Disclaimer: I study the Irish housing market and have a buggy site for finding houses at https://www.gaffologist.com/
Interestingly Ireland has effectively no YIMBY party. The debate here reminds me of what I experienced in California 20 years ago. The left shrieks about "evil developers" and "affordable housing" and opposes new market-rate building. Meanwhile the right has mostly homeowners voting for them so they hardly have an incentive to allow more building.
It's also a place where making a return through investment is horribly discouraged; ETF's are kneecapped with a 41% tax on _unrealized_ gains, and capital gains tax is high (33%). Income taxes are also punishingly high - the top rate of tax (52%) kicks in under 100k, much lower than e.g. Germany.
But houses? Your primary residence is liable for only a laughably low property tax (a few hundred euro a year for most people) and you can sell it with no capital gains tax whatsoever, regardless of the gain. Even the US isn't so generous!
Make a million quid in the market? The notions on you, we'll be taking that thank you very much!
Have the gall to _work_ for it? Why we'll just take €520k, thanks!
But you bought a house in 1992 and then shouted down all new development for the last 30 years and now can sell it for €1.5 million more than you paid? Why, that's your HOME you can't tax HOMES can you??
No wonder money all flows to homes.
Not to mention that the government takes money from taxpayers and funnels it in to new house prices via help to buy, AND takes money from taxpayers and uses it to _outbid those very same taxpayers_ by buying property off the private market to meet social housing quotas. (Social housing is fine but for fuck's sake build your own, don't shrink the already tiny private market)
Even better, mortgages are capped at only 4x your income and you need a 10% deposit, so you can pay 2500 a month in rent to someone like me, who bought a house in cash. Because we need to protect people from themselves, of course!
(I live in my house, I don't rent it out, but you get the idea)
Incidentally I'm probably selling my house an hour from Dublin a bike ride from the train with gigabit fibre on 3.5 acres soon if anyone's interested.
> Income taxes are also punishingly high - the top rate of tax (52%) kicks in under 100k
Wow -- got to make up for that famously lax corporate income tax, I guess! Which provides an interesting window into transnational company exploits. Ireland's decided to place more tax burden on individuals vs companies (which could have good reasons and could in theory even be net-neutral domestically, just shifting tax burden around between companies and their shareholders.) Now a giant tech company decides to domicile as much of itself as possible in Ireland, while themselves remaining US citizens and residents, since our tax code taxes individuals far more lightly than Ireland.
Well it isn't quite like this. The personal tax rate is banded, so only your income _above_ a certain amount is taxed at 52%.
Like, it's a progressive way to tax, rather than a lower flat rate.
Also, the gov just announced a big surplus again from multinationals, so I don't think it lines up to say the tax burden is shifted to individuals, when there is a really big take from corp tax also;
"Higher corporation tax receipts are expected to contribute to a budget surplus of €10 billion this year and €16.2 billion next year."
Certainly, this is very normal. It makes sense to have a high rate of tax on extremely high earners!
But in the US the top tax rate kicks in at $539,901 (for a single person! Higher for married). In Ireland it kicks in at the princely sum of €70,044. We tax people on decent but not incredibly high incomes as though they're on Ferrari money. You might think "well that's Europe for you" but in Germany the highest rate of tax kicks in at €277,826 per year.
And for your taxes you get:
ridiculously expensive childcare (€1000 per month per kid - compared to nothing or a couple hundred a month per kid in other EU countries)
a collapsing HSE (wait times for pediatricians can be a year+ public, and I had to spend hours on the phone to find a private one who'd see my 3 year old in under a month)
(almost all) religious schools that still ask for a "voluntary" contribution
mediocre public transport
US-style car-dependent single use sprawl
horrible cycling infra
incompetent and agonizingly slow public bureaucracies (_especially_ immigration but tbf immigration is horrible most places)
and very high costs of living.
On the bright side, it's one of the better-shielded places from climate breakdown. The weather here is amazing. I grew up in a hot place and never want to be over 40C again.
I'm ok with that tax band at that level. And I imagine the majority of people in Ireland are, as there is no political appetite to tax the wealthiest people less.
People in finance and IT can make a ton compared to other folk. If the top tax band was raised to 500,000k or something all that extra money would just go on bigger houses, fancy cars and holidays and shit.
A less progressive tax system is bad for society. Eg. I just got a letter saying kids books will be free in primary schools now. Don't get me wrong, there are big problems in Ireland, but taxing well off people less is not gonna fix anything!
At least that is good, as immigration takes a lot of what little available housing that is available.
It's the same in the USA. Housing prices are shooting up on everything and 40 million Mexicans - not counting all the immigrants from other countries - that have moved here. Don't tell me that has zero effect on the housing market here in the USA. Probably more than all other causes combined.
