Date 17 May 2015

Page 14

Dont bulldoze through

this vacant site levy
Developers fear
they could be
pushed over the
financial edge by
proposed tax,
says Linda Daly

overnment plans to
introduce a vacant site
levy to prod house
builders into action could
end up being counterproductive, with Keith
Lowe of estate agents DNG warning
that the tax could even push some
developers over the edge.
Under the Planning and Development No 1 Bill, published in
November, the Department of the
Environment, Community and
Local Government proposes that
local authorities apply a charge on
vacant sites in urban areas; the idea
being to incentivise and stimulate
development.
Th l
ld b
3% f h

The levy would be set at 3% of the

market value of a site in the first
year, increasing by 1% in each subsequent year to a maximum of 6%.
In his Budget 2015 speech, minister for finance Michael Noonan
referenced land hoarding, and said
there was a view that some site
owners were waiting for higher
prices before starting to develop
their land or flipping it.
In response, the Department of
Finance launched a discussion on a
tax on zoned and serviced land. The
deadline for submissions was
Friday, May 8.
Robert Ganly, managing director
of Ganly Walters, dismissed the
l i
f h di
d
ibi
h

claims of hoarding, describing the

introduction of a levy or tax as a
nonsense.
We need to encourage construction in cities in Ireland and I dont
believe the levy or tax are conducive
to the encouragement of construction, he said. Hitting builders
with taxes for land that they own is
the wrong thing to do.
Hubert Fitzpatrick, director of
housing, planning and development
with the Construction Industry
Federation (CIF), said taxing zoned
serviced land will not be productive.
CIFdoesnotsupporthoardingof
land, he said. We want construction to take place as soon as possible
b
li i
b

Copyright NLA Media Access. For internal use only. Not for reproduction.

Date 17 May 2015

Page 14

but government policies must be

reasonable.
Figures released by CIF last week
show that 11,016 housing units were
built in Ireland in 2014. This falls far
short of the 25,000 units which the
ESRI and government say are
needed.
In contrast, the Department of
the Environment estimates that
thereismorethan17,000hectaresof
undeveloped residentially zoned
land around Ireland, with the capability of producing more than
400,000 new homes. An 18-month
audit carried out by Dublin city
council found that more than 61
hectares of vacant land could be
developed around the capital.
The Society of Chartered Surveyors Ireland (SCSI) is not fully
opposed to the vacant site levy but
questions whether it will stimulate
construction activity or boost
supply. It said that financial viability
testing should be introduced as part
of any proposed taxes.
A key thing were hearing back
from our members is that a lot of the
sites still arent viable, said Conor
ODonovan, director of policy and
communications with the SCSI. It
doesnt make sense to impose a tax
in areas where there is no viability
for sites.
Even where sites are viable, there
is very little construction funding
available. Developers want to build
houses, they dont want to sit on
land, they make their money out of
building houses, said Ganly. It is
totally unsuitable to have a government-imposedtaxbasedonthelack
of development when there is no
proper bank funding available.
Lowe said that building regulations, within Dublin and around
apartments especially, are proving
restrictive to development.
There are significant challenges
in developing apartments, and part
of that is consequences of planning
codes introduced in 2008, which
make it economically unfeasible to
develop apartments in Dublin.
Brian Moran, chairman of the
Irish council of the Urban Land
Institute, a non-profit education
d
hi i
hi h f

and research institute which focuses

on the use of land, said there are
merits to introducing a development land tax but warned that it
must be on an equitable basis.
The agenda with these taxes is
not to raise revenue but to encourage
behaviour, said Moran, who is
senior managing director of Hines
Ireland. The most logical approach
is an integrated site value tax, which
achieves the objectives of encouraging productive use of land and also
raising long-term revenue.
Any tax on vacant or underutilised land should also apply to all
land. As it stands, local authorities
and the Office of Public Works
would be exempt from the vacant
site levy.
It should apply to land owned by
city authorities, by the state, land
owned by utility companies, land
owned by convents or religious
orders, he said. If you look at the
big land holdings that are underutilised in urban centres, they are
not owned by private individuals.
By and large, they are largely owned
by institutions and state entities.
Excluding local authorities or
Nama from the levy or tax makes it
pointless, according to Moran.
As soon as the council realised
they would have to pay tax for
holding onto that land, they would
immediately bring it to market and
you would see an awful lot more
home building moving ahead.
Hineshasworkedonthreesignificant master-planned developments in Europe over the past 10
years, in France, Italy and Spain.
Moran said site taxes had helped the
property group because it brought
sites to the market that otherwise

Moran.
He recommended the government reflect on the existing property tax and consider in the longer
term the introduction of a site value
tax, which he said would ultimately lead to much more intelligent use of land.
Any tax should be introduced
gradually, he added, to allow the
market to adjust to the new reality.
Fitzpatrick said that there are
other ways government might
make development of land viable
such as addressing infrastructural
deficits or reducing development
levies where it is not possible to fund
the development. It could be
through the reduction of various
other taxes that apply to construction, he said.
The governments Construction
2020 strategy does encompass
measures to incentivise housing
construction including retrospective application of reduced contributions applied after development
and use it or lose it provisions for
planning permissions.
The SCSI is recommending a
reduction in VAT on new homes
from 13.5% to 9% for two years. It
worked in the tourism sector and
created jobs, and would improve
viability and encourage more development in areas where demand is
greatest, said ODonovan.

wouldnt have been available. In

Ireland, Hines last year bought the
400-acre Cherrywood business
park from Nama for close to 300m.
The site has approval for the construction of a retail-led mixed use
town centre with up to 3,800 apartments and houses. The property
group is working as fast as possible
on readying the site for development. Weve no incentive to sit
back because its costing a lot of
money to sit on that land, said
M

Copyright NLA Media Access. For internal use only. Not for reproduction.