The Government will reduce the VAT rate on the sale of completed apartments to 9% from 13.5%, from tonight until the end of December 2030.
Announcing Budget 2026, Minister for Finance Paschal Donohoe said this reduction will help address the "viability gap" in apartment construction.
He said it is part of a social policy to deliver more and higher density apartments.
In terms of cost rental housing, the Government is exempting the rental profits arising from homes that fall within the Cost Rental Scheme from corporation tax.
It is also introducing an enhanced corporation tax deduction for certain costs incurred on the construction of apartment developments, and for the conversion of non-residential buildings into apartments, to improve the viability of such developments.
It will be available for projects where a commencement notice is submitted on or after 8 October 2025, and on or before 31 December 2030.
Social Democrats housing spokesperson Rory Hearne said that there was "no reason to believe that the change in VAT will lead to an increase in affordable housing provision - profits are bound to be pocketed as profits by developers and funds, just as we see with government subsidies.
"The rate of VAT applied in Ireland on apartment construction was already one of the lowest of 27 EU member states, well below the EU median of 20%. The clear message from this budget is that this government will never have the courage to end their cosy partnership with developers and investment funds and directly provide the housing that hundreds of thousands so desperately need."
Labour's housing spokesperson Conor Sheehan TD described the plan as "a Galway tent budget" focused on helping developers before people.
"This Government is choosing to forgo €390m annually to give developers a VAT cut on apartments, with no strings attached," he said. "When stamp duty relief and CT tax deductions for cost rental are also taken into account, that amounts to a developer tax package of €563mm in a full year.
"With the VAT cut coming in to play from midnight tonight, developers will make an extra 4% on apartment sales, which is on top of the 15-20% margins made on apartments as it is. Just what is Fine Gael and Fianna Fáil playing at?
"A whopping €563m tax cut for developers is truly incredible at a time when there are over 220,000 children living below the poverty line when housing costs are accounted for; at a time when house prices are astronomical and rents are out of this world."
The Society of Chartered Surveyors Ireland president Gerard O'Toole welcomed the measures but said that while VAT is a significant input costs for new apartments, other factors such as high utility connection charges also need to be addressed.
"An international cost report by the SCSI and Trinity College last year found Dublin to be the second most expensive place to build apartments after Zurich in Switzerland," he said.
"However, even if VAT rates were reduced to zero – as they are in the UK – Dublin would rank as the fifth-most-expensive city.
"So, while reducing VAT is a move in the right direction, we believe other high-cost elements in Ireland such as utility connection charges need to be tackled."
The announcement of increased funding for key infrastructure was also welcomed by the SCSI.
Mr O'Toole said: "Ring-fencing multi-annual capital allocations for utilities such as Uisce Éireann and ESB is vital to meeting Ireland’s housing targets. Increased investment in enabling infrastructure is essential to ensure new developments can proceed efficiently and sustainably across the country."
Additionally, the SCSI said that it was looking forward to examining the detail of the new Derelict Property Tax but noted that it would be administered by the Revenue Commissioners and not local authorities as was the case with the Derelict Sites Levy.