> The personal tax rate is banded, so only your income _above_ a certain amount is taxed at [...]
Same for the US. Isn't every country like that? The US's highest federal income tax rate is 37%, and that applies to income over $578,125 for single people and $693,750 for married couples. This isn't counting state taxes (0-12.3% depending on the state) and FICA taxes (2.35% at that income level).
So in some states you do match the Irish rates? There's no extra layers like state or city tax in Ireland for individuals, local government is funded by national government, business rates, and sometimes specific charged for services (e.g. bin collection, though private options exist too)
In no states do we hit the Irish rates on your marginal dollar for someone whose taxable income is say € 75000. ( = $82000 )
In Ireland your next euro would be taxed at 52% but in say, NYC which may have the highest burden since it has a rare local income tax:
Using single figures, married is different:
Federal tax -> falls into the 22% bracket (covers taxable income $41,776 to $89,075)
State tax -> 6.25% bracket
Local tax -> 3.819% bracket
Obviously we have the same marginal system you do, so I'm only talking about how much of your "next dollar" is taxed but that adds up to just over 32%.
On the other hand, health insurance. One guess from Google says "a Silver tier plan in New York costs $710 monthly" so using that 710 x 12 = 8,520 a year, or about 10% of your income (note: since we deduct health premiums off your income, it would actually effectively reduce your taxable income and rejigger those tax brackets). And our property tax can be staggering in high-cost areas, and is obviously passed on even to renters. Mine is in the neighborhood of $8,500 a year.
Also does Ireland have a "standard deduction"? This is just an amount that everybody gets to subtract before even using the brackets to compute, so our brackets don't really start taxing at dollar #1 like they appear to.
Anyway, it's all ridiculous, I know! But yeah, it looks like your "€75000 earner" isn't all that disadvantaged compared to here. Your €200000 earner definitely is, though! :D
> And our property tax can be staggering in high-cost areas, and is obviously passed on even to renters. Mine is in the neighborhood of $8,500 a year.
The high band of property tax is €300/yr and I've never heard it passed on to renters here.
> Also does Ireland have a "standard deduction"? This is just an amount that everybody gets to subtract before even using the brackets to compute, so our brackets don't really start taxing at dollar #1 like they appear to.
Yes, there's a minimum standard deduction of €3550 (€1775 for single person, plus €1775 for being an employee), that is effectively deducted from the tax bill at the final step, and others may replace these with larger amounts for different categories of workers, life circumstances on top of that.
In theory yes, but this tax was introduced in recent memory and the rate of rent increases that year was not noticeably different to the rate of rent increases in other years, as the prices are limited (well "limited") by the ability of tenants to pay, rather than being driven by costs. And the most expensive areas have rent control anyway.
You add some excellent background and context. I was reading the article screaming "it's so much more complicated than this".
> Incidentally I'm probably selling my house an hour from Dublin a bike ride from the train with gigabit fibre on 3.5 acres soon if anyone's interested.
I'm curious how much you're listing it above your purchase price. Show me a vendor who doesn't succumb to estate agents whispering in their ear about what you can get for it or a belief they _have_ to participate in 'supply and demand' and I'll eat my hat. (Yes, I'm just as guilty of this)
How would I not participate in supply and demand? I'll sell to the highest bidder, whatever that is.
Though I suspect I'll take a loss when all is said and done. I was stupid enough to buy a protected structure and thanks to heritage's intransigence I now have a thatched cottage (recently rethatched!) with a beautiful 120 sqm extension with huge windows, high ceilings, engineered wood floors, heat pumps, insulated foundation.... and no insurance. Because of the thatched bit...
Removing or replacing the existing thatch with anything but the same material (oaten straw) is highly illegal and could land me in jail.
Of course, heritage's stubbornness is also why my own county lost 40% of thatched buildings in the last 20 years and will probably lose them all in the next 20.
In some cases buildings are worth literally less than nothing (the land would be worth more without them) because heritage is naive enough to think some rich eccentric wants to plow millions of Euro in to fixing some dump in the middle of nowhere.
The land would be worth more if the building were demolished (and it had planning permission to build homes). But heritage officers won't allow that, so nature will demolish slowly (and make the town ever uglier in the process) and THEN in 30 years or so it will finally be demolished.
? Ireland remains in the EU. And it's common to have stricter rules for historical buildings (fair enough, my cottage is over 200 years old) but normally it comes with provisions for supporting maintenance, insurance, etc. Ireland just half-asses it.
What I mean is that vendors/landlords can decide to sell/rent for less than the maximum being offered and collectively cool the market themselves, theoretically.
