The housing crisis and vacanct land
By Kieran Rose
THERE has been a lot of discussion in the media about the need to increase housing supply – and the supply of office space, with concerns expressed about rapidly rising rents and negative impacts on our international competitiveness.
One of the key delivery agents is a properly functioning, competitive and fair development land market, and concerns have been expressed that we do not have such a market.
In a recent report, Housing Supply and Land: Driving Public Action for the Common Good, the National Economic and Social Council (NESC) made an interesting and powerful statement:
Well before the crisis and current logjam, Ireland’s system of land allocation and housing supply was dysfunctional. Ownership of large amounts of building land in some areas was very concentrated, and these landowners cooperated rather than competed, contributing to poor land market performance.
NESC concluded by saying that public action is needed to reduce the price of land for development.
This is a bracing analysis and recommendation from NESC, one of the key bodies advising the Government and chaired by Martin Fraser, Secretary General to the Government.
Supply The NESC analysis is shared by some private sector developers.
According to a report in the Sunday Business Post last July, one proposal to boost the supply of student accommodation is to introduce a zero VAT rate for the construction of student accommodation.
However, Matthew McAdden of the student accommodation investors Ziggurat, suggested such a move could push up land prices.
He said that tax breaks are not the solution, and what was really needed was an increase the supply of land to the market.
As regards Dublin, the strange thing is that there are significant amounts of vacant land in the inner city that have remained vacant and undeveloped despite fifteen years of economic boom and tax incentives.
A Dublin City Council audit puts this at 60 hectares. Many of our towns and cities have similar problems with vacant sites.
As a planner with a particular interest in the inner city, I was fascinated by this paradox and thought that a levy on vacant land might be the way forward.
As he was about to be elected Lord Mayor of Dublin in 2013 I suggested this to Oisín Quinn.
He agreed and set up a vacant land taskforce. The taskforce made a detailed submission to Government calling for a vacant land levy.
The submission noted that vacant sites damage the economic potential and general attractiveness of an area for residents, workers, businesses, investors, and tourists.
Vacant sites are magnets for anti-social behaviour, vandalism, and illegal dumping, all of which place costs on the local authority and community.
The submission also highlighted that vacant development land is the only property category that is not subject to rates or levies of any kind.
Because there is no disincentive to a landowner for leaving a site vacant for many years, the taskforce recommended a levy that would incentivise and accelerate its development.
Alternatively, the levy would foster the sale of a vacant site to those who have the interest, and access to resources, to develop it.
The levy would therefore increase the supply of development land on to the market and help to moderate price increases in development land and prices to end users.
It is most welcome that the Government has included a vacant land levy in the Urban Regeneration and Housing Act 2015.
The commencement order was signed quickly by Minister Alan Kelly bringing the Act into force on September 1.
The levy was strongly resisted by powerful vested interests so it has achieved remarkably rapid progress from policy proposal in 2013 to enactment in 2015.
Now every planning authority must, beginning on January 1, 2017, establish and maintain a vacant sites register and make it publicly available, and establish the market value of the land.
Provision is made for appeals by the landowner. The levy is set at 3% of the market value, with the levy payable from January 2019.
One very innovative feature of the Act is that any money received by a planning authority arising from the levy must be spent on the provision of housing, or on the development and renewal of regeneration land, in the vicinity of the site.
I understand that the Department of Environment, Community and Local Government is preparing guidelines on how local authorities should implement the levy, including in relation to its own land.
The Bill initially excluded vacant land owned by housing authorities.
However, the minister introduced an amendment to omit this exemption and said this would ensure that all owners of vacant sites will be treated equally.
This means that local authorities will have the same responsibilities under this legislation as private land owners.
The Act also amends the Planning and Development Act in relation to objectives that a Development Plan must include.
There are a range of other ways to make the development land market more efficient, such as increasing the availability of public information on the ownership and location of vacant sites, providing data on market valuations and making all this information available on-line.
In its recent report, NESC referred to the 1973 Kenny Report on the price of building land which advocated measures to capture the land value uplift, or betterment, arising from economic and social development.
In one of the great ‘what ifs’ of contemporary Irish history, the Kenny report recommendations were never implemented.
As NESC puts it:
To some degree, we are facing the same issues and challenges within the housing market over forty years later.
I think the vacant land levy could be a real ‘game changer’ in achieving a cultural or ‘mind-set’ shift that says it is not acceptable for owners to leave their properties vacant and so damaging to the common good.
Good practice and corporate governance will mean that private and public organisations will have to justify why they are paying the levy and placing a cost on the organisation, what practical proposals they have for developing the site/s, and if there are none, why the site/s are not being disposed of.
One can imagine, for example, audit committees asking searching questions.
The vacant land levy has huge potential to significantly improve our towns and cities and, as such, this Act is one of the most powerful pieces of planning and development legislation introduced in recent years.
The vacant land taskforce submission is available at: dublincity.ie/sites/default/files/content/Planning/ Documents/Vacant%20Land%20Memorandum.pdf
This article originally appeared in Work & Life, the magazine for Impact trade union members.