THE LIVING CITY INITIATIVE: WHAT THE EXPANSION MEANS FOR PROPERTY OWNERS

Ireland has a dereliction problem. Walk through the centre of almost any town and you will spot it, shuttered shopfronts, vacant upper floors, crumbling buildings that have seen better decades. The Living City Initiative (LCI) is one of the Government's primary tools to reverse that trend, and it just got significantly bigger.

Following Budget 2026 and the subsequent designation orders, the scheme has been extended, enhanced, and - most significantly - expanded to five new locations. If you own property in one of those areas, or are considering buying or refurbishing, this is worth understanding properly.

WHAT IS THE LIVING CITY INITIATIVE?

The LCI is a tax incentive scheme designed to encourage the refurbishment and reuse of buildings in designated urban areas. The goal is straightforward: bring vacant, derelict, and underused properties back into productive use, whether as homes, rented accommodation, or commercial premises.

It does this by offering meaningful tax relief on qualifying refurbishment and conversion expenditure incurred within a Special Regeneration Area (SRA). These are zones identified by local authorities as having high levels of vacancy, dereliction, and underuse, typically in historic town and city centres.

There are three categories of relief available:

• Owner-Occupier Residential Relief: for individuals who refurbish or convert a property as their main residence

• Rented Residential Relief: for landlords refurbishing properties for letting

• Commercial Relief: for businesses refurbishing or converting premises used for retailing goods or providing services

NEW LOCATIONS: THE BIGGEST CHANGE

Until recently, the LCI applied only to six cities: Cork, Dublin, Galway, Kilkenny, Limerick, and Waterford.

As of 17 April 2026, five new locations have been formally designated:

• Athlone

• Drogheda

• Dundalk

• Letterkenny

• Sligo

These designations follow a process in which local authorities submitted SRA maps, which were independently assessed before being formally approved. If your property falls within one of these newly designated zones, you could now be eligible for LCI relief for the first time - and the changes introduced alongside these designations make the scheme more valuable than it has ever been.

THE EXPANDED AGE CRITERIA

Historically, properties had to be pre-1915 to qualify. That requirement was always a limiting factor, particularly outside of the older city centres. From Budget 2026, the scheme now covers properties built before 1975, dramatically widening the pool of eligible buildings across Ireland. In many towns and suburbs, this is a game-changer.

HOW THE RELIEF WORKS

The mechanics differ depending on which relief applies, but here is the broad picture.

Owner-occupier residential relief remains available over 7 years: 15% per annum of qualifying expenditure in years 1-6 and 10% in year 7 (with a minimum €5,000 qualifying spend). The relief is a deduction from total income and applies where the refurbished property is occupied as your principal private residence.

Rented residential and commercial relief operate through capital allowances on qualifying conversion/refurbishment expenditure. For expenditure incurred before 1 January 2026, the allowance is spread over 7 years (15% per annum in years 1-6 and 10% in year 7). For expenditure incurred from 1 January 2026 onwards, the allowance is accelerated to 50% per annum over 2 years. In tandem, the period after first use (post-works) during which a disposal can trigger a balancing adjustment is extended to 10 years for the accelerated regime (previously 7 years).

A key practical constraint is the EU de minimis aid cap: the initiative now operates with a ceiling of €300,000 per undertaking/per qualifying premises over any 3-year period (previously €200,000). This cap applies regardless of how many investors participate in the project, so splitting ownership does not increase the total relief available.

One further change from Budget 2026: restrictions that previously prevented property developers and their connected persons from accessing the scheme have been removed, broadening who can benefit in practice.

LIVING OVER THE SHOP: A NEW RELIEF CATEGORY

One of the more practical additions to the scheme is a dedicated "Living Over the Shop" relief, introduced via a new provision (s372AAE TCA 1997). It supports the conversion/refurbishment of certain commercial units (typically premises that were previously liable to rates) wholly or partly into residential units that are leased on bona fide commercial terms after the works.

For qualifying expenditure incurred from 1 January 2026, the relief is generally available at 50% per annum over 2 years (with a 10-year balancing adjustment period). For owners of mixed-use buildings with vacant upper floors, this can be a directly relevant new opportunity.

THE SCHEME HAS BEEN EXTENDED TO 2030

The LCI was previously due to wind down in December 2027. It has now been extended to 31 December 2030, giving property owners a longer runway to plan, finance, and execute qualifying refurbishment works.

WHAT DOES THIS MEAN IN PRACTICE?

If you own a qualifying property within a newly designated or existing SRA, this is a worthwhile incentive to engage with. The combination of accelerated relief, a higher cap, the extended timeframe, and the broader age criteria makes the 2026 version of the LCI meaningfully more attractive than its predecessor.

That said, as with all tax reliefs, the details matter. Whether you qualify depends on the specific location of your property, the nature of the works, your tax position, and how the relief interacts with any other deductions or allowances you are claiming.

Getting the structure right from the outset, before works commence, is critical.

Why Work with Us

Our role is to cut through the complexity, assess whether the LCI makes sense in your specific situation, and ensure your claim is structured correctly.

If you own property in Drogheda, Athlone, Sligo, Dundalk, Letterkenny, or any of the existing designated cities, and want to understand what the expanded Living City Initiative could mean for you, we would be glad to talk.

Disclaimer: This article does not constitute professional accounting, tax, legal, or any other professional advice. Taxkey accepts no liability for any action taken or not taken in reliance on the information provided in this article. Professional accounting, tax, legal, or other relevant professional advice should be obtained before taking or refraining from any action based on the contents of this article.