Noonan says developers building houses have ‘nothing to fear’

Minister confirms target of vacant sites levy will be landowners sitting on sites in expectaiton of higher prices

Cork developer Michael O’Flynn told Newstalk on Friday that Nama was using Michael Noonan to deflect from the housing crisis. Photograph: Brenda Fitzsimons

Cork developer Michael O’Flynn told Newstalk on Friday that Nama was using Michael Noonan to deflect from the housing crisis. Photograph: Brenda Fitzsimons

 

Developers who are genuinely trying to build houses have “nothing to fear” from a Government policy to penalise landowners who hoard vacant sites, Minister for Finance Michael Noonan has said.

Mr Noonan confirmed on Thursday that the Government will levy speculators sitting on empty development sites to boost their profits as property prices rise.

“People who are sitting on land as an asset will find themselves sitting on a tax liability,” he said at the launch of annual report of State assets agency Nama.

The levy proposal has been criticised by developer Michael O’Flynn, while the Construction Industry Federation said safeguards were needed.

Speaking on the fringes of an event organised by the European Commission and the Institute of International and European Affairs on Friday, Mr Noonan confirmed legislation for a 3 per cent vacant sites levy would come into effect from January 1st, 2019.

“Michael O’Flynn has nothing to fear if he’s using the land for building purposes,” he said. “It’s only people that are sitting on it and allowing the land to go up in value on the back of rising house prices when there’s a housing supply crisis.”

Mr Noonan said there would be “exceptions to protect genuine developers and builders who are phasing in the land for investment purposes”.

“I would expect my successor or the new minister for the environment to say something more about it this autumn, and to confirm that the date of implementation is January 1st, 2019,” he said. “If people want to get into the market before that and sell property, that might be the appropriate thing to do.”

Michael Stanley, the chief executive of listed property developer Cairn Homes, said the introduction of a land hoarding levy was a positive move but it needed to be targeted at people who are actually hoarding sites “and I don’t think you’ll find many of those around, certainly not among housebuilders”.

“Housebuilders can only make money by building on their sites and not by hoarding land. The Government needs to look at measures to further support housebuilding so that our industry can respond to the housing crisis by increasing supply.”

Earlier, Mr O’Flynn said Mr Noonan had been “used by Nama to deflect from the crisis we have in the housing industry”.

In an interview on Newstalk Breakfast, he said that “it suits Nama to get a headline”, and that the organisation was using Mr Noonan.

Mr O’Flynn said he was not defending anyone who is sitting on land for speculation purposes, but that it was “a bit unfair to castigate developers and investors”.

The crux of his argument was that implementation of the tax would impact on the viability of developing sites.

He said the vacant land was nowhere near sufficient to address the housing crisis and pointed out that some land isn’t capable of development until local authorities put proper infrastructure in place.

“Unfortunately, some funds have paid too much for land, so it wouldn’t be viable to develop those sites,” he added.

Cairn’s Mr Stanley said only a small number of housebuilders were building at any scale presently.

“Many are now building smaller developments so that they can build up equity to fund larger developments as they grow their businesses,” he said. “The problem with our industry is that there was little or no real equity put into developments before the crash.

“Banks are now quite rightly demanding that larger amounts of upfront equity be put into developments. Housebuilders who have to turn to private equity to plug the gap are being charged 10-12 per cent. Commercial banks are only funding projects that are ready to go with full planning permission and even at that, they are only willing to lend up to around 65 per cent of the development cost.”