Land value sharing measure doesn’t go as far as Kenny report recommended

Cantillon: Government should give local authorities more power over development land

A measure, not finalised, would force property owners and developers to pay the State up to half of the increase in the value of land when it is rezoned for housing. Photograph:  Yui Mok/PA

A measure, not finalised, would force property owners and developers to pay the State up to half of the increase in the value of land when it is rezoned for housing. Photograph: Yui Mok/PA

 

The Government’s move to rein in land speculation and land inflation – seen as key drivers of house prices here – via the “land value sharing” component of its new action plan on housing has been roundly welcomed.

The measure, which hasn’t been fully finalised, would force property owners and developers to pay the State up to half of the increase in the value of land when it is rezoned for housing. It aims to reduce property speculation and temper the market, while also providing funds for the State to invest in housing.

It was presented as a throwback to the 1973 Kenny report, which recommended – as TU Dublin lecturer Lorcan Sirr writes in his 2018 book, Housing in Ireland – “a system of active land management linked to measures to capture the land value uplift, or betterment, arising from economic and social development”.

‘Compensation rates’

“The Kenny report argued that the official arbitration system used to determine compensation rates for landowners tends to inflate land prices,” Sirr says. “Thus it argued if the free market system continued to be used to determine land prices for that, the price of building land would continue its upward trajectory,” he adds. Hard to believe this discussion was being had as far back as the 1970s.

However, the chief recommendation of the report was that local authorities be given the power to buy development land, using a compulsory purchase order, at its existing use value plus 25 per cent.

Rights of landowners

As Sirr notes in his book, this was seen as a reasonable compromise between the rights of the community and the rights of landowners.

The Government’s plan is different. It seeks to impose a sort of levy on landowners and developers. However enabling local authorities to buy land at reasonable rates for strategic infrastructure is not the same as limiting land speculation via a super tax. The former provides the State with the agency to actively manage development land, the latter claws back some of the windfall gains being made around land deals.

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