Hardware Association Ireland (HAI) represents more than 400 employers in the industry. The sector has a turnover of €2.4 billion (CRO), pays wages in excess of €800 million and is a significant contributor to the public purse.
It directly employs 26,000 and underpins the jobs of a further 147,000 builders and tradespeople.
HAI’s recommendations represent a window of opportunity to trigger growth throughout the country. We believe that these recommendations will spark economic activity, mitigate the impacts of COVID-19, and help us meet our carbon-reduction targets.
This sector has huge scope, scale, and potential.
Home Renovation Incentive (HRI) scheme for Renovations
HAI strongly encourages the re-introduction of the scheme. We suggest that the scheme has a lifespan of three years from July 2020 (or end of universal lock-down period).
Statistics from the Revenue show that the scheme has been highly successful.
During the period of the HRI Scheme 147,369 projects were completed on 94,179 properties. Almost €2.5 billion flowed into the economy, with €105 million claimed in tax credits. (Source: Revenue Commissioners).
HAI also suggests that the minimum qualifying spend is €3,000 to encourage those with smaller homes, and also to increase the ceiling to €50,000 as an incentive for homeowners to pursue additional home improvement projects. Evidence to-date suggests that the HRI scheme has acted as a strong encouragement for otherwise latent home improvement works, thereby making the scheme effectively cost neutral for the exchequer.
HAI requests that the tax credit be made claimable in the same year as work is completed, with 100% of the claim credited the following tax year (originally spread over the following two fiscal years). This would provide an extra incentive and ensure money is more efficiently circulated back into the economy.
HAI recommends that a flat rate of 30% is used to claim credits – this would make it more equitable. In the previous HRI scheme, it was based on income tax paid, it disproportionately incentivised higher earners and areas with a concentration of higher earners.
- Re-introduce and extend the HRI scheme by 36 months
- Lower the floor of the scheme and increase the ceiling
- Incentivies with a flat tax rate
- Claim tax credit in same year as work completed and claim credited following year
All independent consumer insight research(1) conducted over the last number of years underlines a strong appetite for home improvements amongst Irish householders.
Irish consumers also have a considerable amount of savings, largely in low interest deposit accounts.
HAI recommends the Home Renovation Incentive Scheme as the business model to deliver the strategy because:
- It works – it has a proven track record
- It is a core competence of key government agencies
- It is fast and effective – it lets money slow, and flow immediately throughout the economy, and throughout the country
- It will help restore consumer confidence and encourage sensible and local spending
- It will grow employment
Home Renovation Incentive (HRI) Scheme – for Energy Retrofitting of Homes
Again HAI recommends the Home Renovation Incentive Scheme as the business model to deliver the strategy outlined below.
There is a groundswell in public opinion towards becoming more eco-friendly as evidenced by the most recent Eurobarometer Poll(2). Results of the poll evidence that while concern about the environment and climate change has grown throughout the EU – 35% of EU citizens consider it an important issue – this figure rises to 50% in Ireland. Consumer research conducted by HAI shows that householders have a considerable appetite for energy efficiency improvements to their home.
Previously Ireland set a target of 20% reduction in greenhouse gas emissions by 2020. However current forecasts suggest that only a 1% reduction will be delivered(3). 80% of our homes have a C rating or less. We use 7% more energy than the EU average and 58% more carbon. We require a breakthrough on this. The plan to retrofi t 500,000 homes will be enabled by the strategy detailed below. HAI members will be key delivery partners in the implementation of this strategy.
In other areas of environmental protection Ireland has an enviable track record – as evidenced by the success of the WEEE scheme, where Ireland is one of the best performers in Europe. HAI welcomes the recent report of the Climate Action and Tax Strategy Group and its focus on taxation stimulus to encourage retrofitting.
- Reduce VAT to 9% on all carbon saving products such as Heat Pumps, Insulation, Wood burning stoves (all products as per Energy Saving Credits – Better Energy Homes).
