Housing in Ireland: A broken system.

Sophrosyne said:
30 years ago - 1994, the marginal rates were much higher.

Despite no USC, the rates were higher and the rate bands were narrower.

For a single person:

8,200 @27%
Balance @48%

See FA 1994.
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The current rate is 48.8% including PRSI, USC and PAYE up to €70,044 and 52.8% over that.
Taking inflation into account the bands were much wider.
 
Protocol said:
Is there any country where people on below-median wages, like 30k full-time, in cities, can provide their own homes?
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Yea, lots of them. Not so many in the developed countries that have been impacted by the capital price inflation of the last decade and a half. This is an international problem. Only an idiot thinks that the actions of the Irish Government caused our housing affordability problem. Our very high levels of socialism does make it worse but that didn't cause it.
 
Sophrosyne said:
30 years ago - 1994, the marginal rates were much higher.

Despite no USC, the rates were higher and the rate bands were narrower.

For a single person:

8,200 @27%
Balance @48%

See FA 1994.
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30 years ago, rentals were in short supply in many parts of the country. In some areas this was evened out to some extent by an overhang of properties from the comparatively economically depressed 1980s.

Someone I know came to work in Cavan in 1992 and spent the first 6 weeks there couch-surfing with a friend as there were no suitable house-shares available to rent.

The wheel has turned full circle. High taxes = fewer rental properties.
 
T McGibney said:
30 years ago, rentals were in short supply in many parts of the country. In some areas this was evened out to some extent by an overhang of properties from the comparatively economically depressed 1980s.

Someone I know came to work in Cavan in 1992 and spent the first 6 weeks there couch-surfing with a friend as there were no suitable house-shares available to rent.

The wheel has turned full circle. High taxes = fewer rental properties.
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Yep, higher income taxes leaving working people with less of their earned income to buy properties that are much more expensive relative to income... and the "solution" is more taxes and more spending by the State.
 
I hold the view that people on welfare shouldn't have the same access to scarce resources as people who earn more than them. That includes housing. Someone on the median wage should be able to source housing ahead of someone on a low income, even with government support. A system which places people on low incomes ahead of people on higher incomes in the queue for housing is broken.
 
I dont remember a time in the last 40yrs when there were low rates of tax for PAYE, whether that is IT and PRSI or whatever combo you like.
Wages were crap and taxes were high. Tax evasion was common.
There was bugger all housing built by any builder because interest rates were 15%, crucifying anyone with a loan . Job security was very low , 20% were on the dole - hence a job in the bank or civil service was considered hitting the jackpot. Anyone worth their salt, if they were not pig farmers in Cavan had buggered off to London working for the green Murphy.
In my profession, things were so crap for jobs that the state was involved in subsidising by 50% the grad wages (10k a year) of junior hardware and software engineers, such was the lack of opportunity. Today a good H/W or S/W eng can easily get 100-150k++ and they are like hens teeth to find and can ask whatever..

Anyone who did civil eng immediately emigrated. Having a morgage of 25k was considered to be lucky - the banks were incredibly fussy - you actually paid (100pounds ) to apply for a morgage with AIB or BOI.

Lets say we cut IT taxes and the corporation receipts begin to soften even a little - whats the best idea as to how to run even basic services or somehow change things?. I dont want the IMF back again and I'm sick sore and tired hearing about the balls up of a health system and the unfair housing situation
 
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Sophrosyne said:
@Purple work out the effective rates for a single person earning €40,000 in 1994 and 2024.
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We're talking about marginal tax rates. Those on low incomes are under taxed and those in the middle are over taxed on their marginal income. That along with very high levels of welfare makes for a massive disincentive to work. We are living in the most socialist country in Europe and suffering the consequences.
 
The Nordic countries with high taxes, everyone pays income tax. For instance, if you are a student, and get a grant, its taxed, childrens allowance is taxed. Dole money is taxed . Fines e.g. speeding are based on your daily income rate (salary / 365), not a fixed fine .
Everyone pays in, from a small amout to a high amount. OAPS, the lot, nobody is allowed a "pass".. no loafing around.

