Housing sites in Dublin and a number of other areas could fall by up to 20 per cent in value because of Government plans to compel developers to make part of them available for social and affordable housing. The Planning and Development Bill, 1999, published today, will compel developers to sell on up to 20 per cent of land zoned for housing to local authorities, depending on local needs. Although the Government's intentions were well known since the end of July, developers will be surprised at the level of compensation to be paid by local authorities. The Bill stipulates that land must be made available to the local authority at "existing use value", except where it was purchased at a higher price prior to yesterday.

Apart from helping local authorities to cut the waiting list for houses, the measure will have the effect of reducing site values, particularly in Dublin where prices have gone through the roof in recent years. Once the Bill is enacted, local authorities will expect to pay only agricultural prices for land zoned for housing on the outskirts of cities and towns. Although the proportion of a site to be taken over by a local authority will depend on the local needs for social housing, it seems inevitable that many local authorities will avail of the full 20 per cent quota, particularly in the main cities and towns, where the waiting lists have grown sharply.

Official sources in the Department of the Environment acknowledge that the Bill will dampen down site values, particularly in the Dublin area. It may also slow down new house prices because of a reluctance by buyers to pay ever increasing prices alongside local authority housing.

Under the changes announced in the Bill, each development plan will now have to contain a housing strategy which will assess the needs for social housing. In future, when planning permission is sought, the local authority will make it a condition of permission that the stated quota of land be reserved for social housing and transferred to the local authority.

The new measures will come as a shock to many landowners who had deferred the sale of land zoned for housing despite the reduction in the capital gains tax. Pat Nolan, of agents Hamilton Osborne King, yesterday forecast the Government action would lead to a fall off in land sales pending a constitutional test case.

"The release of land for housing may well be deferred and if this happens, first-time buyers will lose out."