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How Italy’s building bonus uncertainty is causing headaches for homeowners

Homeowners face being left with unfinished properties or high construction bills if Italy's building 'superbonus' isn't extended in the new budget as hoped.

Italy's superbonus is facing delays and deadlines, leaving many homeowners worried about their building projects.
Italy's superbonus is facing delays and deadlines, leaving many homeowners worried about their building projects. Photo by Anastasiia Krutota on Unsplash

After Italian authorities gave the green light to next year’s Budget Law at the end of last month, many homeowners carrying out renovations didn’t get the news they were hoping for.

The plans aren’t favourable for those with single family homes, as Italy decided to extend the superbonus only for condominiums until 2023, meaning there isn’t as much time to move through construction projects.

EXPLAINED: How Italy’s proposed new budget could affect you

As things stand, based on the manovra – or financial measures – set out by the government, there are just eight months left to access the superbonus for those with a single family home.

It spells a timeframe potentially too short for many waiting for their building project to get off the ground or those stuck in a backlog caused by high demand for construction companies.

‘No house and all the bills’

Many homeowners have already successfully accessed the bonus, with the government approving over 9 billion euros of investments.

But we count among those waiting tensely for news. Solely on the basis of the superbonus, my husband and I bought a wreck in the northern region of Emilia Romagna in May.

After months of searching and waiting for the sale to go through, once we finally had the deed in our hands we thought we’d be able to move through the process and start on the demolition and build of our new home.

House renovation in Italy using the superbonus.
Photo by Avel Chuklanov on Unsplash

Yet, seven months later, the original and unliveable old farmhouse is still standing in its crumbling glory while we grow ever more anxious for works to start – and potentially finish – in time.

For us, this would be our primary residence, our only home. We have both borrowed money and also sunk every penny we’ve ever had to our names and saved up over the years to afford it.

READ ALSO:

The superbonus was an opportunity too good to miss, as we would never have been able to undertake a project like this without it.

But if we are left stranded halfway through, we will be left with an old building not fit to live in and nowhere else to call home as we have sold our current apartment – at a loss too.

Soon enough, we’ll be living in a trailer on site and all we can do is cross our fingers that we’ll have a real roof over our heads soon.

Italian property.
Photo: Mattia Bericchia on Unsplash

We’re not the only ones fast in the superbonus quagmire. Paul Bains who lives in Sicily almost embarked on the same idea – a full demolition and rebuild – on the house where he resides, but he was worried that it would be “a disaster” and scrapped the plan.

Echoing our fears, he said, “We would have run out of time and I would have ended up with no house and all the bills.”

A shortage of building professionals

Paul still wanted to access the government coffers to upgrade his property without knocking it down in any case. After initially discussing ideas in September and October 2020, an architect eventually came to visit his home in January 2021 to make assessments.

Months passed and on asking for progress, Paul was told that they’ll need another architect after being unable to reach the first one.

READ ALSO: Italy’s ‘superbonus’ renovations delayed by builder shortages and bureaucracy

By July, the builder he had been liaising with also “disappeared”.

He said that he feels like he has lost a year by waiting and asking around for other contacts, but so far is stuck and unable to move forward.

“In some ways I’m just resigned to it,” he said, nodding to the culture of bureaucracy which he described as slow in rural Sicily.

“In some ways I just accept it as perhaps a good thing and move on,” he added.

Bureaucracy is causing delays to accessing Italy's superbonus.
Photo by Julia Solonina on Unsplash

Using the superbonus on a second home

Not everyone is experiencing the same frustration and worry.

Roger Hampton is a British citizen living in Norway and his renovation project is underway on a second home in Italy.

He and his family found the holiday home of their dreams in Ancona, in the Marche region.

Despite breaking one of the biggest rules of house buying in Italy – buying the property unseen – they are successfully progressing through their building plans, blogging the developments as they go.

READ ALSO:

“I first read about the superbonus when it came out and then changed my property search, as I realised there was more we could do than we could initially afford,” he said.

Without the superbonus we couldn’t have done this,” he added.

Due to the various lockdowns, he couldn’t travel from Norway to view properties, so his engineer did it on his behalf and just sent photos and videos. It worked out and now they are embarking on a full demolition and rebuild in the end, as the foundations were too weak to stay in place.

Despite only having visited Italy twice this year, his second home project is moving at a pace.

