The Gallaghers were familiar with many politicians through their work, in particular
Seán Lemass. His influence led to James running for political office. In 1965, Gallagher ran unsuccessfully in the senate elections as a
Fianna Fáil candidate, and instead became a significant party donor. He also became a close friend of Lemass's son-in-law,
Charles Haughey. Haughey and Gallagher became friends in the late 1950s, with Gallagher becoming one of the businessmen who financed Haughey. With Haughey, Gallagher formed a drinking circle with
Donogh O'Malley and
John Healy. Gallagher's access to large funds allowed him to exploit a huge shift in Irish government housing policy in the early 1960s. Fianna Fáil oversaw a new policy which aimed to ease the housing crisis by incentivising private property development and promoting home ownership. In 1964 Gallagher announced he would provide new housing stock to those previously unable to afford their own homes, using the new 1963 planning legislation which facilitated a small number of well connected developers in cornering the housing market. Gallagher bought up undeveloped sites and successfully arranged for rezoning to residential, resulting in him becoming the wealthiest residential property developer in Dublin. Gallagher in turn fed back funds to Fianna Fáil as a donor through Taca, the Fianna Fáil fund-raising organisation he helped found in 1966. Taca gave businessmen direct access to leading party members for a large annual subscription. Gallagher was one of Taca's largest donor, and was involved in its administration. He built 169 houses for free for a number of business associate and politicians, including Traynor and
Neil Blaney. Blaney oversaw the exclusion of land owned by Gallagher from a
Dublin Corporation compulsory purchase order in 1964. Gallagher then built 800 homes on the land, and sold them at market value to the Corporation. The head of planning at Dublin Corporation,
George Redmond, later admitted to advising Gallagher on his applications, and from the mid 1960s, received annual payments of between £10,000 to £15,000 from Gallagher and his brothers. Redmond's salary at the time was £10,000, and Gallagher also built his home and paid for family holidays. In 1969, he purchased land and a Victorian house from Haughey, called Grangemore, for £204,000 in north County Dublin, having convinced Haughey to purchase the house and 45-acre site in 1959 for £13,000. The sale of this enabled Haughey to purchase Abbeville house and its 250 acres for £144,997 in 1969. Haughey also purchased a stud farm in County Meath. During the 1969 general election, this transaction became a major issue, and Gallagher was mentioned numerous times in Dáil debates. However, the criticism was successfully deflected. He later supported Haughey financially and with company cars following his expulsion from office in 1970. ==Later life and death==