SO people have great respect then for public facilities - children take off their shoes at school, in the train, school playground and pitches are open all year round, no rubbish and crap dumped. You then get benefits - universities provide on campus accomadation , not for profit, but because its expected that if you go to their version of UCD, that you'll need somewhere to live and not live in a tent....etc etc.
 
It is the effective rate that matters.

No one pays the marginal rate on their entire income as everyone has some form of tax reliefs - some more than others.

1994​
Income
40,000​
Single Personal Allowance
2,175​
Taxable income
37,825​
8,200​
27%​
2,214.00​
29,625​
48%​
14,220.00​
16,434.00​
Effective rate
41.08​
2024​
Income
40,000​
40,000
20%​
8,000​
Single Personal Tax Credit
1,875​
6,125​
USC
12,012​
0.5%​
60.06​
13,748​
2%​
274.96​
14,240​
4%​
569.60​
904.62​
Effective rate
17.6​

Perhaps someone could check these figures. I think they are correct.

PRSI rates for 1994 here
 
Sophrosyne said:
It is the effective rate that matters.

No one pays the marginal rate on their entire income as everyone has some form of tax reliefs - some more than others.

1994​
Income
40,000​
Single Personal Allowance
2,175​
Taxable income
37,825​
8,200​
27%​
2,214.00​
29,625​
48%​
14,220.00​
16,434.00​
Effective rate
41.08​
2024​
Income
40,000​
40,000
20%​
8,000​
Single Personal Tax Credit
1,875​
6,125​
USC
12,012​
0.5%​
60.06​
13,748​
2%​
274.96​
14,240​
4%​
569.60​
904.62​
Effective rate
17.6​

Perhaps someone could check these figures. I think they are correct.
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They are almost correct. You would have to adjust the 1994 income for inflation to be able to compare the effective rates. Otherwise the tax cut off points are out. Using the CSO calculator from Jan 1994, 40000 would be worth 75791.37 today.

You also get a paye tax credit today along with the single person tax credit.

And also PRSI is missing.
 
Ajax123 said:
They are almost correct. You would have to adjust the 1994 income for inflation to be able to compare the effective rates. Otherwise the tax cut off points are out. Using the CSO calculator from Jan 1994, 40000 would be worth 75791.37 today.

You also get a paye tax credit today along with the single person tax credit.

And also PRSI is missing.
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I have provided a link to 1994 PRSI rates, which you can use for comparison.

I just used the single allowance/credit for illustrative purposes. Different people have different reliefs.
 
Ajax123 said:
They are almost correct. You would have to adjust the 1994 income for inflation to be able to compare the effective rates. Otherwise the tax cut off points are out. Using the CSO calculator from Jan 1994, 40000 would be worth 75791.37 today.

You also get a paye tax credit today along with the single person tax credit.

And also PRSI is missing.
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Would it be best to back-annotte todays 40k salary to what it would have been in 1994.....only very very well paid professions would have earned 40k in 1994 - hence the effective rate is skewed. I would guess it was ~12k from memory, if you could buy a 3 bed house in 1995 in Dublin for 59k..

Aside from that, the mantra that todays marginal rates are HIGH compared to last 40yrs is a misnomer, for modest paye salaries. From #111, ordinary paye workers were getting crucified for IT @48% for incomes > £10,000 - hardly a fortune.

On top of that regular workers were paying 7.75% A class PRSI , so thats 48+7.75 = 55.75% marginal.

There was no housing issue then - except since then capital wealth has rocketed in comparison to wages - have a look at the S&P compared to wage inflation. Purples summary is dead on.
 
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Sophrosyne said:
It is the effective rate that matters.

No one pays the marginal rate on their entire income as everyone has some form of tax reliefs - some more than others.
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You're missing the point.

If someone has already exhausted their lower tax band(s) before they invest in a property, their income from that properly will evidently be taxed at the marginal rate - not their effective rate.

So in calculating their after-tax return on that investment, they must count first their rental profit and then apply their marginal rate to that profit.
 
T McGibney said:
You're missing the point.

If someone has already exhausted their lower tax band(s) before they invest in a property, their income from that properly will evidently be taxed at the marginal rate - not their effective rate.

So in calculating their after-tax return on that investment, they must count first their rental profit and then apply their marginal rate to that profit.
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With respect, I am not missing the point.

