Ibec questions the legality of Government bill to tax rezoned land

Housing Minister Darragh O'Brien said the legislation had the aim of 'limiting the speculation that affects land prices, and by extension, the cost of housing.' File picture: PA

A Government bill aimed at clamping down on land speculation through a new 30% tax “will discourage farmers from willingly selling land for development” and “increase the cost of new homes”, it has been claimed.

Both the Irish Farmers Association and Ibec’s Property Industry Ireland (PII) have written to the Oireachtas housing committee to express their concerns over the proposed measures, with the former saying it has requested a senior counsel to examine the bill and the latter arguing that there is “serious doubt about the legality” of the legislation.

PII said: “The direct and very substantial impact of the charge on viability will greatly exacerbate the shortfall in delivery of housing units compared with government targets and national need.

“For government to disincentivise new homes would be inconsistent with every other expressed government policy.” The General Scheme of the Land Value Sharing and Urban Development Zones Bill 2022 makes provisions to levy a 30% tax on the difference between the existing use value and the market value on land that has been zoned for housing.

The government said the land value sharing element of the law aims to ensure that when land is zoned for development purposes, the increase in value of that land “is shared with the State in interest of the common good”. It said this will facilitate an increase in the supply of housing by providing funding for local authorities for necessary social and physical infrastructure in these areas. It added that “significant increases in revenue” for local authorities’ housing infrastructure is expected under the bill.

Housing Minister Darragh O’Brien said: “Under this legislation, communities will get a greater benefit from State zoning decisions. Land Value Sharing will also influence land transactions with the aim of limiting the speculation that affects land prices, and by extension, the cost of housing.

“Fifty years ago, the Kenny Report identified this problem and I am pleased to finally introduce a response that will address what has been a perennial challenge in land management in Ireland and will help ensure a greater delivery of housing and related infrastructure into the future.”

However, submissions to the Oireachtas housing committee have claimed the bill will not achieve its aims.

The Irish Farmers Association said the proposals are not proportionate and unfair, with the overall objective said to be “to address the systemic market failure that has led to serious and continuing crisis in the availability and supply of housing within the State”.

“It is difficult to comprehend how the placing of a further tax on land will assist in achieving this objective,” it said.

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“The probability is that the combination of this tax along with CGT and other taxes will discourage farmers in willingly selling land for development as their ability to reinvest in replacement farmland after selling will be severely restricted.”

PII also claimed there would be “market distortions” given the tax would not be imposed on public sector housing developments. It also said the 30% levy would act as a barrier to the regeneration of lands in cities and towns zoned for mixed use purposes.