Tuesday 25 October 2016

Site value tax would force builders to use sites they own

Published 30/08/2016 | 02:30

'The State is powerless to force land hoarders to build' Photo: Ben Birchall/PA Wire
'The State is powerless to force land hoarders to build' Photo: Ben Birchall/PA Wire

It seems somewhat ludicrous that the State is advocating zoning more housing land when there is enough already available to build more than 400,000 homes.

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But in the absence of powers to force owners to build homes on prime sites, even when planning permission is in place, it now appears the Government believes the carrot of cheaper development levies and access to a €200m infrastructure fund is not enough to get construction works underway.

A stick is now needed. Build on zoned land, or we'll zone alternative sites and refuse you permission to build in the future, the Department is saying.

Ireland's housing crisis will not be solved overnight. But it's certainly not helped by the unwillingness or inability of landowners to release sites to build homes at a time of such demand.

The Housing Agency analysis shows that units are needed in almost every county - in Carlow town, some 700 units are required, more than 500 in Ennis, Co Clare, and 2,300 in Drogheda and Dundalk in Co Louth alone.

The lack of delivery is fuelling price increases, with knock-on implications for the private rented sector where tenants are now enduring record-high costs.

The problem arises because many land banks are linked to hefty loans, and borrowers are not prepared to sell or develop because whatever return is available will not cover their costs. But not all landowners are lumbered with debt. In a market which shows no sign of slowing any time soon, many are quite happy to sit on strategic land banks and wait to maximise their profit.

Many of these sites have planning permission, but the State is powerless to force land hoarders to build. The vacant site levy doesn't kick in until 2019 and the absence of a site value tax, as recommended by the National Competitiveness Council (NCC) and others, means there is no financial penalty for failing to build.

This tax is based on the value of the land created by the State's investment in roads, public transport links, water networks and facilities such as schools. Such lands would incur a higher tax than a similarly-sized plot far removed from essential services.

It would encourage development on prime sites because the landowner would incur an annual charge. It would, as the NCC points out, force them to pay for the privilege of wasting land.

Without such a stick, landowners can play the waiting game and hoard until values increase and greater windfall gains can be made.

Irish Independent

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