The Chartered Institute of Building has reacted to yesterday’s budget announcement in Ireland:

Overview of budget:

There was a €9.4 billion total budget package signalled for Budget 2026, comprising about €7.9 billion in new spending measures and €1.5 billion in tax reductions.

In terms of additional revenue sources projected for the year, much will depend on continued strength in corporate tax receipts, including windfalls from multinationals (such as back-tax judgments).

With wages rising in the construction sector, reflecting capacity constraints in the workforce, CIOB supports the Economic and Social Research Institute’s call for the government to avoid an inflationary budget that risks overheating the economy.

Joseph Kilroy, Policy and public affairs manager for CIOB in Ireland, said: “Budget 2026 reflects a welcome commitment to sustained investment in Ireland’s built environment and critical infrastructure. The scale of capital spending announced – from housing activation and water infrastructure to transport connectivity – is vital to tackling the structural challenges of affordability, capacity and regional imbalance that continue to shape our housing and construction markets.

“However, while we welcome measures such as the reduced VAT rate on new apartments, we are concerned that the opportunity to align Ireland’s tax system with its climate ambitions has once again been missed. Current VAT rules still treat demolition and rebuild on par with renovation and retrofit, which runs counter to our national goals on decarbonisation and the circular economy. Reform in this area is essential if we are to foster a culture of reuse and retrofit rather than demolish and rebuild.

“The CIOB also urges the Government to shift focus from demand-side measures like Help to Buy towards upstream interventions that address dysfunction in the land market. Supporting land activation and early-stage development would have a far greater long-term impact on housing supply and affordability.

“Overall, this Budget demonstrates that Ireland is serious about long-term planning and capital investment. The challenge now is to ensure spending decisions not only drive economic growth, but also deliver sustainable, high-quality places for people to live and work.”

CIOB's analysis of the budget and it's impact on key areas for the built environment sector:

Infrastructure 

From a construction sector perspective, the CIOB welcomes the significant sums Minister for Finance, Paschal Donohue TD, has earmarked for the built environment.  

As a small island nation with a growing population, a housing affordability and supply crisis, and a prosperous economy characterised by a booming urban jobs market, Ireland’s spatial development should be based on compact growth and regional connectivity, all of which should benefit from the infrastructure funding announced.

In this context, CIOB welcomes the substantial commitment to capital infrastructure investment. A new Housing Activation Infrastructure Fund will be established with €205 million allocated to unlock housing development. The water and wastewater sector sees increased support via a €1.4 billion allocation to Uisce Éireann to build essential capacity to support new housing development and enhance resilience of water supply systems. These are all welcome and speak directly to the concerns CIOB members face when delivering new housing.

Each of these investments is central to placemaking, which is a key part of the National Planning Framework and central to the role of the construction sector in Ireland’s economy. To that end, CIOB also welcomes the investment in transport. A total of €4.7 billion is provided for transport, including funding for key projects such as DART+

National Development Plan

The revised National Development Plan is central to the government’s capital spending strategy. It provides the construction sector with the certainty and pipeline of work it needs to thrive, and we commend it as the framework within which capital investment occurs in Ireland. We are encouraged to see that the NDP will continue to be supported, with around €275 billion in capital expenditure is envisaged to support infrastructure in energy, water, housing, and transport.

Construction

In terms of interventions targeting the construction sector specifically, we welcome the reduction of VAT on the construction of new apartments: the VAT rate is lowered to 9 per cent (from 13.5 per cent) on new apartments, effective as of Wednesday 8 October 2025, and the measure will last until 31 December 2030.

However, we are concerned another opportunity to bring the tax system into line with Ireland’s climate targets as outlined in the Climate Act has been missed. Rather than incentivising sustainable construction practices, Ireland’s VAT structure places demolition and rebuild on parity with renovation and retrofit by charging both at the reduced rate of VAT – 13.5 per cent.  

This VAT structure is facilitating a culture of demolish and rebuild, rather than add, transform, and reuse in the construction sector; and this is reflected in the increasing rates of embodied carbon emitted by the construction sector. The CIOB is calling for a reform of VAT, such that the carbon-hungry activity of demolition is disincentivised, and the sustainable option of reuse and retrofit is incentivised.  

Housing

We welcome the government’s ongoing commitment to public spending on housing, particularly where it leads to direct building of housing. As part of Budget 2026, the Department of Housing will receive €11.3 billion, of which €7.2 billion is earmarked for capital projects (new-build social homes, acquisitions). Within that, €2.9 billion is for new build social homes and acquisitions, €140 million for retrofit of social housing, and €130 million for retrofitting older persons’ homes.

However, in policy terms, the CIOB does not support the extension of the Help to Buy scheme. Demand-side measures of this sort, particularly in the context of constrained supply, have an inflationary impact on house prices. The CIOB has repeatedly made the case to government that policy intervention should focus on the early stages of the development process, specifically land acquisition and preparation. 

Help to Buy does nothing to address a dysfunctional land market in which developers are forced to bid inflated prices for land and make up for this inflated outlay by driving down costs – typically on quality, design, and tenure later in the building process. We urge the Government to focus policy intervention on the land market, rather than downstream demand-side measures like Help to Buy. 

Sustainability 

CIOB is encouraged to see sustainability and the green transition get clear attention in Budget 2026. €724 million is allocated to energy transformation: €558 million goes to energy upgrade schemes (home retrofits etc.).

Budget 2026 represents a shift from the broad acceleration of the National Retrofit Plan seen in Budget 2025 to a more concentrated effort on the deep retrofitting of public social housing and targeted support for vulnerable groups, ensuring the poorest quality homes are upgraded first.

Education/Skills/Research and Development

The R&D Tax Credit rate has been raised from 30 per cent to 35 per cent, making Ireland's incentive one of the most competitive.

The construction industry stands to benefit from these enhancements, especially in areas like: Sustainable Building Materials; Energy-Efficient Building Designs; and Smart Building Technologies.

Also, the expanded eligibility criteria for the tax credit could encourage more construction firms to invest in R&D activities, thereby enhancing their competitiveness and contributing to the industry's modernization.