Subscriber Only

Government’s radical land sale plans potentially contentious

Constitutionality likely to be tested given potentially large sums at stake for landowners

To borrow from the late Seamus Mallon, Government plans to compel landowners to pay up to half the value of rezoned land to the State look rather like the Kenny report for slow learners.

Mr Justice John Kenny’s report on the price of building land, published in 1973, contained measures to secure community benefit from the uplift in development land value, including giving local authorities the right to acquire undeveloped lands at “existing use value” plus 25 per cent. But the report went nowhere, overtaken by events and hindered by anxiety that the intrusion on constitutional property rights would not pass legal muster.

Now, almost half a century later, Minister for Housing Darragh O’Brien plans something similar in the form of land-value sharing. The State would receive up to 50 per cent of the value uplift on a site when it is zoned for new homes, the increase being tracked from the point at which the property was zoned to the point at which planning permission was granted. Planning approval would be conditional on direct payments to the State. Contrary to any legal naysayers, the Attorney General’s view is that it is constitutionally sound.

This is a radical and potentially contentious departure, all the more so given the entrenched reluctance over decades to adopt Kenny’s proposals to temper dysfunctional property markets. There have always been winners and losers through cycles of boom and bust on the housing rollercoaster. But no government ever really challenged the right of the private property owners to take virtually all of the gain from zoning and investment decisions by the public authorities.

Still, it was taxpayers who were saddled with huge costs from the misadventures of professional landowners and their credulous banks when the edifice collapsed in the 2008 crash.

That O’Brien is now about to open this door is a measure of the titanic housing challenge faced by the Fianna Fáil-Fine Gael-Green coalition. The task has been made more difficult still by the pandemic, which shut down construction and curtailed the supply of new homes amid surging demand.

For the moment at least, the gravest threats from Covid-19 appear to be receding as the vaccination programme reaches its final stages. But that only adds to the urgency of making serious inroads on housing.

Crucial as that is for all Government parties, it is something close to existential for Fianna Fáil and Taoiseach Micheál Martin as they languish in the polls.

Housing for All plan

The land-value sharing proposal is but one part of O’Brien’s delayed Housing for All master plan, which will be cast as an all-encompassing effort settle the short-term crunch while overhauling the system for the long term.

At root, the aim is to rein in land speculation and hoarding. But the need to make more funds available for the State to boost building is also critical, given the public finances are in tatters after huge pandemic spending.

Will it work? The National Social and Economic Council, which advises the Taoiseach and Government on policy issues, examined “land-value capture” in a report last November, saying the notion was premised on the view that the public should share in the rise in the value of land driven by public investments and/or policy decisions.

The core principle of the Kenny report regarding the capture of the “betterment” in a development site’s value “remains as relevant today as it was 50 years ago”, the council said. “Locational value-capture mechanisms, when combined with a range of supportive policies, including land-use policies, have the potential not only to pay for some or all of the costs of servicing land and infrastructure for housing but also, importantly, can drive the supply of more affordable housing and a more sustainable model of urban development.”

Given the potentially large sums of money at stake for landowners, some form of legal challenge appears inevitable.

Yet that too is a question which has been examined in detail repeatedly, both in the Kenny report itself and, in 2004, by the Oireachtas committee on the Constitution. While the committee said it was impossible to be definitive, it found that major elements of the Kenny recommendations “would not be found unconstitutional” and said the report may indeed have been too conservative.

“Judged by contemporary case-law, it is . . . very difficult to see why the recommendations contained in the Kenny report would not survive constitutional scrutiny,” it said.

That assertion may soon be put to the test.