Developers will have to sell up to 20 per cent of their land to local authorities for social or affordable housing in exchange for planning permission to build private housing on the remainder, according to the Planning Bill.
Announcing the most controversial provision of the Bill yesterday, the Minister for the Environment, Mr Dempsey, said his plan "will probably bring a touch more realism into the land market". Builders were in the market to make money, he said, "but governments have wider obligations".
Under the Bill each local authority must draw up a housing strategy assessing the housing needs for its area. In particular, the authority must assess the need for affordable and social housing, and must then require that a percentage of the land being zoned for private housing be reserved for social and affordable housing. The maximum percentage cannot exceed 20 per cent.
When planning permission is applied for in respect of this land, the local authority will impose as a condition of granting the permission that the relevant percentage of the land be sold to it for its existing use value, almost certainly at agricultural prices rather than housing prices.
In some cases land worth £5,000 per acre for agricultural use would cost £100,000 were it zoned for housing. The provisions in the new Bill, if enacted, would therefore substantially cut the cost of providing social housing. The local housing strategy for the area will ensure developers know in advance what percentage of the land will be required to be sold to the local authority. The new provisions will apply to all land over a half-acre.
The houses to be built on this land can be used in a variety of ways. They can be rented to people on the local authority housing list, given to a voluntary housing body, sold under the shared ownership scheme or sold off directly. Those sold will be sold at cost price to purchasers selected by the local authorities in accordance with "a proper fully transparent scheme of priorities".
The successful applicants must be "persons whose relevant income would be inadequate to obtain a sufficient mortgage to purchase on the open market any newly built house to meet their accommodation needs".
Mr Dempsey said he hoped that, as well as providing affordable housing for rent or purchase for some who needed it, this scheme would counter the growing social segregation in the State. More modest houses would now be built alongside some very expensive houses, he said. It would not be acceptable for a developer "to build million-pound houses in one place and then build social houses at the other end of the county.
"We are trying to foster social integration," he continued. "The growing trend to social segregation is largely contributed to by house-building patterns." He rejected suggestions that the scheme could create "ghettoes" on the edge of upmarket housing developments, saying he would be more concerned about creating ghettoes "by building hundreds of local authority houses on a greenfield site".
He said these provisions would not come into effect in a particular area until the local authority had agreed its housing strategy. This delay, said Mr Dempsey, might encourage some developers to build now on land that was currently lying idle. He said he was "quite satisfied that this provision is constitutional, equitable and designed to meet a clearly defined public concern. It is well targeted and clearly defined."
If a house built under the scheme is sold, but then resold within 10 years, there is a clawback measure to prevent profiteering. The seller will have to repay to the local authority the difference between the market value of the property and the price at which he or she purchased it, with a discount of 10 per cent per year.
However, after 10 years, the owners will be free to sell their homes. As they will have bought them at cost price, this means they may be able to reap substantial windfall gains on houses built next to or within expensive developments.