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Around budget time at Dublin City Council, you will often get wind of the debate over how to set the local property tax. But what about the vacancy refund rate?
For those who have missed it, this refund rate means that owners of vacant commercial units can currently get 50 percent of their rates bill refunded.
Councillors have the power to alter that rate, and some think that this year is the year to do it.
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Last year, Fianna Fail Group Leader Paul McAuliffe suggested the rate be reduced to 45 percent. He wasn’t successful.
But the argument is simple, says Green Party Councillor Ciarán Cuffe. “I think, ultimately, if we reduce the vacancy refund, it encourages people to lease property even at a lower rent than they might hope for.”
By increasing the tax, which is another way at looking at lowering the refund, owners of vacant commercial units would pay more.
This could help to avoid “hold-outs”, says Cuffe. “One argument is that if you get rid of the refund, people will not be able to pay. But I think that there’s a lot of property in Dublin where people are hanging on for the higher rate,” he says.
It’s a position that’s found across parties. As Labour Councillor Andrew Montague sees it, the refund rate should be reduced.
“I think we should be increasing it [the tax],” he says. “There’s an enormous amount of vacant space. The ground floor might have retail and you could have four more empty floors above it and so they’re not paying the full rates, they’re paying half the rates.”
Ultimately, vacancy reduces the vibrancy of the city centre, says Montague. “We should be taxing empty units to encourage people to use them,” he says.
Fianna Fail’s McAuliffe says he would like to see a finer-grained approach to the vacancy refund rate that would encourage a more even economic balance across city districts.
“The current approach by the officials in the council is effectively to do no harm,” he says. “But we can vary them by electoral district. If you were to change the vacancy rebate in Dublin South East, for instance, you could use that then to balance out economic activity elsewhere.”
Of course, that wouldn’t necessarily help a district like Ballymun, says McAuliffe, because the electoral boundaries themselves are ill-defined.
“We could use it for that one district and it wouldn’t radically change the economic issues in that area, it would bring in a certain amount of income,” he says. “But the problem is that the boundaries are very crude,” he said.
But it would mean more income for the city as a whole, and could potentially reduce the vacancy levels of commercial units.
While Labour’s Montague hasn’t encountered much opposition among councillors to the idea of a reduced vacancy refund rate, council management weren’t so keen on it last year, he says.
“The staff, the executive last year made a case that the businesses that aren’t getting any income won’t be able to afford this,” he said.
McAuliffe says he’s unsure whether a motion will be put forward ahead of this year’s budget meeting, which is scheduled for November. But like Green Party councillor Cuffe and Labour’s Montague, he’s keen to see it on the cards.
“There’s no doubt that we would prefer rather that the reduction be passed on to someone in their first year of business than the landlord allowing it to lie empty,” says McAuliffe.
But if the refund rate were reduced – and the tax on vacant commercial units increased – straight away, the effect could be unfair, he says. In other words, some business would be paying more than others.
“You would phase it out over three years,” he says. “What you don’t want is a situation where one business is under pressure while another is incentivised.”
Green Party’s Cuffe agrees. “I think we should phase it out,” he says. “I would like to see it rolled back down, not overnight but over a couple of years.”
For Fianna Fail’s McAuliffe, it’s high time that the councillors actually used their power. “There’s a lot of talk about us having more power but those that are granted we actually have the power to use.”
Councillors, please just phase it out.
Some units could be converted into residential with the extended renovation scheme, let’s not hold that back.
The vacancy tax should only last a month or two. That will encourage people (landlords) to hurry to get either a place filled and or repurposed such as a retail unit being converted to residential.
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