As an architect by trade, Roger admitted he found the process less stressful than most as he understood a lot of the jargon and the protocol. Regardless, accessing the bonus and progressing through construction from a distance is an achievement.

He met a technician last September who used his contacts to get the appropriate contractors for construction.

READ ALSO:

For us, this is currently the greatest stumbling block as there’s high demand for thermal technicians (termotecnici) and we cannot move forward without this key contact.

In fact, we have found a construction company to knock down the wreck and build our new home, but without the final approval from technicians, we are at an impasse.

Other home renovators I spoke to said they are having the same issues with appointing these particular professionals.

Soberingly, one told me that it took a year to start works after buying the property. In our case, that would definitely be too late to claim the superbonus under the current rules.

One reader of The Local contacted us to say that they also had this experience, saying, “Getting knowledgeable professionals has been a real struggle.”

In their case, they are moving within the same comune (municipality) and it will be their primary residence. They actually didn’t intend to use the superbonus initially, as they began their project before it was introduced.

However, due to the difficulties of finding the right professionals, time has rolled on and they can now benefit from more government aid than they originally thought.

“The whole thing has been hard but we stand to gain so much if it works out for us, it’s well worth it,” they said.

It’s a positive sentiment that Roger expressed too. “It’s a case of having the patience and it’ll work out,” he said.

For those who are jittery and restless, they might not be far off the mark with such optimism.

The budget proposals indicated a change in the superbonus to cover only those single family homeowners with an ISEE (the social-economic indicator of household wealth) of 25,000 euros maximum for the whole of 2022.

If you don’t fall into this category, the deadline of June 30th 2022 applies.

READ ALSO: Building superbonus: Italy’s draft budget leaves homeowners in limbo

However, some respite is still possible as the Budget Law has not yet been examined by parliament and has so far not been made into law.

At this point, amendments are being made and pressure is mounting to remove the income ceiling and to scrap the shorter deadline for single family homes.

“We are fine-tuning amendments to remove references to ISEE ceilings as a requirement for continuing to benefit from the superbonus on single- and multi-family houses,” Agostino Santillo, vice-president of the Five Star Movement party is reported to have said in a Senate meeting.

He criticised the measure as “discrimination”, saying his party have “put an alternative option on the table that does not create obstacles”.

The government launched the so-called ‘superbonus 110‘ back in May 2020, one of a raft of measures aimed at boosting the Covid-hit economy. It offers homeowners large tax deductions on expenses related to energy upgrades and reducing seismic risk.

Property owners have been petitioning to extend the bonus for the same amount as planned for condominiums, with some arguing that those with single or multi family homes shouldn’t be excluded or labelled “houses of the rich”.

Reports suggest that news on who can access the superbonus and for how long are expected this week.

All proposed measures and extensions to come into force from next year are yet to be converted into law and are still subject to change.

See more in The Local’s Italian property section.

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PROPERTY

Nine things we’ve learned about claiming Italy’s building ‘superbonus’

Two years after it was introduced, Italy's popular renovation discount scheme continues to cause headaches for homeowners trying to access it. Here's what we've learned so far about claiming the so-called 'superbonus 110'.

Nine things we've learned about claiming Italy's building 'superbonus'

In May 2020, as the pandemic gripped Italy in its first wave, the government introduced a new building bonus programme to kickstart the country’s sluggish, Covid-hit economy.

This emergency response, known as the ‘superbonus 110′, came as part of the government’s Decreto Rilancio (Relaunch Decree), which offered a tax deduction of up to 110% on the expenses related to making energy upgrades and reducing seismic risk.

Other types of building bonuses existed before – and continue to be available.

However, none had offered quite so high a value to those looking to make home improvements on their property.

In fact, not only did the new measure incentivise people to upgrade their existing properties, it encouraged people to buy old, abandoned properties, making previously unfeasible renovation projects, in financial terms, a genuine possibility.

READ ALSO: How Italy’s building ‘superbonus’ has changed in 2022

We counted among those taking the plunge to buy a crumbling and uninhabitable building, with the intention to carry out extensive works thanks to funds from the superbonus.

Our property search completely changed due to the scheme and we planned on taking advantage of the generous sums of state aid.

