knowledge 9 October 2025 |

Budget 2026: Housing measures focus firmly on supply and regeneration

Introduction

In terms of the sums allocated, €19.1 billion is to be allocated in 2026 for capital investment in infrastructure generally, of which €5 billion is to be allocated for housing delivery (in addition to investment by the Land Development Agency and approved housing bodies). The remaining €14.1 billion is being allocated to address the country’s wider infrastructure deficit, part of which will be used to progress water, electricity and transport projects, which are vital to the proper and sustainable delivery of housing. €200 million of additional funding is also to be provided to Home Building Finance Ireland to provide finance to homebuilders.

Apartments and large-scale development

With ambitious housing targets of 50,000 to 60,000 homes a year to be met up to 2030, the government needs an equally ambitious package of incentives to stimulate development and supply at scale. Apartment development is key to that. The following measures focus on apartment development and large-scale development and investment.

• Reduction in VAT on sale of completed apartments: The VAT rate on the sale of completed apartments is reduced to 9% from 13.5% with effect from 8 October 2025. The fact that the reduction in the VAT rate will only apply on a sale of completed apartments means that there is a potential unintended impact for forward fund transactions, but this could be addressed in the Finance Bill and we will monitor this closely. It also means that the measure won’t impact where apartments are held for rent and not sold on.

• Enhanced corporation tax deductions for certain costs incurred in apartment construction and conversion: There are to be enhanced corporation tax deductions for certain costs incurred on both (a) the construction of apartment developments and (b) the conversion of non-residential buildings into apartments with effect from 8 October 2025 until the end of December 2030. Further details are expected in the Finance Bill.

• Exemption for rezoning and further changes to enhance the operation of RZLT: Landowners of lands subject to RZLT will have a further opportunity in 2026 to seek to have their land rezoned to reflect genuine economic activity being carried out. If successful, this would allow a claim for an exemption from the 2026 RZLT liability affecting those lands. We also expect further changes to enhance the operation of RZLT to be brought forward in the Finance Bill.

• Extension of Residential Development Stamp Duty Refund Scheme: The existing scheme that applies to refund part of the stamp duty paid on the acquisition of development land (at the 7.5% non-residential rate) where residential development is completed on those lands (and further details of which are available on the Revenue website here) was due to expire at the end of 2025 but is now to be extended until the end of 2030 with some changes. For large-scale residential developments, the 30-month time limit that has applied as a condition of the relief to (i) the period from site acquisition to commencement of development and (ii) from commencement to completion of developed units is to be extended to 36 months. For multi-phase developments, a refund will also be available on commencement of the first phase of development.

• Full exemption from corporation tax for cost rental homes: Rental profits arising from homes that fall within the Cost Rental Scheme are to be exempt from corporation tax with effect from 8 October 2025.

• Public consultation on proposals to simplify the IREF regime: The importance of fund investment structures to real estate investment was acknowledged in the Funds Sector 2030 Report published in October 2024. In his budget speech, Minister Donohoe announced that the recommendation in that report for a public consultation on potential options for an entity level tax for IREFs will not be progressed by government, but that a public consultation on proposals to simplify the IREF regime without limiting its effectiveness would be undertaken. An Implementation Plan for the overall Funds Sector 2030 Report was also published on 7 October 2025 and is available here.  

Smaller landowners and landlords

For smaller landowners and landlords, mortgage interest tax relief is to be extended for a further two years, with reduced value applying in the final year. The income tax deduction for small landlords who retrofit their properties with the benefit of an approved retrofitting grant from the SEAI is to also be extended for another three years, to 31 December 2028. (Details on the current operation of the retrofitting tax deduction are available on the Revenue website here.)

Promoting regeneration and tackling dereliction

There are two key measures in the budget aimed at promoting regeneration and tackling dereliction.

• Expansion of Living City Initiative: The Living City Initiative, a scheme which allows tax relief for money spent on refurbishing residential properties or converting commercial properties to residential in designated special regeneration areas is to be extended (i) to 2030 (from 2027) (ii) to include the additional urban centres of Athlone, Drogheda, Dundalk, Letterkenny and Sligo (iii) to include residential properties built before 1975 (up from 1915) and (iv) to further support the use of “over the shop” premises for residential purposes. This has the multi-fold benefit of incentivising (i) more residential supply (ii) regeneration of urban areas and (iii) refurbishment (with energy upgrades and retrofitting) of the State’s worst performing buildings under obligations to take effect under the Energy Performance of Buildings Directive recast due to be transposed in Ireland by the end of May 2026. It is something that makes such sound social and economic sense that the only concern is that enough will be offered and done in the administration of the scheme to incentivise take-up.

• New Derelict Property Tax: A further measure to incentivise supply of new homes, but operating more as a stick than a carrot, is the proposal to introduce a new derelict property tax to replace the derelict sites levy under new legislation to be published next year. The intention is that this would be operational by 2027 and overseen by Revenue, rather than local authorities. The legislation to implement this is expected next year, but we would expect the tax to operate administratively in line with the vacant homes tax and/or the local property tax. These both require self-assessment and place the onus to register and file returns on the property owner. Minister Donohoe noted in his budget speech that is not the intention that the rate of tax would be at any lower than the current derelict site levy, which is 7%.

Conclusion

Scaling up housing delivery is the clear and serious focus of Budget 2026, with very little room for sentiment. The government is relying heavily on incentives to increase supply to bring the wider social benefit of new home opportunities for all. The Finance Bill and the proposed legislation to implement the residential rental reforms announced on 10 June 2025 and further judicial review reforms will all bring further certainty to how this will be achieved.