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A 10% LEVY is to be introduced on concrete blocks, pouring concrete and other concrete products to offset the “significant cost” of the redress scheme agreed earlier this year for homeowners who have been affected by the issue of defective products used in the building of their homes.
Housing Minister Darragh O’Brien said it will come into force from April next year, but that the detail of the levy will have to be worked out.
He denied that now was a bad time to introduce the levy given the rising cost of materials, stating that some of the estimations from the Department of Finance shows a small increase in costs of about 0.8%.
“I do believe it’s important the sector make a contribution,” he said, adding that the largest contributor by far to the redress scheme will be the Exchequer.
It is right that the Government is stepping in and using taxpayers money to “put people’s lives and their homes back together”, he said.
However, he said that there is a need for a sustainable funding structure, said the minister.
Speaking in the Dáil, Finance Minister Paschal Donohoe said: “Earlier this year, the government agreed a comprehensive redress scheme for those owners who have been affected by the issue of defective products used in the building of their homes.
“This redress scheme comes with a significant cost and, therefore, I am bringing forward a levy on concrete blocks, pouring concrete and certain other concrete products.”
The levy is expected to raise €80 million annually and it will be applied from 3 April 2023 at a rate of 10%, according to Donohoe.
Defective building blocks containing excessive deposits of the mineral mica have seen thousands of properties start to crumble across the country.
An estimated 5,000 homes in Co Donegal are affected, with thousands more understood to have faulty blocks in counties Sligo, Clare and Limerick.
Tom Parlon, director general of Construction Industry Federation, said the announcement came as a shock to himself and the entire industry.
He said the measure is going to cause “substantial” inflation.
“We have a housing crisis, the whole viability of building houses is challenged. We’ll be more challenged next year,” Parlon said.
“Our estimates from talking to our people is that the actual 10% levy on pouring concrete and blocks will add at least €2,000 to the cost of a new build house. That’s very substantial,” he said.
David Browne, director and head of new homes at Savills Ireland, said that “rising construction costs ultimately impact the end purchaser”.
“At a time when affordability is the biggest barrier to home ownership, introducing a levy that will further increase the cost of construction is counterproductive,” he said.
In June, Cabinet signed off on the mica grant scheme, which is designed to help homeowners whose houses were damaged by the presence of mica in their concrete blocks
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The estimated cost of the scheme stood at €2.7 billion in June.
When the scheme was signed off on, Housing Minister Darragh O’Brien said the total grant amount per home would be capped at €420,000 as had been previously announced.
He said grant rates will be in keeping with a construction cost report prepared by the Society of Chartered Surveyors Ireland earlier this year. This report put the average rebuild costs per square metre at between €1,561 and €1.701, depending on the size and type of property.
The scheme includes alternative accommodation and storage costs and immediate repair works to a maximum value of €25,000 within the overall grant cap.
Separately, the minister said he brought a memo to Cabinet today on the recently published report from the working group to examine defects in housing.
He said an inter-departmental agency group will bring forward proposals to Government by the end of the year.
“I’ve always talked of this issue as a nettle to grasp and we are doing so. The group will also develop a timeframe for implementation of any agreed actions,” he said.
With reporting by Christina Finn and Tadgh McNally
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