'Aggressive' site tax needed to force speculators to build
"Use-it or lose-it" taxes to force land hoarders to release sites needed for housing must be pitched "aggressively" to be effective, an expert has warned.
The head of Nama dramatically accused funds, which his agency sold billions of euro worth of property assets to, of now hoarding the lands to beef up their profits.
Just 6pc of land bought from Nama has been built on, according to CEO Brendan McDonagh, who was speaking at the launch of Nama's annual report yesterday.
He said the agency had sold enough land to build 50,000 homes but so far only 3,000 had been delivered.
Property owners who sit on land as house prices go up will pocket fat profits, he said, because their other costs are not rising.
There may be other reasons housing construction is so slow, he said. But he said hoarding by landowners was a significant factor.
"That is a huge issue in my view," he said.
The bulk of assets sold by Nama were bought by US investment funds, including so-called vulture funds, in huge tranches.
Finance Minister Michael Noonan, who also spoke at the Nama event, said the attorney general had raised constitutional concerns about previous attempts to tax development land into use, but said the way was now clear for action.
A vacant site levy was the best approach to punish land hoarding, he said.
"It can be brought in now," he added.
He indicated that his successor would bring in a new levy in the Budget for next year.
Mr Noonan is due to stand down later this month, but he said he expected the Government would bring in the tax on empty development sites.
"People who are sitting on land as an asset will find themselves sitting on a tax liability," he said.
He posed an annual charge of 1pc, 2pc or 3pc a year to incentivise land hoarders to sell.
Legally, any levy would have to be "proportionate", including to social needs, he said.
Economist Kieran McQuinn of the ESRI said a more punishing levy was needed to force speculators to use zoned land for housing.
Landowners currently can hoard undeveloped land at little cost other than keeping planning permits up to date, and are rewarded as prices rise, Prof McQuinn said.
"I'd look to be more aggressive," he said.
In Denmark, where a successful scheme is in place, the rate of the levy increases as property prices rise, Mr McQuinn said.
It means the levy varies from place to place and time to time, and is most penal for landowners where housing is most in demand.
Landowners who cannot afford to develop their sites are effectively forced to sell on the property to builders who can.
A vacant site levy is already due to come into force next year, but it's targeted at derelict sites, rather than zoned land and sites with planning permission.
Meanwhile, Nama itself said it expected to make a surplus of €3bn once its last assets had been sold off. That is €700m more than previously expected.
The bulk of cash raised by Nama to date has gone to the banks - the final balance will be paid back to the Exchequer.
Nama reported a profit for 2016 of €1.5bn yesterday. It repaid €5.5bn of debt the last year.
Mr McDonagh dismissed speculation that the agency could be wound-up early. "Nama isn't done, we still have three years of hard grind," he said.