Is the new Derelict Property Tax designed to fail?

Analysisthe housing essay

In part one of a deep dive into the Budget 2027 measure, our resident Derelict Ireland experts look at how we got here.

The Housing Essay is a weekly deep dive from a rotating variety of voices into issues impacting the property crisis in Ireland. Are there potential solutions that may be currently overlooked or traditionally ignored by policymakers?  

WE HAVE CALLED twice for a Derelict Property Tax at an Oireachtas Committee Hearing, first in 2021 and again last year. So of course, we welcome its inclusion in last week’s budget announcement.

So why the negative headline? Why not take this as a win and wait to see how the tax is implemented before critiquing it? We all know the current Derelict Sites Levy has failed, so surely the new tax will do better.

We need a tax that is comprehensive, effective and enforceable, which is why you’re reading the first of a two-part essay which examines the failure of the Derelict Sites Levy, and investigates the design of the new Derelict Property Tax.

The need for a derelict property tax is not what we are debating.

It has long been recognised as an essential policy tool for tackling dereliction.

Which might explain why Fine Gael promised a 10% tax on derelict sites 43 years ago, when they included it in their 1983–1986 Joint Programme for Government with Labour.

When questioned in 1986 about why the-then government never implemented this promised tax, the excuse given was: “The question of a tax on derelict sites is being considered but complex issues, such as the need to discriminate between genuine developers and speculators and the impact on the building industry, still need to be resolved.”

Four decades later

Imagine if there had been a Derelict Site Tax in Ireland over the last four decades. Imagine what our towns and cities would be like if more buildings were brought back into use.

For instance, such a tax might have discouraged the Construction Industry Federation (CIF) leaving Grand Canal homes go derelict for decades in Dublin. The tax might have motivated the CIF to renovate these homes, or convert them into offices, or even a café. Instead, they left them to rot, to the point that they collapsed onto the public street. But then the CIF would most likely have been left with a less valuable site, possibly not worth the €16 million they valued it at when they put it up for sale earlier this year.

When the government finally brought in a financial penalty for dereliction, they designed it to be ineffective. The Derelict Site Act 1990 created, for the first time, a 3% levy (increased to 7% in 2020) that councils could place on derelict sites to pressure owners to redevelop, rent or sell.

However, the likelihood of owners paying this levy is extremely slim for four reasons.

Firstly, 90% of derelict homes are not even officially registered with councils and as such they aren’t subject to the Derelict Site Levy. At the end of 2024 there were only 2,140 derelict properties registered, far less than the 19,821 derelict homes counted by Geodirectory in Q2 2025. Considering we don’t even count derelict commercial buildings, the percentage of unregistered dereliction is far higher.

Secondly, even if the derelict site is officially registered, it’s unlikely the owners will receive any invoice for the levy. It’s at the discretion of the Council whether to invoice or not. As a result, in 2024, only 36% of registered derelict sites were invoiced (778 out of 2,140) and, disgracefully, 10 councils didn’t even bother invoicing any owners.

Thirdly, an invoice doesn’t mean owners have to pay, as councils can write off any unpaid levies. Take for example Cork City Council, which wrote off €3.7m of Derelict Sites Levies in the last decade alone, more than the €3.2m they collected over the same period.

Fourthly, all councils have struggled to achieve a decent collection rate for the Derelict Site Levy. We can only assume that some owners might hold back payment after council executives publicly announcing that “there are few mechanisms to force owners to pay and the collection of DSLs can often be a waiting game”. It’s no surprise then, that in 2024 less than 10% of Derelict Sites Levies invoiced nationwide were actually paid.

The missing €42 million

This low collection rate has resulted in €42m worth of Derelict Sites Levies outstanding to Councils. That’s €42m that could provide vital funding for urban regeneration, housing and other pressing needs. That’s €42m that could be used to alleviate the need for local property tax hikes, particularly when so many are badly struggling with an ever escalating cost of living. But this €42m is unlikely to ever be collected, since Revenue have announced that they will not be collecting these outstanding levies as part of the new Derelict Property Tax.

Have no doubt the failure of the Derelict Sites Levy has been costly, to society, to communities, to heritage, to the economy, to the built environment. At this point it is worth mentioning we are not looking for a perfect tax. A perfect tax would be progressive, rising every year that dereliction is present. Companies would be paying a higher rate than citizens would, and those not residing in Ireland would pay higher again.

So is a tax really better than a levy?

Absolutely, because Revenue has a much higher collection rate when compared to councils. For example, Revenue have a 95% collection rate for the Local Property Tax. However, turning a levy into a tax doesn’t guarantee it will be comprehensive, effective and enforceable.

We only need to look at the failure of the Vacant Homes Tax (VHT). Based on Revenue’s forecasts we predicted that 4,000 homes would pay the VHT. We were pretty spot on with 3,932 properties paying it in its first year in 2023. But this has shrunk to a miserable 1,454 in 2025. This means that just 1.8% of the 79,703 vacant homes identified by Geodirectory paid the VHT last year. This is a scandalous outcome when so many urgently need a home.

Damaging ‘normal practice’

It has recently been stated that Revenue “adopted a lenient approach because the tax was in a start-up phase”. According to the Compliance Comptroller and Auditor General this “is normal practice when new taxes are introduced”. How is this damaging mindset accepted as ‘normal practice’?

If this normal lenient approach is applied to the Derelict Property Tax, we will not have a fully enforced tax until after 2031, since the first payment won’t be till June 2028. This means we’ll have 40 years of ineffective financial penalties for dereliction which is totally unacceptable.

On a positive note, the announcement of the tax alone might jolt some owners to finally decide to sell up that dilapidated building that they realistically will never redevelop. However, other owners might decide to wait it out a few more years, especially if they take the time to read the details.

As always, we live with Dóchas that we can end dereliction and create more homes, places to play and create.

• Part two of this deep dive – to be published next Thursday – will look at the finer details of the derelict property tax and how it is being designed to fail.

Jude Sherry and Dr Frank O’Connor are founders of anois.org, ffud.art and #DerelictIreland. They are part of a series of writers, academics and economists penning a weekly essay delving into the housing crisis and potential solutions.