Local Property Tax Cut – Expensive Theatrics in Dublin City Council

Credit: Dublin City Council

Monday, September 21st, saw Dublin City Council vote in favour of maintaining a 15% cut on Local Property Tax (LPT) for city homeowners.

The vote came amidst controversy, as many, including Council Chief Owen Keegan, called for a reinstatement, or indeed an increase of up to 30% on LPT to help plug a €41million deficit forecast for this year.

A reinstatement to normal rates would see the council generate upwards of €20million to make up for record falls in planning fees, parking fees and rental income experienced as a result of Covid-19.

The vote of 34-21 was carried bilaterally, with centre-right to ardently left-wing councillors aiming to withhold increased expenses from being passed on to homeowners, who may already be facing uncertainty and/or a loss of income heading into the winter months.

By no means without nobility, such reasoning is hard to fault; however, with the aforementioned hemorrhaging of council funds, such a vote creates no such solutions to longterm problems within the city, most notably, Dublin’s position as the 5th most expensive European city for renters (€3,613 p.m avg), according to ECA International. Moreover, there has been a massive loss of purchasing power within the capital, shortly following the exodus of semi-permanent and seasonal residents once Covid forced international borders shut.

Quite paradoxically, the past 7 months have not seen much of a decrease in rent prices, or house prices for that matter, despite the vacancies the Coronavirus would have taken with it, so once again we are left wondering why such a cut was carried through for the 8th year running.

Michael Pidgeon, South-West Inner City councillor, Green Party Leader on the council, and one of the more outspoken proponents of doing away with the cut wrote an op-ed for, believing that such a decision shall only benefit the wealthier homeowners, who could see “thousands” from such a tax cut; as for low or medium-income households, Pidgeon decribed their potential returns as “a pittance or nothing”.

Pidgeon, who was unavailable for comment for The Liberty, echoed aforementioned issues that such a cut could be used to mend, and believes that a “cut to taxes means a cut to services”.

Darragh Moriarty spoke to The Liberty on behalf of the Labour Party on the city council.

“Dublin City Council is the largest provider of public services in this city. Throughout the pandemic, there have been more and more strains on these public services and I just don’t understand how anybody could look at the last 7 months and say ‘less public services please’: that’s what those parties who voted in favour of cutting the LPT were saying”.

Councillors representing The Liberties were split on their stance on the motion, with Darragh Moriarty (Lab) and Michael Pidgeon (Green) voting against the cut, and Tina McVeigh (PBP) alongside Michael Watters (Fianna Fáil) voting in favour of the motion.

Neither of the councillors who voted in favour of the cut were available for comment.

Strangely, whilst there was solidarity on the no side, with the Social Democrats, the Greens (bar 1) and Labour councillors toeing the party line, the yes side was a mix of centre-right and left councillors, with Fianna Fáil, Sinn Féin,Fine Gael and People-Before-Profit all conglomerating to one side.
It would appear, however, that perhaps the stance was taken more theatrically than the hard numbers could portray.

Dublin City Council are subject to an Equalisation Fund on Local Property Tax earnings; this means that 20% of all LPT earnings are redistributed throughout other councils in the country. It can be assumed perhaps that out of fear of losing taxable income to the rest of the country, the council would rather search elsewhere for cash that isn’t subject to redistribution; very much a centre-right ideological standpoint, which should explain the stances taken by the two centre-right parties on the yes side of the isle, but not some of the self-proclaimed socialists.

One may argue that the council would rather allow the exchequer to make up for this years shortfall, but, such a bailout would invaraibly lead to a decrease in government funding for the council in the future, moreso than if they were making too much money through LPT, and deemed more self-sufficient. It’s also interesting to note that the increase of LPT would also act as a disincentive for landlords to hoard property.

As mentioned before, the most expensive property in Ireland exists in Dublin City Centre, where coincidentally the LPT is the lowest in the country; redistribution of wealth is a major ideological standpoint on the left, so this still doesn’t explain the stance of these left-wing councillors.
“The Labour Party felt that increasing the rate from the baseline by 15%, as Dublin City Council urged Councillors to do, an effective 30% swing, was too much. Given the track-record of other parties in consistently cutting the LPT, this was an unrealistic ask. The Labour Party, along with the Green Party, proposed a 5% increase. If you lived in a house, for example, valued between €300,000-€350,000, with the current cut of 15%, you pay €9.56 in Local Property Tax, per week. Our increase would have asked you to pay €11.80 per week. But, if you lived in a much more expensive house, if you were wealthier, say a house to the value of €800,000-€850,000, you would go from paying €25.70 per week to €31.80 per week. This would raise DCC revenue at a time of great economic uncertainty by asking those with more money, to pay more.” councillor Moriarty said.

One must dread the idea that such a vote was done on populists grounds, where out of risk of increasing tax on constitutents, left-wing councillors voted to maintain the cut despite the reality of council deficit, as well as the shortcomings of how LPT is implemented in Dublin city centre.

Indeed, Cork City Council voted in the same month to increase their LPT by 7.5%, a much more welcome increase in a city with it’s own issues with housing.
Elsewhere, Belfast City Council have maintained a near 2% increase on rates in the City for the next two years.

“The Local Property Tax is far from perfect. Yes, there are problems with the LPT, no house built or refurbished after 2013 pays property tax, that’s madness, but we, as Councillors, can’t fix that: only central government can”.

Indeed the cost of imposing this tax cut may very well outweigh the cost of the recurring issues with housing in the capital.

Looking further into potential means of recouping lost earnings, it became apparent that in 2018, a Vacant Site Levy of 3% of land value was introduced to try and curb the hoarding of land in Ireland’s crowded cities and major towns.
Then housing minister Eoghan Murphy believed that the levy could generate “upwards of €25.5million countrywide”. The total market value of sites listed in 2018 came to €144million.

However, in May of this year, it was revealed that only 1 in 8 council constituencies had collected Vacant Site Levies last year, with €2.3million being owed to councils as of January this year. The levy was also set to increase to 7% of property value 12 months in arrears for sites listed as of 2019.

The Oireachtas’ Parliamentary Budget Office (PBO) stated in May that only €882,000 had been collected on vacant property, and also estimated that the levy could help create some 18,000 homes per year, if implemented properly.

With regard to the VSL Moriarty added, “We don’t want vacant and derelict sites scattered across the South West Inner City, or indeed across anywhere in the city. But given the pandemic situation, we can’t take a one-size-fits-all approach to this. Some vacant sites are sat on by land speculators and developers and there’s a clear difference between these and struggling local business owners”.

With Local Property Tax income being slashed, as well as a failure to act upon outstanding Vacant Site Levies, the on-going theatrics within Dublin City Council may prove very costly; and exacerbatory to the major issues of housing in one of Europe’s most expensive cities.
This doesn’t take in to consideration the fact that the closure of business in the city as a result of efforts to curb the spread of Covid-19, will only serve to lessen LPT earnings as well as increase the market value of taxable vacant sites within the city this year.

Moriarty concluded by saying “It is the closest thing we have in this country to taxing wealth. We often he hear cries from some other left parties calling for wealth taxes, but the reality is, 60% of wealth in this country is tied up in property. Given this, I have no idea how you tax wealth without taxing property. Left and social democratic parties all over Europe advocate for property taxes, but in Ireland, supposed left parties would prefer to give tax cuts to millionaire property owners”.