Health System Crises Could Worsen Because Of Changes To Stamp Duty

Ireland's health system is in crisis. Overcrowding, staff shortages and waiting lists are now a common occurrence despite the fact that Ireland is ranked seventh on health spending per capita in the OECD, higher than the U.K., Sweden and Iceland.

A recent government budgetary decision could potentially damage the health system further by slowing down the development of primary health care centres.

The centres are seen by many as a way to tackle overcrowding and waiting lists in hospitals by ensuring most patients are treated and cared for in the community rather than in already over-stretched hospitals.

In October, the government announced it would be tripling stamp duty on commercial properties from 2% to 6% in the budget. It was thought this would take out some of the heat from the sector and relieve fears of another bubble as well as generate €376M in revenue for the exchequer. 

However, industry experts have said that is unlikely due to a lower volume of transactions occuring after Nama's deleveraging in 2014, 2015 and 2016.

The delivery of primary health care centres could be negatively impacted by the recent hike in stamp duty where margins are already tight for developers, William Fry Partner in Real Estate Graham Quinn said. 

Primary health care centres are developed in three ways: direct builds, public-private partnerships or through operational leases. 

From 2009, the government decided to partner up with private developers to help alleviate costs and speed up delivery of the centres. 

As part of the partnership, the HSE would enter a 25-year lease agreement and the developer would also have occupational leases with GPs, pharmacies, physios, etc.

In exchange the HSE would get a modern development that suits their needs.

From 2011-2016, 57 primary care centres have been opened with a further 10 primary care centres due to open this year.

"The HSE has been very clever in doing this, they are imposing very high standards on developers and they have a lot of input on what the plans and specs will be," Quinn said.

But because it is a competitive market and because the HSE have high standards, it is an expensive thing for developers to do, Quinn said.

Developers plan projects over two to four years and they have a long-term plan of what their costs are going to be, so the difference between a stamp tax of 2% and 6% on your bottom line is "potentially considerable ... it doesn't make it as attractive or profitable."  

Quinn thinks that while one arm of the state, the department of finance, was "looking to cool a bit of the heat" in the market generally by moving the stamp duty from 2% to 6%, it did not realise that would have an "unintended consequence" for an important policy belonging to another arm of the state in the department of health and HSE.

He believes there is justification for the development of primary health care centres to merit a different stamp duty treatment for a "critical piece of infrastructure for the state."

Primary health care centres take a long time to get through the procurement process to contract stage, and Quinn said developers with projects in the works may just complete the long process.

But when everything is taken into consideration including residuals, the HSE requirements and overall costs, future development of primary care systems could "become unworkable," Quinn said.

Bisnow is waiting on the HSE for comment.