Real Estate and Housing

Key measures

1. VAT on supply of apartments – Rate reduction from 13.5% to 9% 
   A financial resolution expected tonight will reduce VAT applied to the “construction of new apartments” from 13.5% to 9%. This lower rate will apply from the date of passing until 31 December 2030.  
2. Apartment development – New enhanced corporation tax deduction 
   An enhanced corporation tax deduction will apply for costs incurred on apartment development and conversion of non-residential to apartment development to improve viability. The measure will allow an enhanced deduction of 125% of qualifying costs, up to a maximum additional deduction of €50k per apartment unit. This is intended to provide a net benefit of up to €6.25k per apartment (€50k x 12.5%). The enhanced deduction will be provided to a developer that is the beneficial owner of the property at the time it is completed. The enhanced deduction will be available for projects comprising of 10 or more apartments. It will be available for both for new-build developments and for conversion projects including a change of use, such as the conversion of offices or retail spaces into apartments. The enhanced deduction will be claimable upon the completion, when the Certificate of Compliance on Completion is signed. This measure applies to projects with commencement notices issued between 8 Oct 2025 and 31 Dec 2030.  
3. Rental profits arising from cost rental activities – Corporation tax exemption  
   Exemption to apply to rental profits arising from developments that are designated as falling within the Cost Rental Scheme by the Minister for Housing on or after 8 October 2025.  
4. Residential Zoned Land Tax (“RZLT”) – Further rezoning opportunity 
   Further rezoning exemption opportunity to be provided for in 2026 where rezoning is to reflect genuine economic activity being undertaken. 
5. Living City Initiative (“LCI”) – Expansion of the existing scheme 
   Scheme extended until end of 2030 with expanded scope to include residential properties built before 1975. Amendments will support the use of ‘over the shop’ for residential purposes. Maximum relief where the works are carried out by enterprises increased from €200k to €300k. Greater flexibility will also be afforded in the timing of when relief may be claimed. Further regional areas are also planned to be added to the scheme e.g. Athlone, Drogheda, Dundalk, Letterkenny and Sligo. 
6. Stamp duty refund scheme – Changes to terms 
   Refund scheme extended until end of 2030. Time limits for acquisition to commencement and commencement to completion are extended from 30 to 36 months for large-scale residential developments. A “full” refund will also be available at the commencement of the first phase of multi-phased developments. The meaning of “full” in this context is unclear currently.   
7. Irish Real Estate Fund (“IREF”) Tax regime – Simplification review  
   The Minister does not plan to introduce an entity level tax. However, a review will be undertaken to simplify the regime without limiting its effectiveness. 
8. Derelict Property Tax (“DPT”) – New tax 
   DPT will replace the Derelict Site Levy (“DSL”). DPT should be at a rate at least equal to the current 7% DSL. Preliminary registers of dereliction will be published in 2027, with the DPT implemented as soon as possible thereafter. The Revenue will be responsible for collecting the DPT. 
9. Infrastructure 
   Detailed action plan to be published next month to tackle barriers to delivery to include: 
   - progress legislative reforms to strike a better balance between the rights of individuals and the public good 
   - simplify regulation and consenting systems to make it easier to deliver projects; and 
   - reduce the administrative burden and cut the red tape so that we are not delaying much needed investment. 
10. Other Measures 
    - The Rent Tax Credit is extended by three years to the end of 2028.  
    - Mortgage Interest Relief is extended by two years, with a reduced rate applying in the final year.  
    - The existing retrofitting relief for small landlords will also be rolled over. 
    - The Government has committed over €5 billion in capital investment for housing delivery in 2026, alongside investments by Approved Housing Bodies (AHBs) and the Land Development Agency (LDA).  

Our view

While Budget 2026 alone will not resolve the housing crisis, we believe that it is a further meaningful positive step in the right direction.

A combination of the VAT reduction and enhanced corporation tax deduction with respect to apartment developments which we expect is intended to include purpose-built student accommodation acknowledges the severe viability constraints currently being experienced by the sector and the urgent need for action to increase supply.

Interestingly, on the VAT apartment rate cut, the Minister’s speech (“sale of completed apartments”), the accompanying Dept. of Finance tax policy document (“construction of new apartments”) and the financial resolution (“supply of an apartment used or to be used for residential purposes”) all use different wording when specifying how the rate cut will apply. It remains to be seen at this point what impact this will have on the operation of the reduction.

While undoubtedly more could have been done, it is a thin line to thread and the Government will be hoping that a combination of the financial measures announced today, and the arguably more important non-financial measures announced recently will together make the difference in increasing supply.

The exemption to be applied to cost rental is also a positive affordability measure.

Providing taxpayers a further opportunity to rezone land in scope of RZLT is also sensible in our view as some taxpayers who were carrying on genuine economic businesses suffered this tax in 2025. We hope other technical operational issues with the tax will also be addressed in the upcoming Finance Bill.

The expansion of the LCI and the introduction of the DPT also demonstrate a commitment to revitalising urban centres and tackling underutilised properties.

Importantly, the absence of unexpected or “shock” announcements will be welcomed by the sector, allowing for greater certainty.

Although the details in the forthcoming Finance Bill will be crucial, today’s measures offer a more encouraging outlook than recent years. We remain hopeful these commitments will contribute in time to addressing the housing challenges ahead.