Budget 2026 analysis: Housing measures

In addition to relief for homeowners and renters in the form of an extension to the Mortgage Interest Tax Credit and Rent Tax Credit, Budget 2026 sets out a number of measures designed to stimulate the supply of residential properties, with a particular focus on apartments.

Stimulating apartment development

The most notable measure is the reduction in VAT on new-build apartments from 13.5% to 9%. The new reduced rate applies to sales made from 8 October 2025, including apartments already under construction, and is due to apply until 31 December 2030. Many housing experts point to a “viability gap” in apartment development – broadly, the gap between the sale price of an apartment and the cost of constructing it – hindering development of apartments, and this measure has the objective of bridging this gap with a view to unlocking stalled development in the sector as well as encouraging further delivery of apartments.

A second measure of relevance to apartment construction will allow for an enhanced corporation tax deduction of 125% of certain construction costs of apartments and also on the conversion of non-residential buildings into apartments. It applies to developments of 10 or more apartments and the maximum additional deduction is capped at €50,000 per apartment. This will apply to projects for which a commencement notice is submitted between 8 October 2025 and 31 December 2030.

Cost-rental sector

In a sign that the government also sees the cost-rental sector as playing a key role in the ultimate resolution of the housing crisis, the Budget includes a measure to exempt from corporation tax any rental profits derived from such lettings.

Existing schemes

The Living City Initiative, which looks to incentivise regeneration in certain areas within the major cities, is being expanded to Drogheda, Dundalk, Athlone, Sligo and Letterkenny. Furthermore, it will now apply to properties built before 1975 (previously pre-1915) and is also being expanded to “living over the shop” properties.

The Residential Development Stamp Duty Refund Scheme, which provides for a partial refund of stamp duty on sites that are subsequently developed as residential property, is being extended to 31 December 2030. A number of technical amendments will also be introduced in Finance Act 2025.

Carrot and stick approach

In addition to the “carrot”, the government is also applying the “stick” approach, announcing the intention to introduce a new Derelict Property Tax to replace the existing Derelict Site Levy, albeit with a long lead-in period meaning that it is unlikely to come into effect until 2028 at the earliest. Meanwhile, the existing stick, the Residential Zoned Land Tax (RZLT), is being amended to allow certain impacted landowners another opportunity to apply for zoning changes to the land and potentially entitling them to apply for a further deferral of RZLT for 2026.

There is much for property owners, developers and investors to consider in Budget 2026. Whether these measures have their intended impact, time will tell.

Our Budget 2026 webinar, featuring leading economic analyst and commentator Jim Power along with a panel of Crowe Ireland experts moderated by tax partner Claire Davey, is now available to view on demand. Click here to to find out more about what Budget 2026 means for business owners across all sectors.