Richard O'Donoghue Demands VAT Relief to Fund House Rebuilds
Richard O'Donoghue addressed the minister on rising building costs, VAT and industry price hikes affecting homeowners who need to rebuild. He argued the state should exempt VAT on 100% redress payments and consider funding rebuilds directly to reduce the financial burden.
Rising building costs and VAT
He set out year-by-year examples for a 2,000-square-foot house: at €120 per square foot in 2021 the build cost was €240,000 with €32,400 VAT; at €180 in 2023 the cost rose to €360,000 with €48,600 VAT; and at €200 in 2024 the cost was €400,000 with €54,000 VAT. He warned that taking remedial work and current prices into account could push VAT on the same house to around €70,000 in 2025.
Concrete prices and levies
He highlighted industry price movements, saying an umbrella group circulated an 8% increase in concrete products while some builders announced a 10% rise, and asserting some companies have applied 34% increases over two years. He also noted a 5% levy on oil concrete products is in place, and blamed quarry pricing under umbrella arrangements for adding to costs.
Proposal for VAT exemption and direct funding
He proposed exempting the VAT on 100% redress payments so that the VAT amount could instead be used toward rebuilding homeowners' houses. He urged the minister to fund rebuilds directly based on engineers' reports, provide bank guarantees to homeowners and stage payments as in new-build contracts so homeowners do not have to raise the full cash up front.
Indexing and contract adjustments
He argued government and private contracts should include inflation indexing and adjustment clauses tied to engineers' reports when material costs rise. He said current private costings are based on three-month windows and that prices move quickly, so a formal indexation mechanism is needed to prevent repeated goalpost shifts.
Timing and qualification concerns
He warned that delays in rolling out schemes and qualifying applicants will allow prices to rise further, reducing the effectiveness of any redress. He called on the minister to consider tax-exempt status for redress and to build cost-containment and funding measures into government contracts to relieve affected homeowners.
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Thank you, Chair. Minister, as the other speakers have said, you haven't got this costed since 2022. So let me give you a small few facts for yourself. And it won't cost the state anything for the facts, because the facts are, as I know, the funds myself based on year-to-year basis on building costs. So I'm going to carry you to 2021, where the average cost of building a house on a 2,000-square-foot house was €120 a square foot. Now, this is a greenfield site. Build does finish, €120 a square foot, which would have cost you €240,000 in 2021. You then add the VAT, which gives you €32,400 VAT onto that. We'll jump forward to 2023, and we were at €180 a square foot. Same house, gone from €240,000 to €360,000, and the VAT intake, €48,600 VAT. And we then jumped to 2024, where you're now up to €200 a square foot. Same house, nothing extra. It's now costing €400,000 for 2024. But €54,000, you're a VAT. What I'm trying to say to you here is, when you come on with these schemes, if you take on a government contract tomorrow morning, built into your contract, if your project goes over, due to inflation, over a certain percentage, it's added on to the contract, once the engineers can prove that the material has moved. And ironically, and I said this in the Dáil last week, and I read out the letter, and it's ironic actually, from the same umbrella group where the concrete products came from, some of their companies, not all of their companies, some of them, sent out throughout all their companies around Ireland, 8% increase in concrete products across the board. It wasn't one company saying it, it was the umbrella group sent it out to all their companies, 8% and he announced a 10% increase in the building, and they have to come up with 8% alone on the concrete products. On top of what I'm talking about here, Minister, is I've been telling you green field sites, you now have to look at dismantling houses, getting rid of the material environmentally and through the proper certification. The costs are absolutely astronomical. You can add another 20 or 30 euros a square foot to that, and that's on 24 prices. But we're talking about people that are short of money, and a small thing that could go towards it. Small. Why don't you put in, for the costs that you got for your house, you're exempt from the VAT? Why not? Because on a 2024 price, you would be giving them an extra 54,000 on a house towards the money that they can't raise. And what you could also do on this, based on government doing their own contracts, is you can actually fund this yourself, because you're going to give them the money in the first place, so why don't you fund it yourself, based on the engineers' reports coming in, that you actually fund it yourselves. So they don't have to go out and try and raise 2,000 and 3,000 and 400,000 to try and rebuild a house. And they won't have to pay the VAT rate. So if you go to 2025 costings, and you take in the remedial work that has been done outside of the scope of works, you would probably be looking at around 70,000 euros VAT based on a 2,000 square foot house. That 70,000 could go towards the rebuilding of their house, if they get their costings. That would go somewhere on addressing inflationable costs. And the other thing is, there's a 5% levy on oil concrete products that was brought in by this. And the same companies that were part, that were the problem in this, have now given an 8% increase this month. And total is coming in force from the 1st of January. That same company in the last two years have given 34% increases in all concrete products. And you're charging another 5% levy on top of it. So when are we going to have a regulation put in place to tackle the elephant in the room here? The person that has built their house, got home bond and all these other certifications done for their houses. Houses now falling down around them. The quarries that caused the problem are putting up their prices under an umbrella group. The people that are trying to build their houses are getting a 5% levy, putting on all concrete products. And everyone in the country that are building today are now paying for the mistakes that wasn't regulated at the time. And you have in your way now, somebody at the moment is getting costed for their house, based on today's current prices, that the fat rate could come back to help that burden. That to me is a solution for part of the problem. And the other part of the problem is, the government is going to pay this as you say, as a 100% redress. As you said. Why don't you fund the people themselves and give the bank guarantees to the people? And do it the same way as anyone is building their new house today and give them their payments based on their building as it goes on. And if a person does have to come up with a small bit of money, they can try and fundraise that small piece of money themselves. That to me is a solution. So why would you charge tax on 100% redress? Why? And that's in the remit of you, Minister, you could actually address that yourself. And also, any costings going forward. If I am pricing a project at the moment, it is based on three months. How long has it taken for this system to come in place? And how long is it going to take for people to qualify for it? And by the time you move the goalpost, again, prices have gone up again. So would there not be something involved in index length based on the cost of prices going up now? Based on the economists that are showing the inflation costs now? All this is at your fingertips. I have to do it on a daily basis. So why can't you? And if you are doing government contracts, you build it into the contracts. So why can't you do it for everyone else? So Minister, I want you to look at this and look for the 100% redress and give them the tax that they are supposed to pay on this. Give them tax exempt. Which then will go somewhere towards paying for the houses that need to be rebuilt.
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