After looking around and viewing properties for months, attracted by adverts that claimed a property was eligible for restoration with the superbonus, we found an old farmhouse – which had become a derelict wreck – in the lowlands countryside outside Bologna, near where we are already located.

(Photo by Philippe HUGUEN / AFP)

In our case, we had to demolish the old property and rebuild a home from scratch – it couldn’t be restored due to earthquake damage in the area, rendering it far too unstable and destroyed to ever be habitable again.

READ ALSO: Why we decided to build our new house in Italy out of wood

That wasn’t a disappointment as we had the opportunity to design our own home instead, choosing every angle, material, layout and floorplan we wanted. It would have been beyond our means to take on a project like this without the superbonus, but with it, we thought it was possible.

Incredibly, the small print of the incentive permits this too, as the government intended to reinvigorate the nation’s many old, damaged and inefficient buildings and recover lost land – including using existing plots to build new homes if the property was too damaged, as is the case for us.

So, we ploughed all our savings and the money from the sale from my husband’s apartment into a collapsing set of bricks, filled with junk and debris from years gone by.

Although daunting, the figures stacked up and meant that we could create our own country home with a manageable mortgage for around 15 years.

Since I’m now 37, that seemed to work well and it all looked reasonable.

READ ALSO:

But it was just the beginning, before the superbonus spiralled into delays, bureaucratic quagmires and fraudulent claims, which all contributed to making accessing the funds a stalemate for many homeowners.

18 months into our project, we have got as far as a concrete shape in the ground, the old farmhouse demolished, but no sign of our future home still – and a budget that has blown out of proportion, changing our financial future considerably.

18 months ‘ progress looks like this on our Italian property renovation project. Photo: Karli Drinkwater

The clock is ticking with deadlines too, albeit briefly extended, to access the bonus in time.

Since its inception, here’s what we have learned about (trying to) claim Italy’s superbonus 110.

1. Demand slowed down starting renovation projects

Within its first year, interest in the scheme was so high that building companies were overwhelmed and projects piled up in a queue.

Many firms stopped taking on new clients, as they battled to push through projects that were already delayed by months and some homeowners abandoned their plans altogether as a result.

As the backlog built up, firms increased their construction quotes and material prices rose – driven by a worldwide boom in cost increases and also most certainly not helped by Italy’s superbonus-fuelled building boom.

Photo by Bill Mead on Unsplash

The situation has continued to worsen due to the war in Ukraine, which has impeded the import and subsequently driven the cost of raw materials.

It was this demand that also saw us sit and wait, watching on while absolutely nothing happened and we continued to be stuck, all the while watching the project cost continually rack up.

READ ALSO: How to stay out of trouble when renovating your Italian property

It had taken four months just for the sale of the wreck to go through, so we were on the back foot already as far as the bonus is concerned.

We were ready to get going in May 2021 after putting in our offer on the property in the January, but in the past year, very little has happened.

We’ve since had to move out of our apartment, as the new owners understandably wanted to move in and we’re now effectively camping out in a part of my husband’s parents’ new house.

As they, too, are trying to access the superbonus, our life has been packed into boxes while we our living area and office is all squeezed into a garage.

I write this surrounded by scaffolding and orange construction barrier tape, now heavily pregnant, and trying not to lose hope that we’ll have our own place to go to.

Our building project has got no further than knocking down the old wreck and laying down the concrete foundations. One year on, there’s not even the bones of a structure.

READ ALSO:

So is it still demand for the bonus and materials that’s causing the delay?

Yes, but also a huge part is down to how you can claim the bonus.

2. Credit transfer problems stopped the banks lending

Another recent cause for a further slowdown is the change in how people could access the bonus and the increasing difficulty of obtaining credit.

There are a few routes to obtaining Italy’s superbonus. The option of offsetting tax from income is likely only financially viable for high earners, as any unused tax discount gets lost.

Image: moerschy / Pixabay

Let’s say your renovation costs come to €100,000, which are tax deductible at 110 percent for five years.

So, if you have a tax break of €22,000 every year for five years, therefore, but your tax bill from your income tax, known as ‘IRPEF’, falls short of that, you lose the deduction and will end up footing the rest of the renovation bill.

READ ALSO: Do you have to be Italian to claim Italy’s building bonuses?

Note – the latest changes specify tax deductions for the superbonus will be spread over four years, not five as previously.

