force owners to pay the levy.

We might not then have had this damaging dereliction epidemic impacting us all today.

We had hoped the department’s drawn-out tax development process would have given us a comprehensive and effective tax but alas it seems it was just another delaying tactic. As Jude pointed out at last year’s Oireachtas Committee, these delays are “telling owners of derelict properties they can hoard away continuously for another few years and watch their wealth assets rise”.

The new Derelict Property Tax will certainly have a better collection rate and should raise considerably more money than the existing levy. Some owners will finally experience financial pressure to reuse a derelict building or to sell it on. However, we fear it won’t be the game changer we were promised. A reminder we also urgently need supporting policy measures such as compulsory sales and compulsory rental to really move things along.

What was perceived at the time as a huge victory for the #DerelictIreland movement through our 2021 and 2025 Oireachtas submissions, it now seems the Derelict Property Tax is just another way for the government to kick the can of responsibility and action further down the road. But as ever we live with Dóchas that the needs of wider society will prevail, and we finally end this destructive blight.

Jude Sherry and Dr Frank O’Connor are founders of anois.org, ffud.art and #DerelictIreland. They are part of a series of writers, academics and economists penning a weekly essay delving into the housing crisis and potential solutions.