Government Budget Aims To Help Break Deadlock In Residential Supply
Targeted tax breaks for developers and major infrastructure spending were at the heart of the government’s housing measures in the budget 2026 this week, as ministers pledged to accelerate homebuilding amid Ireland’s deepening housing crisis.
Minister for Public Expenditure Jack Chambers announced a record €11.3B allocation to the Department of Housing, describing the delivery of more homes as “this Government’s absolute priority.”
Minister for Finance Paschal Donohoe told the Dáil that the crisis was “to the forefront of my mind” in preparing this year’s budget.
Among the key measures, the value-added tax rate on the sale of new apartments will fall from 13.5% to 9%, effective immediately and lasting until the end of 2030. Donohoe said the reduction would help address the viability gap in apartment construction and support higher-density development.
Developers will also be able to claim a corporation tax deduction on certain costs associated with building new apartments or converting nonresidential buildings into housing. In addition, rental profits from homes within the Cost Rental scheme will be exempt from corporation tax, a move aimed at expanding the supply of affordable rental accommodation.
Infrastructure support will come via a €205M housing activation infrastructure fund, designed to back the work of the newly established Housing Activation Office. The HAO will coordinate between government departments and key agencies, including the ESB and Uisce Éireann, to remove infrastructure bottlenecks and speed up housing delivery.
In terms of social housing, €2.9B has been set aside for 10,200 new-build and acquired homes, matching last year’s target.
A new derelict property tax will also replace the existing derelict site levy from 2027, set to be no lower than the current 7% rate.
The Irish Institutional Property lobby broadly welcomed the measures, in particular the decision to reduce VAT on residential construction, and said that taken together, the measures announced represented a positive step toward increased housing delivery.
“IIP members have consistently highlighted that reducing costs across the delivery chain is essential to meeting national housing targets,” the organisation said in a statement.
However, opposition parties criticised the budget, with Social Democrats housing spokesman Rory Hearne claiming the measures “lack vision.”
In its most recent report, Colliers said the residential sector was the most popular asset class in the third quarter, accounting for 38% of investment, at €260M, and the two largest transactions of the quarter, Ardstone’s acquisition of Spencer Place for €177M and its €79M purchase of Birchwood Court.
“Investor appetite for PRS opportunities of scale had almost entirely evaporated over the last number of years — not seen since Q1 2023 — and its re-emergence demonstrates growing appetite and investor confidence in the sector,” Colliers said in a statement.
For more on this subject and for tickets, the Ireland Residential Investment and Development Conference 2025 takes place in Dublin on 27 November.