Little surprise, then, that the other two options to access the funds – transferring the credit (cessione del credito) or discount on the invoice (sconto in fattura) – have been more popular.

It effectively means you either trade the tax credit for cash to an Italian financial institution, such as a bank, for the credit transfer, or directly to your contractor or supplier for the discount on the invoice.

Using the credit transfer system means you’ll get cash back that you paid, directly in your bank account.

It’s a slightly riskier route than a discount on the invoice, as the latter means the the supplier recovers the bonus on your behalf, taking a slice of it as a fee.

So, you get less of the bonus but you don’t have to deal with the paperwork and the contractor takes the burden of getting the credit.

“The easiest option is the discount on the invoice,” tax expert Nicolò Bolla of Accounting Bolla told us.

“It takes care of the credit transfer. If you deal with the bank yourself, it takes some expertise and requires a little knowledge of technology and the system, such as downloading and uploading invoices.

“Contractors have multiple sales, so they are more trained to do that,” he added.

However, billions of euros of fraudulent claims led the government to introduce stricter laws, blocking being able to access credit for months, putting the bonus – and renovation projects – on hold.

Our builders were using credit from financial services provider Poste Italiane, who reduced the threshold of credit. This pushed all the building jobs back by months with no word on when works would start.

In that time, they had to search for another bank willing to fund the bonus, while home construction sites lay dormant.

3. Banks blocked and refused credit halfway through projects

Some homeowners faced extra setbacks when they encountered not only delays, but an outright cancellation of prior agreed credit.

Peter (not his real name) told us that he had got the green light to access one of the other building bonuses that can be used in conjunction with the superbonus – the Renovation Bonus (Bonus Ristrutturazioni).

READ ALSO: Budget 2022: Which of Italy’s building bonuses have been extended?

It allows homeowners to apply for a 50 percent tax reduction on carrying out renovation work in both individual properties and condominiums.

The maximum limit on expenses of €96,000 and the 50 percent offset to taxes is divided into annual instalments for 10 years. Or you can apply for the invoice discount or credit transfer.

Photo by Cristina Gottardi on Unsplash

He applied and was approved for credit transfer for works on his home in Modigliana, Emilia Romagna. After buying a property with his partner in December 2020, they began renovations in January 2021, based on credit approved by Italian bank UniCredit.

He told us they carried out €60,000 of works for a new floor and underfloor, electrics and plumbing throughout, a new boiler, replastering walls and installing a new bathroom.

That means that €30,000 credit was due from the bank, but Peter told us they are now refusing to pay out.

“The excuse from the bank is that we didn’t sign with them, however they didn’t ask us to sign anything when they opened the portal for us at the beginning,” he told us.

So, while the bank registered the renovation jobs for them on the government’s portal in order to be able to claim the bonus, they now refuse to return the credit as originally agreed.

“The thing that upsets me so much with UniCredit is we made about 10 payments to builders and suppliers costing €7.50 a time (in administration fees) to make it, and taking the time to go into the bank especially, to get it registered correctly. And to be let down by them now, really is pretty bad,” he added.

Taking this route is “harder” according to Bolla, as “banks prefer to deal with larger businesses than to give credit to individuals,” he said.

For Peter, he now has the option of deducting the tax from his annual income tax bill or finding another bank to take on and transfer the credit.

4. Finding other solutions to open up the credit transfer system

As accessing finance slowed down and projects ground to a halt, the government intervened with yet another regulatory change to the superbonus.

Along with extending the deadline of 30 percent completion of works for single family homes by three months – to the end of September 30th 2022 – the authorities also looked at how to make accessing the funds more straightforward.

The reason for so many changes stems from how the superbonus originally started.

“Two years ago, it was the Wild West. Anyone could get credit to use the bonus – a person, company or business. Due to that, the authorities lost track of sales and plenty of fraudulent claims slipped through the net,” according to Bolla.

“Everything stopped. Then they regulated too much, creating more bureaucracy and delays. So now, they’ve deregulated a little to reopen the transfer of credit,” he added.

Understanding why there were delays to accessing the bonus are complex and manifold. Along with the reasons above, banks also faced rising inflation, which in part caused them to stop lending.

“Somebody needs to offset the tax at some point. Many banks wanted to buy the credit and resell it to larger banks, but any credit that couldn’t be offset in their taxes got wasted.