While a parcel of income may be subject to the marginal rate, that does not mean that their entire income is, as some people are trying to imply.


To the main discussion, is comparing the housing situation in the past going to solve the present situation?

The Finnish example cited is for assisted housing for the long-term homeless, similar to those catered for by the McVerry trust.

At present, everyone including the Government is competing in the private market.

So what is to be done?
 
Sophrosyne said:
With respect, I am not missing the point.

While a parcel of income may be subject to the marginal rate, that does not mean that their entire income is, as some people are trying to imply.
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Nobody has tried to imply that. If you calculate your after-tax rental return using your effective tax rate, you're doing it wrong.
Sophrosyne said:
The Finnish example cited is for assisted housing for the long-term homeless, similar to those catered for by the McVerry trust.
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That's going well.
Sophrosyne said:
At present, everyone including the Government is competing in the private market.

So what is to be done?
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Supply, supply, supply.
 
Sophrosyne said:
So what is to be done?
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This is were there a variety of ideas, often on opposing sides of the spectrum.

Sophrosyne said:
To the main discussion, is comparing the housing situation in the past going to solve the present situation?
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One thing we can gain from the past, is that for many decades houses were considered for their use as a place to live. They had broadly stable income to price ratios. They were not speculative assets for investment. Until suddenly they were. The first generation in Ireland to broadly gain good incomes from employment, used their spare income, available to them ironically in part due to low housing costs, on buying additional homes as investments for retirement, inflation offsetting, new income streams etc. Fast forward over the decades and this had a massive effect on boosting the prices of housing and capital in general. These people are still a massive voter base and hence there is little appetite by government to do anything that would effect house prices negatively.

Simultaneously households suddenly grew from largely single income households to dual income households. This had a very strong effect on increasing the prices of houses as the extra spending power was inflated away. Now you need a dual income household to afford what a single income household could once afford. Whilst I 100% agree with women being allowed to work or do as they wish, I strongly believe dual income households is the biggest scam of the end of the last century for families. You now have the second person working to essentially spend all of their income on increased housing costs and the costs of hiring someone else to raise their kids. You both only get to enjoy a sliver of time in evenings and weekends with them and spend the majority of your time at work. If you buy an older home, the houses are often the exact same as they were decades ago with no work done to them etc. Just a far higher single income to price ratio. This is also why single people often feel so left out in the housing market today.

You see the symptoms of this manifest in the average first time buyer age being 34 and the fertility rate of 1.6 being well below the required replacement rate of 2.1. People are having families later and as a result having no choice but to have less kids. Who benefited from this? Companies did as they saw their productivity rise significantly while wages never had to keep up. Profits soared and shareholders or capital owners benefited greatly.

I believe a much better transition would have been to keep the economic protections of a single income household and just remove any reference to gender from it. Refer to them as a parent. Either parent can stay at home and one works. There is an upcoming referendum on removing this reference to household economic protections in our constitution as it refers specifically to the role of women in this context. However I think it should just be altered by removing references to gender rather than be removed completely. Anyways this risks turning into another discussion entirely.

To stay more on point this also plays another role into what makes social housing even more attractive today if you want to have a family. It lets you have a one income household without having to be in the top 10% of PAYE earners in the country.
 
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I think the people who are rightly raging about ryanairs purchase of 25houses in Swords to facilitate employment of their staff are NOT amateur landlords raging about paying 52% on their profit - this sector has capital wealth and has done very well out of the status quo .

Its the people starting out in life, whose income and wealth is derived from working who are deeply affected, they are caught in a vice of outrageous rents and high house prices. They saw an opportunity and its been taken away, for the reason elequenty stated by Purple
 
Sophrosyne said:
Do you mean adjust it upwards for inflation?
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Of course average earnings in 1994, 30 years ago now were 18000 euros now they are 45000 , I doubt anyone was paying the high rate of tax on 18,000 in 1994 but they are paying the high rate at 40000 now raised to 42000 in last budget. 40,000 in 1994 is equivalent to over 100000 euros in today's money. You were not comparing like with like in that table. That would be like a statistic that varadker would pull out to try and suggest misinformation
 
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