Landowners and developers could end up paying the State more than 50 per cent of the increase in the value of land that is rezoned for housing under new legislation aimed at clamping down on property speculation.
The Government’s new Land Value Sharing and Urban Development Zones Bill, an updated version of which will be published on Friday, provides for a charge of 30 per cent on the difference between existing use value and the market value on land that has been zoned for housing.
Landowners would pay the charge as a condition of the granting of planning permission with the levy being used to fund infrastructure and other services needed for housing on the sites in question.
When combined with traditional development levies and Part V obligations (which force developers to set aside part of their schemes for social and affordable housing), this could see more than 50 per cent of the original uplift in land value from a rezoning flow back into State coffers, the Department of Housing said.
The proposed legislation comes amid reports that agricultural land rezoned for housing can fetch up to 50 times its original value when sold on. The new charge is ostensibly designed to counteract land speculation, which is frequently cited as a factor in the high cost of housing here.
“Land value sharing will influence land transactions with the aim of limiting the speculation that affects land prices, and by extension, the cost of housing,” Minister for Housing Darragh O’Brien said.
The new charge could in theory apply to the 75,000 hectares of zoned residential lands nationally and a further 21,000 hectares of land zoned mixed-use that also permit residential development. It is expected to net local authorities up to €270 million a year, equivalent to the revenue generated from the existing development levies.
A map showing lands in scope for the land value sharing (all lands zoned for residential and mixed-use, including residential) is to be published by each local authority in March next year in advance of the charge coming into force.
Self-assessments
Landowners who benefit financially when their land is rezoned for housing will be required to submit self-assessments of the markup in value from next year.
The Department of Housing said owners of “substantially undeveloped” land identified on the final Residential Zoned Land Tax maps and falling inside the scope of the new charge will be required to submit self-assessments of the existing use value and market value of the lands by July 2024.
The charge will apply to housing development planning applications lodged from December 2024 on land bought and sold since December 2021.
However, an additional one-year lead-in is proposed in respect of lands transacted prior to this, the department said. Commercial and industrial zonings will fall into the scope of the charge from 2026.
The local council may amend the valuation on the basis of its own assessment, said the Department of Housing. “Where this occurs, the landowner may appeal the valuation of the planning authority to the valuation tribunal,” it added.
“Currently, significant increases in land value arising from zoning are not shared adequately with the State. Ultimately, those purchasing or renting new homes, as well as new communities where the need for infrastructure and facilities is often greatest, bear the cost,” it said. And it noted that these issues were highlighted as far back as the Kenny report in 1973 and more recently by the National Economic and Social Council, which stated that Ireland must bring about a fundamental change in its system of urban development, land management and housing provision.
The Kenny report recommended the State adopt a system of “active land management”. It advocated giving local authorities the power to buy development land, using compulsory purchase orders, which is different from seizing part of the value increase from rezoning but its recommendations were never acted upon.
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Mr O’Brien said under the legislation, communities will get a greater benefit from State zoning decisions. “Land value sharing will also influence land transactions with the aim of limiting the speculation that affects land prices, and by extension, the cost of housing,” he said.
The Government’s Bill also provides for the establishment of Urban Development Zones, updated versions of the existing Strategic Development Zones, to fast-track the delivery of new residential and non-residential development.
‘Existing settlements
“These will include under-utilised, large-scale areas with potential for significant development for housing and other purposes, generally within or in proximity to existing settlements,” he said.
The designation of these areas will involve a faster two-stage process. A right of appeal to An Bord Pleanála will exist “and thereafter, consents for planning applications consistent with the scheme will be fast-tracked”, said the department.
Housing delivery has been severely hampered by appeals to An Bord Pleanála and to the courts with up to 70,000 homes delayed or stuck in the planning system.
“Urban Development Zones will lead to a more plan-led approach to development,” said Minister of State for Local Government and Planning Kieran O’Donnell.
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