Not feasible to penalise individual companies over defective apartments - report

A report on defective apartments built during the Celtic Tiger years has concluded it would not be feasible to impose penalties on the individual companies involved.

The independent review, commissioned by Minister for Housing Darragh O'Brien last year, says an industry levy would target those who were not responsible for the defects, would face legal issues, and have a knock-on impact for current construction costs.

However, it does leave open the possibility of a levy being imposed, saying the Government is already examining an industry levy in relation to the Defective Concrete Blocks Scheme, and in the context it should consider the findings of this report.

The report, which was published this afternoon, says the estimated cost of remedial work on between 62,500 and 100,000 apartments building during the Celtic Tiger era, is between €1.56bn and €2.5bn.

It says it would not be feasible to impose a penalty on individual companies who were responsible for the defects, and says a more "general levy" would "target all those who did not contribute to the problem".

It said such a levy would require legislation to be passed in the Dáil and would require "careful policy, legal and public scrutiny".

This would include consideration of legal issues in relation to imposing financial burdens on enterprises and impinging on constitutional property rights.

It would also need consideration of the "potential impacts on the general costs of construction in the current inflationary environment," it said.

The Working Group references a decision made by Cabinet in November to introduce a Defective Concrete Blocks Grant scheme.

The Government is currently considering a levy on the construction industry to raise €80m a year under this scheme. The Working Group says that this examination of an industry levy should consider its findings in relation to defective apartments.

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'Nettle we had to grasp' says minister

Minister O'Brien said that he would consider the report's findings over the coming weeks before bringing proposals to address the problem of defects to Cabinet.

"The evidence gathered by the Working Group along with the options for potential supports contained in the report will be of considerable assistance in informing Government's next steps," he said.

"This report provides a very useful set of recommendations that I will now examine in detail. I will also give this report full consideration, in consultation with Government colleagues, and in developing a plan to address the situation that many homeowners find themselves in through no fault of their own," he added.

"Upon my appointment as Minister I said that this was a nettle we had to grasp and I am very much committed to helping those whose lives have been impacted by this issue. I believe this report will help us do just that."

Separately, the Construction Defects Alliance (CDA) described today’s report as a "very welcome landmark" for owners of defective apartments and duplexes.

Spokesperson Pat Montague explained that the CDA has proposed that the Government introduces refundable tax credits for the full value of defects levies paid for owner-occupiers, grants to housing associations, and extended tax reliefs for landlords in Budget 2023.

Mr Montague said while the immediate focus of the alliance will be on ensuring retrospective financial assistance through Budget 2023, it will also be seeking to engage with Government on the creation of the overall remediation scheme.

"The Working Group has set out a number of options for financing remediation works for Government to consider. It’s clear from its analysis that loans are fraught with practical difficulties, so the focus will need to be on grants to owners’ management companies (OMCs) to undertake remediation works or the State directly commissioning such works.

"In this regard, Government should look at transforming the Pyrite Remediation Board into a Defective Homes Board to oversee and manage the remediation scheme here," he added.

Earlier this month, Minister for Public Expenditure Michael McGrath said the Government cannot shoulder the full responsibility for the cost of repairing defective apartments and the construction industry will have to pay part of the bill.

He said: "We acknowledge that, in the resolution of this issue, the State does have a role to play, but it cannot solely fall on the State to resolve the issue."

Labour Party leader Ivana Bacik who previously raised concerns around defective apartments in the Dáil, has suggested a 1% levy on the industry would be "appropriate" and would raise around €350m a year.