However it requires extreme coordination because if the vendor of my next property is trying to achieve maximum gains then it would be a financial double whammy for me if I take less than the maximum being offered.
The point is that by accepting the absolute maximum I can get for my property, I am playing a part in raising property prices, whatever the reason.
You said “I will sell”. It’s an active choice, not a law of nature. You make a decision. We all do
The problem is that the focus on "greedy landlords" or "greedy corporations" or "greedy homeowners" is that it suggests the solution is to make people stop being greedy. As a "greedy homeowner" that's very convenient for me because I know it'll never happen. No, don't increase my property taxes, don't ask for CGT on my primary residence, just keep imploring me to "stop being greedy".
Unfortunately "greed" is about the only thing you see in the discourse on the matter in Ireland, which really remains pretty unsophisticated and unable to comprehend second-order effects. I posted once or twice on one of "Ciaran's crazy house prices" rants about greed saying that we needed systemic change and the focus on "greed" was absurd - humans in Ireland are no more greedy than anywhere else - and was shouted down. Similarly, if you say "letting tenants remain in properties for months or years without paying rent might discourage people from renting out homes and make the problem worse" or "making it impossible to evict people will result in more places never being rented out in the first place" then you're some kind of heartless bastard.
Everyone is greedy! Do you go to your boss and ask for a pay cut? Do you put your car on donedeal and say "10,000 or lowest offer"? What we need is _systemic_ change that acknowledges people are greedy and produces good outcomes despite that greed.
Not to mention that the idea of selling to someone based on something besides price invites all sort of prejudice and bias. Should I choose to sell to a nice local family and tell the immigrants to go to hell? Should I sell to someone who shares my own political views? How would you have me decide?
Finally, a lot of people are selfless until faced with the reality of the situation. The next house I buy? It's going to the highest bidder. The best way for me to make sure that bidder is me is to get the best price I can now for my current house.
Greed is hardwired into the human condition and I think it would be absurd to try and persuade people into transactions that would not be in their best interest and think you can have success.
Especially where it is akin to a prisoner's dillema and a few bad actors can take advantage of your good intentions.
My point was if you really care about this issue you need to think about incentives and/or government regulation as a solution - not preaching.
Sure, but I'm not a charity and I need to move somewhere else so I'm going to sell it to whoever is willing to pay me the most. My personal choices will not effect the systemic change needed.
Haven't read it, though quickly skimming doesn't give much hope. All this talk about "hoarding" and not enough about how it's default-illegal to build a house until you satisfy every church biddy around. We need as-right zoning. I'd weep for joy if Ireland passed sensible ADU rules like California.
Not the OP, but I would describe this article as muddled. And in a way that’s common for people who haven’t thought deeply about the housing market.
For example he complains that 95% of apartments are owned by institutions, but also that rents are too high. These complaints are in tension. One of the key ways in which rental supply is expanded is through large developments that are owned and managed by companies. For example, here in Downtown Brooklyn we’re getting a new “super tall” building with 425 apartments for rent [1]. How can you create this kind of rental supply without institutions? Is your plan to somehow sell 425 apartments to individual owners and hope those owners can rent them out? I don’t think it makes sense.
One of the weird things moving from Australia to Germany was that most rentals are owned by private individuals in Australia and companies in Germany. The difference is huge - renter's rights are much greater in Germany, and that seems to go hand-in-hand with institutional landlords (I guess because the landlords aren't voters but the tenants are, so laws skew towards the tenants).
I've been fortunate to have a personal house we rented out, and also have insight into a larger organisation that has multiple properties to rent.
The difference between the two is the risk of a bad tenant.
With my personal property we were fortunate to never have a really bad tenant. We had high ish turnover (it's a starter home, indeed was our starter home, so typically people grow out of it.) we'd lose a month or so if rent between tenants, there would be some money spent on maintainence and so on. Our time was uncoated.
We have strong tenant laws here, so if you geg a bad tenant, who literally just stops paying, it can take months of lost rent, and significant legal fees to get an eviction. Bizarre as it sounds its cheaper to _pay_ a bad tenant to leave than drag it out in the courts.
For institutions this is a cost of doing business, and is factored into overall rent.
If a private owner encounters such a situation it basically causes them to sell out - one more private property goes into institutional hands.
In other words private owners don't understand the risks and "hidden costs". As long as they only gave good tenants things are rosy. First bad one, and they exit the supply chain (and have lots of good horror stories for their mates.)
So I think your cause/effect is backwards. Good tenant laws (which I think are generally a good thing for good tenants) can make house-rental unattractive to individuals. Resulting in mostly "for profit" housing supply. Plus good tenants subsidise bad ones.