“It made the banks less willing to buy credit, which in turn slowed down companies’ and individuals’ ability to access it,” he added.

Now, to keep better track of works being done, Italy’s Inland Revenue Agency (L’Agenzia delle Entrate) has introduced better tracking systems in its latest ruling. These will follow the trail of where the money is going, with the aim of cutting down on time lost to bureaucracy.

5. You might – legally – be left with a half-finished house

Depending on what you’ve agreed with your construction company, you may be taking a gamble with the superbonus no matter what, even if works have begun and the system has eased the bottleneck on claiming the funds.

Our builders would only go ahead with the project if we signed a document, in short saying that we understand the project won’t be finished if the funds aren’t available in time or if works roll on past the deadline.

Photo by Filiz Elaerts on Unsplash

The firm wasn’t going to be liable for paying for the construction of our home (and others’ projects too) if they continued to get caught in delays.

In this case, we had no choice. Sign it and hope for the best or lose the €200,000 that has already gone into the works and wreck purchase so far.

6. There are added fees to account for when claiming the superbonus

If you’ve ever sold or bought property in Italy, you’ll know there is an abundance of hidden costs associated with it.

From agency and notary fees, taxes to legal costs, buying a property in Italy can incur another ten percent of the purchase price. For a list of the hidden costs to watch out for, see our guide here.

When it comes to restoring properties using the superbonus, you’ll need to fork out for various certificates, including an energy certificate known as ‘Certificato Energetico APE’ to prove that the property would benefit from energy upgrades using government funds.

This will also need to be done afterwards to prove that the property meets the requirements of the superbonus and has jumped up at least two energy classes.

You may also incur charges from your local town hall or comune for making changes to the property. In our case, as it’s a considerable project, the administrative fee just for submitting our house plans to review cost €12,000.

In total, the cost of fees on our project – before any restoration works using the bonus have taken place – have come to €30,000.

7. The amount you claim and pay continues to rise

Since the superbonus began, the scope of house restoration projects has changed significantly.

The noted demand pushed up construction quotes and material prices continue to rise, vastly increasing the scale of a project’s budget.

It will come as a blow to home renovators who thought they were potentially getting considerable sums of money from the government and therefore making huge savings.

In fact, there will still be large pots of funds to come from the government, but the problem is the price you pay will track the increases and rise too.

Our particular home renovation project has almost doubled since we began.

We initially accounted for a final cost of €450,000 for all works, using the superbonus for almost half of that.

Instead, the quote we received in November was over €700,000 (on top of what we’ve paid for the wreck) and we were told this is unlikely to be the final cost, rising in line with continuing material price rises when works do finally get underway.

The impact of this is life-changing. In our case, it means we’ve had to apply for soaring monthly repayments for 25 years instead of 15. And that’s only if the bank agrees to grant us such a huge financial commitment – which it has, as yet, not done.

8. You might have to pay taxes if you sell your house after claiming the superbonus

At least for a while, you may have to stick with the property you’ve renovated using the superbonus.

Once you’ve claimed this building bonus, essentially you can’t sell it on for another five years if you want to avoid paying capital gains tax.

Tax expert Nicolò Bolla said that this depends on when you bought the property, however.

If you already owned the house for more than five years and took advantage of the superbonus, you can sell it on with no capital gains tax.

On the other hand, if you just bought the property to benefit from the bonus, and therefore have only owned it for under five years, you’ll be liable for the tax – that is, if you make a gain on its sale.

If you bought an old wreck and renovated it, for instance, it’s likely that you will.

For more advice on selling your property after using the superbonus, remember to check with professionals beforehand.

9. It continues to be popular and set back by delays

Despite the recently extended deadline, homeowners continue to wait in queues for their projects to begin or be completed.

Tax expert Bolla told us he gets “daily requests” for the superbonus, but issues a word of caution about the incentive.

“It is a long journey and you need to have some money to renovate your property with the bonus. It’s an expanded timeframe and there are still supply chain issues,” he said.

Despite this, though, Bolla believes it’s an “amazing” scheme. “We have a lot of energy dependence, so this is a good way to upgrade. Normally, the way we deal with our reliance on energy is to punish those who pollute more with higher energy bills, but those are always lower income people.

“Higher energy costs just punish the poor – this, instead, is a good way to solve the problem.”

See more in our articles about property in Italy on The Local.

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