Tensions are growing in the Coalition over the controversial proposed measure of cutting VAT for builders being used to fix the housing crisis.

Taoiseach Leo Varadkar favours tax breaks and other Fine Gael Cabinet ministers advocate absolving builders of VAT on materials.

Justice Minister Simon Harris, in an interview with DMG Media, says he is in favour of providing help to builders to confront "viability" of building due to the rising costs of materials.

However, Fianna Fáil ministers and the Department of Finance, led by Fianna Fáil Minister Micheal McGrath, are opposed to tax breaks, VAT holidays or any such measures, it has been learned.

Fianna Fáil ministers, due to historic accusations of close relationships with the building sector, do not want to support such tax policies. The party is not against direct intervention in the property sector. Mr McGrath recently said he is in favour of purchasing entire apartment blocks that have stalled in construction because cuckoo funds have pulled out of financing them.

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He also wants to continue to use the €500m Croi Conaithe Cities fund, which helps developers building apartments for sale to owner-occupiers.

Mr Harris said: "I think the Taoiseach was honest about this when he said that nothing can be taken off the table when it comes to housing, such as the scale of the challenge we face.

"People try to say, 'Is that a Fianna Fáil perspective? Is that a Green perspective?' It's just a Government perspective, that we have to throw the kitchen sink at housing to increase supply."

There have been calls from the building sector to significantly reduce or abolish VAT on all materials to help them continue building. Already building is slowing down over the cost of materials.

The sector said that a significant cut in the 13.5% VAT rate would make building more "viable".

Mr Harris said: "This is one for the Minister for Housing, the Minister for Finance, the Government as whole, the Taoiseach to consider: the issue about viability. Is there actually a viability gap here still between the cost of building a home and the price that that home gets sold for?"

Sources in Fine Gael believe the quickest and easiest way to continue construction is to help builders with the rising cost of materials.

A Fine Gael Minister said: "In most cases where this will be effective, the developers are already on site building or are just beginning. It is a whole lot more effective to allow them to buy the building materials and keep at the developments where the shovels are already in the ground than the more complex ones Fianna Fáil are pushing.

"Otherwise the developers just down tools on what they are already at and don't even start what they have planning for."

There is opposition in Fianna Fáil to tax breaks for developers. Dublin FF TD Darragh O'Brien holds the Department of Housing portfolio through.

A Fianna Fáil Minister said: "There is a small margin between an all of Government approach to something like housing and downright interference.

"We already have multiple schemes as part of Housing for All that are assisting building and Fine Gael are now coming up with all these bright ideas.

"However, they had the Department of Housing almost continually from 2011 to 2020 and didn't get much done then, did they?" Also Fianna Fáil is loath to get into giving tax breaks for developers. Historically the party has faced numerous tribunal cases where it was shown it was close to the building trade.

A number of Fianna Fáil public representatives were found to be corrupt by the Mahon Tribunal and Government minister Ray Burke was jailed.

A Fianna Fáil Minister said: "It's just not an area we need to be connected to politically and we must be mindful that complex tax and other measures ultimately have unforeseen consequences in the property space, as we found to our cost in the crash."

Last November, then tánaiste Mr Varadkar expanded on providing tax breaks for developers.

He said: :I think the Department of Finance needs to have a more open mind on what we could do around tax to make housing developments more viable."

When asked to expand on tax measures for developers, Mr Varadkar said: "There's two areas that I think we need to give thought to. One is around viability. Developers [and] builders are saying to me, that's one of the reasons why there's now a slowdown in new home starting, is the increase in the cost of building materials. And that's made a lot of new developments unviable.

"So there are lots of ways we can help with that. But I don't think we should rule out tax measures that would help make the building of new homes more viable."

Cabinet sources said that these tax breaks may extend to removing significant direct taxation on building materials, transport and other costs. In addition, they also speculated that there could also be tax breaks on losses incurred in building houses in the near future or on debts already incurred.

However new Finance Minister Mr McGrath made it clear he was not in favour of tax breaks for developers while accepting that there were viability difficulties for them.

Mr McGrath, arguably the most powerful minister in Fianna Fáil, now sees the focus as being elsewhere.

He said: "[Tax breaks for developers] is a sensitive area and we shouldn't really be speculating on [it]. We've just had massive investment again and the Housing Finance Bill has just been completed and enacted.

"We are seeing the institutional investors take a step back for a whole variety of reasons: interest rate policy and returns that they can get elsewhere."

When asked what the Government will do to face the ever accelerating housing crisis, Mr McGrath placed his focus on two schemes.

One is Croí Conaithe - the scheme could see developers handed up to €144,000 for every apartment built.

Another is the far more substantive, and as yet underutilised, plan to allow the Land Development Agency (LDA) to fund apartment blocks that have received planning permission but are unlikely to see deals completed by the institutional investors - some of which are called cuckoo funds - because of a changed financial climate.

Mr McGrath said: "We do have the Croí Conaithe fund and that is the vehicle really through which we need to try and deliver high-density schemes. LDA, who are now partnering with private sector developers who have planning permissions that they do not intend to activate themselves. So I think those are the two main streams that we should be seeking to bring about delivery of high-density homes at the moment." Firmly slamming the door on Fianna Fáil's support for tax breaks for developers, he said: "We have no plans to do anything further at this point."

Asked whether the State intended to use the LDA to buy entire apartment blocks, Mr McGrath said: "Yes, the State will be committing to the purchase of those units for social housing for cost rental and possibly affordable housing."

Also in his interview, Mr Harris said the Government is looking at housing completion targets.

Again this may cause tension with Fianna Fáil, as a modest target of 33,000 a year was set down by the Housing For All project only 18 months ago.

Asked whether he believed that housing completion targets are sufficient, Mr Harris said: "I think ministers and Taoiseach [Varadkar] have been clear on this. That based on the latest census results in the CSO work, the targets will be revised during the course of this year.

"The population in this country is growing. And it's growing for a whole variety of reasons. There are genuine upward pressures in terms of supply."