Budget 2027 measures aim to ease cost-of-living pressures amid ongoing housing shortages, but critics question their impact.
Ireland’s government has announced an increase in the rent tax credit by €150 and an expansion of the rent-a-room tax relief scheme to include certain garden cabins, as part of Budget 2027 measures intended to support renters and boost housing supply.
Finance Minister and Tánaiste Simon Harris confirmed the changes in the Dáil on Tuesday. The rent tax credit, which currently assists around 400,000 people annually, will rise to €1,150 for single claimants and €2,300 for couples from 2027. This represents an increase of €150 for individuals and €300 for jointly assessed couples compared with previous levels.
Ireland Expands Rent-a-Room Tax Relief:
The rent-a-room scheme, which allows homeowners to earn rental income tax-free from letting a room in their principal residence, will see its annual threshold raised from €14,000 to €16,000. Crucially, the relief is being extended to cover rentals of detached garden cabins or modular homes measuring between 32 and 45 square metres. This extension applies retrospectively from 27 July 2026, when new planning rules for such auxiliary dwellings came into effect.
Junior Housing Minister John Cummins defended the expansion, describing it as a positive step to unlock additional accommodation. Harris noted that the rent-a-room threshold had not been adjusted for several years and argued the measures form part of broader efforts to address housing pressures.
The announcements come against the backdrop of Ireland’s persistent housing crisis, characterised by high rents, limited supply and significant cost-of-living strains. Government officials have emphasised that increasing the supply of homes remains the primary long-term solution. Additional Budget 2027 provisions include raising the maximum support under the Help to Buy scheme for first-time buyers by €5,000, to €35,000, and allocating substantial funding for new home construction.
Rent Relief Increased Amid Housing Crisis:
Housing Minister James Browne acknowledged that the rent tax credit increase offers only “small help” and is “not everything that people need.” He stressed the importance of boosting the number of properties available on the market. Opposition voices and housing advocates have long argued that incremental tax measures fall short of addressing structural shortages and affordability challenges facing tenants, particularly in urban centres such as Dublin.
The rent tax credit operates as a reduction in income tax liability based on qualifying rent paid, while the rent-a-room scheme treats qualifying income as exempt from income tax, USC and PRSI, provided the homeowner continues to live in the main residence. Expanding it to garden units is intended to encourage more homeowners to offer spare accommodation without the full regulatory burden of traditional tenancies in some cases.
These adjustments will meaningfully ease pressures for the hundreds of thousands of renters and potential landlords remains to be seen. With construction costs elevated and demand continuing to outstrip supply, the effectiveness of Budget 2027’s housing-related tax changes will depend on how quickly additional units enter the market and whether further structural reforms follow.