New zoned land tax to be delayed for at least two years, says Paschal Donohoe

Budget 2022: Help-to-buy scheme extended and ‘record €6bn’ allocated to Housing

The new zoned land tax, designed to encourage the construction of housing, will not be introduced for at least two years, according to Minister for Finance Paschal Donohoe.

The tax, which will replace the existing vacant site levy, will target any unused land zoned and serviced for housing, regardless of its size. The current levy, which came into force in 2018, only impacts the owners of sites bigger than 0.05 of a hectare. The majority of the site must be “vacant or idle” for more than 12 months, be zoned for residential or regeneration purposes, and be in an area in need of housing.

The new tax will be based on the market value of the land and the rate will be set at 3 per cent, the same starting point for the vacant site levy when it was first introduced.

However, in his Budget 2020 speech Mr Donohoe said there will be a minimum two-year lead-in time before the tax is applied.


Incentivise development

“An appropriate lead-in time for the general application of the zoned land tax will be required following its introduction in the Finance Bill 2021. I am proposing a two-year lead-in time for land zoned before January 2022 and a three-year lead-in time for land zoned after January 2022. This will also give scope to review the workings of the tax, to listen to stakeholders and ensure it is both effective and equitable,” he said.

Mr Donohoe said the scrapping of a minimum size exclusion would incentivise the development of small sites in town centres.

Minister for Housing Darragh O’Brien said the vacant site levy “had not worked”. The collection rate had been “really poor” with “demands sent out in the order of €11 million and just €21,000 in collected in 2020”. While the levy was collected by local authorities the new tax would be collected by the Revenue Commissioners.

While there was a the lead in time for its introduction, the vacant site levy would continue to to be payable in the meantime . Mr O’Brien said he did not envisage those currently paying the levy at 7 per cent would see a reduction to 3 per cent. “This is much more far reaching than the vacant site levy and I see it as an important mechanism to activate land for the use it was intended.”

As announced by Tánaiste Leo Varadkar last month, the help-to-buy scheme which provides tax relief for first-time homeowners, has been extended again to the end of 2022.

Minister for Public Expenditure Michael McGrath said the Department of Housing’s budget would be allocated a “record €6 billion” in exchequer funding, an increase of more than “15.5 per cent on the 2021 allocation and a 48 per cent increase over the last three years”.

A total of €2.5 billion in capital would be made available for housing alone to support 9,000 new-build social homes, while €174 million will be used to support the construction of 4,000 affordable purchase and cost rental homes.

Meanwhile, €50 million has been allocated for the Croí Cónaithe fund to service sites and refurbish properties in towns and villages, and to increase owner-occupier apartment development in city centres.

Mr McGrath said €168 million will be used to deliver an additional 14,000 housing assistance payment tenancies, bringing to 66,000 the total number of tenancies supported.

Olivia Kelly

Olivia Kelly

Olivia Kelly is Dublin Editor of The Irish Times