Friday 26 April 2019

Heated debate on cards as 'vacant property' levy looms

The Lord Mayor of Dublin Oisin Quinn has established a task force to tackle vacancy issues
The Lord Mayor of Dublin Oisin Quinn has established a task force to tackle vacancy issues
Donal Buckley

Donal Buckley

EFFORTS to kick start property development in Dublin City are likely to provoke a heated debate tonight at a meeting for land owners, developers and councillors as well as citizens concerned at the rocketing rises in house prices and rents in the capital.

Some developers feel that already restrictive planning and tax measures are among the key factors which are curtailing new development and supply. Furthermore with development site prices rising by 20pc last year there are warnings that genuine developers may be priced out of the market by speculators who have no intention of building.

On the other hand the Lord Mayor Oisin Quinn feels that one way of addressing prospective shortages in the residential and office markets is for existing land owners to put more than 600 vacant properties to some use or to develop them.

The council is also concerned that some owners of vacant commercial buildings avoid paying council rates by rendering their buildings not capable of use by removing lifts etc.

Mayor Quinn established a task force to tackle the vacancy issue and the group is considering a new levy on vacant properties to force property owners to act or get off the pot. Word on the street is that the levy could amount to between 5pc and 10pc of the value of the property payable each year.

FEEDBACK

The levy will be discussed this evening at the meeting in Dublin City Council offices in Wood Quay where other initiatives to address the vacancy problem will also be discussed.

Entitled 'City Limits', the meeting is designed to provide feedback on how to "match the most innovative ideas in urban development with the most suitable spaces."

However many in the industry regard the levy as yet another factor which could discourage development activity. The proposal comes at a time when developers have already been pressing Government and local authorities to row back a number of other measures which are regarded as anti-development. These inhibitors include the 80pc windfall tax on rezoned land; increased sizes and higher design standards for new apartments as well as financial penalties arising from the social housing contribution (Section V) in new developments.

On the other hand, with development land prices increasing and little development activity under way, some observers are concerned that investment speculators may be outbidding genuine developers with the intention of hoarding land and selling it on later when the speculators can make an even bigger profit.

Indeed the Society of Chartered Surveyors Ireland (SCSI) have advised the Lord Mayor's task force that the levy could well cause such a problem.

The society's planning and development spokesperson Michael Cleary, points out that there is a risk that the levy could push some land owners to sell land to purchasers who can avail of low cost of finance allowing them to sit on the land with a view to paying the levy from the expected profits.

Meanwhile, genuine developers, who are dependent on more expensive finance, would find themselves out-bid for their essential raw material as they cannot afford to pay the levy while waiting to secure development funding and planning permissions.

SCSI is not opposed to the levy as such, unlike both the Construction Industry Federation (CIF) and Property Industry Ireland, an affiliate of IBEC.

CIF's Hubert Fitzpatrick asked the Minister for Finance Michael Noonan to reject the council's proposals as he says they could back fire and have the opposite effect to what is planned.

"Business people who may be prepared to invest in the longer term development in the inner city of Dublin may now shy away from such potential investment options having regard to deterrents being considered by the City Council in respect of site assembly requirements and renewal of these areas."

The proposals would "impose further unsustainable costs for banks, NAMA, receivers and developers who would be required to fund the levies," Fitzpatrick adds.

He says the proposals don't allow for the development of "in-fill sites in inner city areas where overall site assembly requires acquisition of a number of smaller plots, the long term planning issues associated with such acquisition . . . sustainable development of the area, the availability of development finance and the requirement to have a properly functioning market."

He also concludes that the existing laws on derelict sites and council's compulsory purchase powers are more than adequate to deal with the issue.

Property Industry Ireland warns that the levy could prove a blunt instrument which could be liable to legal challenge. Its director, Dr Peter Stafford says the levy would be unfair at a time when many buildings are selling for less than their construction cost and so development isn't economically viable.

Indeed Brian Moran chairman of Urban Land Institute Ireland says that developers would need to generate about €300,000 from the sale of a new one-bedroom Dublin city centre apartment in order to justify building to the latest Dublin council apartment standards whereas the previous standards made it feasible to build at value targets of around €200,000 each.

The city council says a levy would require government legislation and expects an announcement in the near future.

However Dr Stafford points out that this would be contrary to the Department of the Environment, Community and Local Government directions to local authorities to reduce levies in order to encourage development. Indeed Dublin has reduced levies in its overall administrative area and is seeking to increase levies in the North Lotts and Grand Canal Docks STZ, area.

Indo Business

Also in Business