Ironically strong tenant laws also make it a _very_ tough market for new, or risky, tenants. Landlords understand the high costs involved, and do become very risk-adverse with applicants. Which is bad if you have high risk factors (like self-employment).
It's a very delicate balance to get tight. We need strong tenant protections, but we also need some landlord protections to keep the market in balance.
> Incidentally I'm probably selling my house an hour from Dublin a bike ride from the train with gigabit fibre on 3.5 acres soon if anyone's interested.
Christ I would love to be, but 3.5 acres is way out of my league. Good luck with the sale man!
It could be, though I can't help but notice that the USA levies taxes on primary homes and in many jurisdictions in that country they also have very expensive real estate. (yes there's a sizeable exemption, but not so big that no one would ever pay it)
I suspect other issues such as low rental vacancy, not enough supply of homes and very low property taxes are more dominant causes of high Canadian real estate prices.
No, in Canada there is no limit to the tax exemption for primary residence.
> the US where mortgate payments are sheltered
Not sure what you mean by this. In the US, the interest on your mortgage is tax deductible up to a certain amount. But the amount of this tax advantage is fixed at your purchase price. You don't get increasing tax savings as the value of your home increases. As for capital gains tax deduction, this is limited to $250k for a single filer, or $500k for married.
Yes basically. I am in the process of getting a mortgage in Ireland and they will give you up to 4x the gross income of those applying. This doesn't include any deposit or savings you may have of course.
Over here in Croatia they only look at your last 3-6 pay slips and that's it. I own a small LLC and I gave myself a raise before taking out a mortgage, then after I got the mortgage I returned back to my original salary.
On a 2.200 EUR before tax salary I was cleared for a 150.000 EUR mortgage, but could have went even above that. They don't care about deposits or savings, even though owning a credit card and investing briefly (40 EUR each month for 2-3 months, then you can stop investing) in one of the bank's funds does lower your interest rate (which was 2.48% before New Year, now it over 3%).
> But you bought a house in 1992 and then shouted down all new development for the last 30 years and now can sell it for €1.5 million more than you paid? Why, that's your HOME you can't tax HOMES can you??
The other side is this helps people move. When a parents kids move out of home you dont want them holding onto big homes just because theyd take a major financial hit by moving, even if their current home doesnt suit their lifestyle.
Incentivising ownership through reducing capital gains for owners also encourages a society where people own their home which hugely softens the issues of retirement and pensions as well as greatly adding to peoples psychological sense of security.
Increasing annual land taxes is a better solution imo, especially in more desirable locations (they should stay low in poorer areas).
> The other side is this helps people move. When a parents kids move out of home you dont want them holding onto big homes just because theyd take a major financial hit by moving, even if their current home doesnt suit their lifestyle.
I don't think this really matters unless a lot of people are upside down on their homes.
We could probably target a 2% annual housing price decline (until builders stopped building) and still be fine in that regard.
Everyone is upside down on a home in at least the first five years. In a world with job instability and lack of remote options, I can see their argument as valid.
Interestingly Ireland has effectively no YIMBY party. The debate here reminds me of what I experienced in California 20 years ago. The left shrieks about "evil developers" and "affordable housing" and opposes new market-rate building. Meanwhile the right has mostly homeowners voting for them so they hardly have an incentive to allow more building.
It's also a place where making a return through investment is horribly discouraged; ETF's are kneecapped with a 41% tax on _unrealized_ gains, and capital gains tax is high (33%). Income taxes are also punishingly high - the top rate of tax (52%) kicks in under 100k, much lower than e.g. Germany.
But houses? Your primary residence is liable for only a laughably low property tax (a few hundred euro a year for most people) and you can sell it with no capital gains tax whatsoever, regardless of the gain. Even the US isn't so generous!
Make a million quid in the market? The notions on you, we'll be taking that thank you very much!
Have the gall to _work_ for it? Why we'll just take €520k, thanks!
But you bought a house in 1992 and then shouted down all new development for the last 30 years and now can sell it for €1.5 million more than you paid? Why, that's your HOME you can't tax HOMES can you??
No wonder money all flows to homes.
Not to mention that the government takes money from taxpayers and funnels it in to new house prices via help to buy, AND takes money from taxpayers and uses it to _outbid those very same taxpayers_ by buying property off the private market to meet social housing quotas. (Social housing is fine but for fuck's sake build your own, don't shrink the already tiny private market)
Even better, mortgages are capped at only 4x your income and you need a 10% deposit, so you can pay 2500 a month in rent to someone like me, who bought a house in cash. Because we need to protect people from themselves, of course!
(I live in my house, I don't rent it out, but you get the idea)
Incidentally I'm probably selling my house an hour from Dublin a bike ride from the train with gigabit fibre on 3.5 acres soon if anyone's interested.