A working group set up to investigate the issue of defective apartments is urging the government to consider a construction sector-wide levy to pay 2.5 billion euros in remediation costs for up to 100,000 defective apartments.
Minister Darragh O’Brien has received a report from the group set up to look into repairs for defective Celtic Tiger apartments.
There are between 62,500 and 100,000 apartments built between 1991 and 2013 that have been affected by fire, structural safety or water ingress problems.
The total cost of remediation is estimated at €1.56 billion and €2.5 billion, according to the report, at an estimated average cost of €25,000 per apartment.
The report does not go into details about how much such a charge would be or exactly who would be levied, except that it would be the entire industry.
However, the working group says it is “not feasible” to introduce retroactive penalties for individual builders responsible for defects.
“A general industry tax imposed now would target everyone in the industry, including those who have not contributed to the problem,” it said.
The report said the working group was considering raising funds through an industry levy, the concept of which “requires careful policy, legal and public scrutiny and should be considered as an option, particularly in the context of other similar industry levies under consideration”.
The working group outlines a number of options for financing the story.
The first option is cheap loans for apartment owners, but also support in the form of a tax credit, a local property tax, an income-tested subsidy or a cheap loan.
However, the report acknowledged that this option would be “very challenging” as a cheap unsecured loan would first have to be paid to owner-management companies (OMCs), which operate apartments.
State-funded 100 percent grants can also be paid to OMCs for the most direct works. Apartment owners would then have to pay the rest of the costs themselves and the state would provide support.
A state agency should be established to provide this financial assistance.
The third option is a combination of the first two options, where the state pays for some of the work directly and the rest of the work is done by some of the other options.
The working group said there should be retroactive support for works already done or started on faulty apartments.
This aid may consist of a combination of repayable tax credits, grants, low-cost loans or a combination of tax credits, subsidies to persons outside the tax network and low-cost loans.
Only a quarter of the apartments are owner-occupied, more than 70 percent are rented out privately or as social housing.
About 86 percent of landlords who rent out apartments have only two rental properties in their portfolio.
The Construction Defects Alliance said the report is a “landmark” for owners of defective apartments and called on the government to provide support for 34,000 apartments with high fire safety risks in the 2023 budget.
“The task force has warned that the postponement or cessation of critical remediation work may take place ‘to ensure that a remediation support scheme can be used,'” spokesman Pat Montague said.
“Such a scenario – which they call a ‘moral hazard’ – ‘could create an unnecessary risk to health and safety’ for those living in these 34,000 apartments.
“The working group has made it clear that access for the owners of these 34,000 apartments to ‘ex-post financial aid could play a very important role in addressing this moral hazard’.
“According to the Construction Defects Alliance, Budget 2023 and this year’s Finance Bill should provide for access to such ex-post financial assistance.
“Unfortunately, any delay in doing so will lead to the very unnecessary health and safety risks that the working group is warning about.”