A new tax on the value of land, as part of a range of measures to tackle the problems of the housing market, is proposed in a report being written by the National Economic and Social Council (NESC).
The tax would hit homeowners, based on the value of the site on which their house is built.
The "site value tax" is a central recommendation of a draft NESC report on housing, which said it should be levied "at a low rate on a wide base of properties".
The tax would be based on the site value, rather than the value of land and buildings, and would apply to all types of property, including residential, commercial and development land.
The report argues that such a tax would encourage the early release of land by property-owners for housing and promote high-density development. It could also lower the price of land, it says, thus making it cheaper for the State to provide social and affordable housing. The revenue could contribute to local infrastructure development.
The NESC council includes representatives of the Government and all the social partners, and its recommendations carry considerable weight.
The proposed tax would prove controversial. The report looks at a "typical" owner-occupier, with a house valued at €300,000.
The site value of such a house could be around €100,000, it says, and a 1 per cent tax rate would cost the householder €1,000 per year.
Similar taxes operate in Denmark and in some US cities. If such a tax is not adopted, the council sees a case for a full property tax on second homes.
The site value tax is one of a range of measures recommended to reduce housing demand and increase supply.
The NESC renews an earlier call to abolish mortgage interest tax relief, saying this merely inflates the price of housing. A phasing out would be necessary so as not to unduly hit those who had recently purchased, it says.
However, purchasers of second-hand houses would welcome the proposal to abolish or substantially reduce stamp duty, while for business the site value tax would replace rates.
The NESC also calls for a new drive to increase the density of new housing developments and to link this with transport provision. A Greater Dublin Authority is needed to co-ordinate this, it says.
Local authorities should maintain land banks adequate for the future development of social and affordable housing, the NESC says.
It does not go as far as the report of the Joint Oireachtas Committee on the Constitution, which is to recommend that local authorities be allowed to purchase land from owners at well below its market value.
But it does say that this approach may have to be considered if land supply does not rapidly expand.
