State to take half of increased value of land rezoned for housing

The Government is to compel 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 under radical moves to rein in speculation and cool the market.

The far-reaching measures from Minister for Housing Darragh O’Brien, to be unveiled within weeks, are part of a renewed effort to settle the housing crisis that is the Government’s top priority after the coronavirus pandemic.

The aim is to ensure the State makes a gain from the significant increase in the value of private land that arises from zoning and investment decisions by public authorities. Similar measures were proposed as far back as the early 1970s in the Kenny report, a landmark document on controlling property prices, but were never advanced.

Described as “land value sharing”, the new initiative will be a centrepiece of Mr O’Brien’s delayed housing masterplan, which will be published in late August or early September.

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Surge in prices

The Housing for All policy will aim to boost the supply of new homes as rising demand drives a surge in prices. By ensuring landowners pay a large part of the gain from zoning or public investment, the Minister aims to reset the most basic terms of the property market after decades of dysfunction.

“It is a transformative move,” said a senior Government source. “It means that private benefit will be shared with the State to pay for public goods such as infrastructure and social and affordable housing.”

This will curb constitutional property rights, an area that has perplexed policymakers for many years, but officials believe it can survive legal challenge.

“The preliminary legal advice from the Attorney General is that is constitutionally sound once it’s properly devised in underpinning legislation,” the source said.

The move – agreed by Taoiseach Micheál Martin, Tánaiste Leo Varadkar and Green Party leader Eamon Ryan – follows a pledge in the programme for government to “review how community gain can be captured through a review of the development levy process, rezoning systems and planning permission conditions”.

Highly complex

Draft laws, said to be highly complex, will be published in autumn. Government leaders aim to bring them through the Dáil and Seanad by early 2022.

The value uplift on a development site will be tracked from the point at which it was zoned to the point at which planning permission is granted. It will be a condition of planning approval to direct payments toward community gain.

In the short term, the system will cover all new residential zoning or mixed-use zoning that includes residential development. To prevent long-term hoarding of zoned development land, the system will include a “use it or lose it” zoning mechanism.

Developers already make some contributions to local authorities for roads and lighting under a levy system. But Mr O’Brien will argue that there is a solid case for much bigger payments as the increase in land value that arises from zoning is far greater than current levies allow.

Similarly, he will say current rules – known as Part V measures – to set aside a proportion of new developments for social and affordable homes do not go far enough. The new measures will be enforced in addition to Part V obligations.