Thursday 23 October 2014

Windfall tax to be reduced under Government plans

Published 23/08/2014 | 02:30

Minister for Housing Paudie Coffey
Minister for Housing Paudie Coffey

LANDOWNERS – including developers – who sell sites for housing will avoid massive tax bills under plans being considered by the Government.

Some 80pc of profits arising from the sale of housing land are subject to capital gains tax, but the Government has plans to reduce or abolish the rate to help kick-start construction in our towns and cities.

The move is among a number of measures being proposed to help tackle a shortage of homes  on the market, particularly those suitable for families.

Other measures include reducing development charges to fund essential infrastructure, including water and sewerage; imposing a levy on undeveloped prime sites in city and town centres; and reducing a requirement to provide affordable housing in new estates.

The plans are expected to be announced when the Dail returns next month.

They may prove controversial among those who believe that tax breaks helped fuel the boom-and-bust economy of the past decade.

But there are now fresh concerns about rocketing property prices in cities – particularly in Dublin, Cork and Galway.

Prices have risen by 22pc in the capital in the past year and 10pc nationally, and they are expected to continue to soar unless more homes are built.

Despite some 25,000 hectares of zoned land being available for housing – enough for 500,000 homes – a major stumbling block to development is a requirement that 80pc of profits arising from the sale of land zoned for housing since 2009 is subject to capital gains tax.

This means that many landowners and developers are not building or selling sites.

The move will benefit farmers, landowners and developers, many of whom bought sites at the height of the boom.

Housing Minister Paudie Coffey said the Government was “anxious” to utilise zoned land to provide new homes, and that moves were under way to release sites.

"I recognise there's a challenge there," he told the Irish Independent.

"We'd be anxious in Government to get those lands back into play and developed.

"It would seem obvious to me that if you have land primed for development, and you're willing to sell but there's an 80pc windfall tax, it's an impediment.

"I would think the Department of Finance should review that to a more sustainable level," said Deputy Coffey (inset).

No money has been collected by the Revenue Commissioners under the windfall tax, Finance Minister Michael Noonan confirmed last month.

It is understood that pressure is being placed on officials in his department to review the provision, brought in under NAMA legislation to prevent profiteering by landowners, given that it has not resulted in any tax take and is seen as a barrier to development.

In Dublin alone, there is some 2,575 hectares of land available to build more than 50,000 homes - some 275 hectares has been rezoned since 2009, enough for 5,500 units.

In Galway city, the amount of zoned housing land has increased by 42 hectares in the same period, enough for 840 units, and land for 1,000 homes has been rezoned in Cork city.

It is hoped that by abolishing or reducing the tax rate, more landowners will be encouraged to sell, which would allow housing to be built close to essential services including public transport.

There is a need for 7,500 units a year in Dublin alone, and addressing the windfall tax would help to bring more land forward for housing.

In his first interview since being appointed as minister with responsibility for housing, planning and coordination of the Government's Construction 2020 strategy, Mr Coffey said there were vast quantities of land available with the necessary services already in place, including water and public transport.

Other measures aimed at providing new homes would be introduced where there was a "clear need" for housing and where developers committed to providing a specific number of units.

They include:

• Allowing local authorities to waive or reduce development levies in existing planning permissions to encourage development.

• A reduction in the number of "affordable" units to be provided.

• A levy on prime town and city centre sites, with "flexibility" where finances are an issue.

• Using the National Pension Reserve Fund to provide funding for new projects, including housing.

• Regulating the voluntary sector which will help it access private sources of funding for social housing.

Mr Coffey also said he was open to utilising land banks held by local authorities for housing, which could include joint ventures with private developers.

He said reducing development levies could be a "game changer" - but only where a "clear need" had been identified, a set number of units would be delivered and where finance was in place.

A social housing strategy will be finalised next month.

"It would seem obvious to me that if you have land primed for development, and you're willing to sell but there's an 80pc windfall tax, it's an impediment.

"I would think the Department of Finance should review that to a more sustainable level."

No monies have been collected by the Revenue Commissioners under the windfall tax, Finance Minister Michael Noonan confirmed last month.

It is understood that pressure is being placed on officials in his department to review the provision, brought in under NAMA legislation to prevent profiteering by landowners, given that it has not resulted in any tax take and is seen as a barrier to development.

In Dublin alone, there is some 2,575 hectares of land available to build more than 50,000 homes - some 275 hectares has been rezoned since 2009, enough for 5,500 units.

In Galway city, the amount of zoned housing land has increased by 42 hectares in the same period, enough for 840 units, and land for 1,000 homes has been rezoned in Cork city.

It is hoped that by abolishing or reducing the tax rate, more landowners will be encouraged to sell which would allow housing to be built close to essential services including public transport.

There is a need for 7,500 units a year in Dublin alone, and addressing the windfall tax would help to bring more land forward for housing.

In his first interview since being appointed as minister with responsibility for housing, planning and coordination of the Government's Construction 2020 strategy, Mr Coffey said there was vast quantities of land available with the necessary services already in place including water and public transport.

Other measures aimed at providing new homes would be introduced where there was a "clear need" for housing and where developers committed to providing a specific number of units.

They include:

• Allowing local authorities to waive or reduce development levies in existing planning permissions to encourage development.

• A reduction in the number of "affordable" units to be provided.

• A levy on prime town and city centre sites, with "flexibility" where finances are an issue.

• Using the National Pension Reserve Fund to provide funding for new projects, including housing.

• Regulating the voluntary sector which will help it access private sources of funding for social housing.

Mr Coffey also said he was open to utilising land banks held by local authorities for housing, which could include joint ventures with private developers.

"Using local authority sites is an option as well. I wouldn't rule out anything," he said, adding that reducing development levies could be a "game changer", but only where a "clear need" had been identified, where finance was in place and where there was a commitment to deliver a set number of houses.

He added that social housing would be addressed in a new strategy going to Government next month.

Irish Independent

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