The Kenny Commission and the housing crisis

 

Sir, – The 1973 Kenny Commission report is often cited as a great missed opportunity that, if implemented, could have averted the housing crisis. This is not the case.

The commission had a narrow focus, primarily “controlling the price of land for housing and other forms of development” and “ensuring that . . . increase in the value of land attributable to the decisions and operations of public authorities . . . shall be secured for the benefit of the community”. In its descriptions of the housing crisis of that time, the content and conclusions of the report are readily recognisable and are largely as pertinent in most instances today as they were 48 years ago.

The commission discussed several proposed actions intended to ensure land would remain affordable for purchase by local authorities, and that the public would receive its due from any private windfalls generated by public works. Some of the proposal were subsequently implemented in various forms.

The imposition of a high “betterment” tax rate on the proceeds of the sale of rezoned land was suggested to recoup money for the public. Such a tax (“windfall” capital gains tax) was implemented at 80 per cent in the Nama Act of 2009 but was abolished in 2015. It was quickly apparent that such high taxes were a significant deterrent to the sale of land and had a negative effect on housing development. Simply put, landowners are generally wealthy people and are quite content to wait, even for generations, until conditions for sale are most favourable.

The imposition of a high stamp duty tax rate (which would be payable by the buyer, rather than the seller) has been determined to have a similarly negative effect on the development process.

The suggestion that developers should contribute to the costs of service provision via a land “betterment” levy was implemented in the form of “development levies” in 2000. These continue to be imposed, although unevenly. They ensure that the costs of public service provision are shared by developers and have to be factored into the amount that a developer can afford to pay for land.

The majority report ultimately recommended a “designated area” scheme, in which property in a legally defined development area could, subject to appropriate new legislation, be acquired by the State for “current use”’ (ie pre-zoning and agricultural) value plus 25 per cent.

It is notable, however, that the “minority report” disagreed strongly with the majority in a number of areas.

While the majority noted that the rate of conversion of acquired land to housing by local authorities was much slower than in the private sector, it expressed confidence that local authorities could “rise to the challenge”. The minority refuted this, arguing that local authorities were failing to deliver and that encouraging the private sector to develop housing would prove a more rapid and less costly route.

While the majority felt that the State could safely limit the price of compulsorily purchased land without offending the Constitution, the minority believed that any attempt to legislate a cap on the value of the land at rates below market value would be quickly overturned.

The minority report also opined that the main reason for the high price of development land was not speculation, but rather the failure of the State to expand utility services, primarily mains water and sewerage, much beyond the established confines of large cities and towns. Expanding very gradually in small increments means that only land immediately adjacent to city limits is ever open to development, ensuring permanent short supply and high prices. It argued that if the State were to invest more aggressively in expansion of services more deeply into undeveloped areas, that much more land would be unlocked for development, leading to greater supply, a significant fall in land prices and an ultimate saving for the state.

This is something that could be considered now. The creation of Irish Water has instituted a centralised system of water management for the first time and provides a vehicle for State investment and expansion of the whole network in all areas, at a time when international borrowing rates are close to zero.

The commission did not consider the suggestion, made in recent times by commentators such as David McWilliams, to impose a tax on underdeveloped land without planning permission, and that is something that could also be considered now. Issues to be resolved would presumably include the very tricky task of finalising a legal definition of “underused” land that was fair (possibly excluding institutional and amenity land, such as that held by religious orders, golf clubs, etc, or large gardens attached to residential properties) and that wily owners could not find a way around (such as by using a vacant lot as a car park or storage yard), and to make allowances for owners who had been refused or were attempting to secure planning permission for new developments.

It seems a new commission might be needed for an old crisis. – Yours, etc,

JOHN THOMPSON,

Phibsboro,

Dublin 7.