The Construction Industry Federation (CIF) is calling on the Government to reduce the VAT rate on construction at 9% up to the point where Ireland is building the agreed sustainable level of 25,000 homes per year.

The CIF estimates at this level of activity the Government would generate €1.85b on the basis of an average sales price of a new home of €230k even with a reduced overall tax take by the Government of 32% due to a reduction in VAT.

A group of policy-makers has also heard that the housing crisis will not be resolved until there is a reduction in the cost of Government levies and taxation estimated to be 36% of the value of new homes at a forum hosted by the Construction Industry Federation.

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Hubert Fitzpatrick, Director of the Irish Housebuilding Association, CIF, said: "Due to the cost of construction, many Irish homebuilders are finding residential development unviable. In many parts of the country, the cost of construction is so high relative to asking prices of existing houses they would be building at a loss. As a result, housebuilding activity outside the Greater Dublin Area is stalled.

"In the capital and other urban centres, there is insufficient supply to meet growing demand. Dublin is an economic engine, its population is growing rapidly and unemployment is dropping faster than other parts of the country. The Central Bank's mortgage rules are freezing many first-time buyers out of the market. More people are forced to continue to rent well into their 30s as they save for the average deposit of €51,000 for a home in Dublin. This in turn is putting upward pressure on rents and forcing some people into homelessness and onto the social housing lists and forcing people to buy their homes further from their work."