- Introduce a value-based incentive scheme for retrofitting with similar incentives to the HRI scheme. At present most incentives are weighted towards deep retrofitting. Even with current grants the financial outlay for many householders is prohibitive. According to the Property Price Register the average selling price of a second-hand house in many parts of the country is less than €200,000. Currently the Deep Retrofit Grant programme has the aim of an A rated home. This requires an investment by the homeowner of an estimated €30,000. Adjust the grant system such that it will encourage medium-level retrofi-tting. Target properties with a BER rating of B3 or less. Works to be conducted only by a qualifying contractor who is registered for the scheme and who can demonstrate tax compliance and VAT registration.
- Previously SEAI granted works were practically excluded from the Home Renovation Incentive. To overcome this, we suggest that if an individual receives an SEAI grant then the total qualifying expenditure (grant + tax exemption) will be reduced by the amount equal to the grant amount – allowing for co-existence with SEAI grants and avoiding duplication of funding. e.g If a household spends €10,000 – The grant may account for €5,000 and the household can claim tax relief on the other €5,000.
- Introduce measurements (KPIs) and targets for retrofitting activity at local government level.
- HAI fully endorses St. Vincent de Paul’s recommendation to “Ensure sufficient funding is available to allow Local Authorities to complete the energy retrofitting of social housing stock in the next four years. Cost: allocate €50 million for energy upgrades in 2020”.
If ever there was a time for this it is now.
This will help restore confidence, inject cash into the economy and create thousands of sustainable green jobs.
It will enhance our energy security by decreasing our dependence on imported fuel.
It will decreate our carbon footprint
Stimulate Housebuilding and Renovation of Property
Residential housing remains heavily under supplied and new house build activity subdued. Most builders and economists estimate that we need at least 35,000 new homes to clear the backlog. In 2019, 21,500 new homes were build, this year the target was for 24,000. With the cessation of construction due to COVID-19 in most likelihood this target will not be met. The general election underpinned housing as a pivotal area and one of very signifi cant concern to the electorate. The recent Eurobarometer results show housing to be, by far of greater concern in Ireland than 26 of the 28 EU states. Only Luxembourg is more concerned about housing than us. We welcome the Rebuilding Ireland plan and its ambitious targets;
However, we feel the sector needs additional stimulation to encourage new builds and reduce the number of vacant dwellings.
- Introduce a Derelict Property Renovation scheme (similar to Home Renovation Incentive Scheme) for property owners.
- Continue with the Help to Buy Incentive Scheme
- Introduce a Tax Incentivised savings scheme for first time purchasers based on the SSIA model
- Typical banks make exceptions in terms of deposits/income in 20% of cases of mortgage applications. Usually this is used up by Quarter 3.Increase to 33$ to the end of 2021.
Upskilling the sector and re-skilling new employees
It is essential that the industry can respond to changing demands. Up to the onset of Covid-19 there was a shortage of skilled workers in the sector. With so many people out of work there is a potential pool of new workers. A cohort of those currently out of work are unlikely to return to their previous careers, at least in the short to medium terms. Some will need to be re-skilled to adapt to the needs of the economy.
We support the recommendations in the Construction Industry Federation’s report ‘Demand for Skills in Construction’. Despite the positive outlook for construction over the medium to long term, a skills shortage could threaten to derail this. In particular, HAI advocates the establishment of a Construction Skills Forum, to monitor progress and address barriers in the education and training system which are impeding the delivery of the required skilled employees.
HAI believes that the recommendations detailed above are a coherent and right response to the challenges and opportunities that we face. They are both appropriate and pro-social with a particular relevance for much-needed regeneration throughout the country.
(1) Core Research- Household Attitudes to Renovating and Energy Efficiency Nov 19
(2) Eurobarometer Spring 2019
(3) Extract from Speech by Minister for Communications, Climate Action and Environment Richard Bruton TD McGill Summer School July 2019
(4) Demand for Skills in Construction CIF/DKM Economic Consultants