Tuesday 21 October 2014

Plan to boost supply of family homes will create 60,000 jobs

Punitive tax on developers who hold on to zoned land

Fionnan Sheahan Group Political Editor

Published 24/02/2014 | 02:30

Councils to spend half a billion on projects they're unable to afford. Photo: Thinkstock Images

THE Government is set to sign off on a raft of measures aimed at increasing the supply of housing and creating 60,000 jobs in the construction sector.

And a punitive tax on developers who are holding on to zoned land is a key part of the coalition plan to speed up the construction of family homes.

Shortages of new housing in Dublin and other urban centres are causing property prices to soar, as demand for family homes is not being met by the supply.

In the capital, there is intense competition to buy houses in areas inside the M50 close to schools, hospitals and public transport.

The new plan aims to boost construction in areas where affordable homes are most needed, while also creating jobs.

Councils will also be given the power to introduce a "vacant site tax".

The tax will be charged on land that is zoned and planned for development, but not built on.

The vacant site tax will particularly apply in Dublin where zoned land banks are lying idle.

"In some cases the developers don't have access to finance. If they don't, they should be selling the land on to someone else. It really should be a matter for the individual local authorities," said a source.

"One of the sources of the opposition to this will be NAMA. It is sitting on a lot of sites and that will take time to work through. But that's really just about the recycling of money between different elements of government, so can be overcome."

In areas of the country where there is enough supply of houses already the tax won't be applied by the local authorities.

The plan includes a fast-track system to allow builders to change existing planning permission and shift the focus to family-sized homes rather than shoebox apartments.

And a more formalised system of planning will be put in place to look at the housing, demographic and immigration trends. Reductions in development levies for builders are also proposed, as councils now have fresh income from the property tax.

In a further measure, the controversial requirement for builders to give one-fifth of new homes over to social housing will be reduced substantially or abolished completely.

The whole plan is aimed at tripling the number of houses built from 8,000 units last year to 25,000 by 2016.

That compares with 93,419 houses which were built in 2006, as the end of the boom approached.

The Cabinet will hold a special meeting on Thursday to discuss a draft, but decisions are not expected for another month.

The Government believes the level of construction is not keeping pace with the new housing demand and infrastructure requirements of the country.

At the moment, there are 90,000 construction workers drawing the dole, with doubts over whether they can be retrained for other jobs.

The construction industry is actually underperforming as it accounts for just 6pc of GNP.

The aim is to bring this up to 12pc and create 60,000 jobs in the process – 12,000 in the next year alone.

"We are not building enough houses, commercial offices or infrastructure for the country's needs," a source said.

A new fast-track system for planning permission changes will be brought in to try and focus activity where it is needed – particularly in Dublin.

Last week, a MyHome.ie survey, based on an analysis of the Property Price Register, showed that the number of house sales in the capital last year rose to 10,000, an increase of 17pc on 2012.

Angela Keegan, managing director of MyHome.ie, expressed concern about the supply shortage in some parts of Dublin, which is clearly driving prices.

In the Greater Dublin Area, there are now an estimated 30,000 housing units planned, but many are high-density one- and two-bedroom apartments.

However, the market demands more family-sized houses and larger apartments.

IMPACT

Amendments to the planning laws will allow quicker changes to existing planning applications, without having to go back to the start of the process – as long as it doesn't fundamentally affect the infrastructure or visual impact of the development.

The fast-track planning changes will allow more flexibility in housing density. In Dublin city, the planning requires high density in almost all developments.

Developers are arguing for some latitude, whereby the first phase of the project can be lower density and then move to higher density in later stages.

Development levies – the charges paid by developers to councils for building new houses – will also be substantially slashed to help builders.

Planning permissions granted more than two years ago have development levies attached that are viewed as "making no economic sense".

Councils will be told to adjust the formal terms of planning permissions to reduce the development levies.

In the longer run, the Government will instruct the local authorities to "abolish or dramatically reduce" their development levies – as they now have a different revenue stream from the local property tax.

"In the absence of the property tax, you were getting new buyers to finance infrastructure for everybody. Now you have the property tax," a source said.

The plan will either abolish or substantially reduce the requirement on developers to contribute to social and affordable housing – known as Part Five.

Under Part Five of the Planning and Development Act 2000, developers have to give up to 20pc of a development of more than five houses over to social and affordable housing.

FUNDS

But the source added: "That's never really worked. It's just become another tax on development. The proposal is to significantly amend the legislation to reduce the obligation."

The country's water infrastructure will also be a focus of the plan. The biggest impediment to building in the capital, including Dublin's Docklands area, is the lack of water and wastewater facilities.

The Government is already planning to invest €300m a year in water infrastructure through Irish Water and the intention is to double this figure through borrowing.

The borrowing will be carried out by the Government as "equity investment" with more funds being borrowed by the Strategic Investment Fund. Irish Water will start borrowing itself from 2017 to 2018. The major environmental issues around the water quality nationwide will also be addressed. Across the country, an estimated 1,800 communities have been subject to boil water notices because of contamination. The additional funding will speed up these water service improvements.

"The intention would be to dramatically accelerate the infrastructure plan under Irish Water. You've already had some informal engagement on this front. Irish Water will be publishing its investment and infrastructure plan in the near future," the government source said.

Irish Independent

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