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



## Brendan Burgess (2 Aug 2021)

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

Move is part of far-reaching measures to rein in speculation and cool property market




					www.irishtimes.com
				





_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._

Very interesting proposal, but will it work? 

If I had land, I would probably seek zoning for uses other than housing. 

Or just sit on the land rather than apply to have it rezoned. 

I think it will need to be accompanied by some form of Compulsory Purchase of land suitable for housing to make sure that the supply of land continues. 

Brendan


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## Brendan Burgess (2 Aug 2021)

What happens at the moment?

If I have a farm worth €500k as a farm and I get it rezoned for housing and sell it for €5.5m, how is the €5m capital gain taxed? 

Is it the normal 33%  or is there some other tax on development profits? 

Under the new scheme, will I pay €2.5m to the government and then pay CGT on the €2.5m net gain? 

Brendan


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## noproblem (2 Aug 2021)

Up to now what was the situation when a person sold (let's say) 10 acres for €5million,  a neighbour just a few hundred yards away has the same acerage, but it's not inside the zone and only worth agricultural value. What tax would the lucky farmer have had to pay on the sale for €5mill?


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## Mocame (2 Aug 2021)

Brendan you are assuming that a landowner applies to have land rezoned. In reality this is a local authority decision - although obviously land owners lobby they have no power over rezoning decisions.

In answer to your question about what tax land owners currently pay, they currently pay capital gains tax.


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## MugsGame (2 Aug 2021)

Surely this will both reduce supply and raise costs. A bizarre move driven by ideology and populism.


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## Brendan Burgess (2 Aug 2021)

Mocame said:


> Brendan you are assuming that a landowner applies to have land rezoned.


A very good point.

So if I am a happy organic farmer with a farm worth €500k and I want to continue my lifestyle, but suddenly the Local Authority rezones it, what happens? 

I presume that the "levy" will be paid only if I sell it. 

Brendan


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## Brendan Burgess (2 Aug 2021)

MugsGame said:


> Surely this will both reduce supply and raise costs.



I presume that the plan would be that the funds raised would be used to bring down the price of housing in some way. 

But such interventions do tend to have unintended consequences.


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## Brendan Burgess (2 Aug 2021)

Mocame said:


> In answer to your question about what tax land owners currently pay, they currently pay capital gains tax.



I had some idea that there was an additional charge for development land?   Maybe I am mixing it up with something else. 

Brendan


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## MugsGame (3 Aug 2021)

It seems we've tried this before.


> The National Asset Management Agency Act introduced a “windfall gains tax” on certain Capital Gains. This tax is charged at a rate of 80% in respect of a disposal of development land where both a rezoning and a disposal took place in the period beginning on 30 October 2009 and ending 31 December 2014.



I'm currently renting and in the market to buy a home. I don't welcome these sorts of pricing interventions.


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## NoRegretsCoyote (3 Aug 2021)

It's an odd policy choice to be taxing something you want to see more of.


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## SPC100 (3 Aug 2021)

Trying to construct a supply increasing argument: Does land banking decrease supply? this tax would make land banking less interesting; Hence newly zoned land might be more likely to be developed rather than banked?


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## SPC100 (3 Aug 2021)

To increase supply It would need to be accompanied with something to encourage/force folks to sell.

E g.
-high annual wealth or idle tax on zoned land
-zone land for 3 years only (so your opportunity for windfall is time limited)
-zone land and and cpo.


Edit: it seems the plan is to have some use it or lose it clauses


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## SPC100 (3 Aug 2021)

"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."

Ok, I found a hypothesis on how this can have decent short term impact.

Imagine you owned zoned land, you now have a stong incentive to get planning quickly before this legislation is passed.


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## Brendan Burgess (3 Aug 2021)

Please read the thread title before replying. 

No need for another general discussion of housing. 

Off topic posts have been removed. 

Brendan


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## MugsGame (3 Aug 2021)

SPC100 said:


> Imagine you owned zoned land, you now have a stong incentive to get planning quickly before this legislation is passed.


Substitute 'rezoning' for 'planning' and you have a point. Except, in theory rezoning is not something you apply for - it's something that's done to your land by strategic planners, unswayed by lobbying.


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## SPC100 (3 Aug 2021)

"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"

My point is that the threat of this tax may immediately increase supply of development land.

If you owned zoned land you now have an immediate reason to act.

From the article quote I assumed planning would be enough to avoid these new taxes. (Aside then the govt can 'declare success' with all these new planning applications)

Although maybe if you owned the land you would need to sell it to fully avoid the taxes.


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## SPC100 (3 Aug 2021)

I guess you are implying it will only apply to newly zoned land. And hence will not influence existing owners of zoned land?


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## SPC100 (3 Aug 2021)

'In the short term, the system will cover all new residential zoning or mixed-use zoning that includes residential development'

Ok so it will only apply to newly zoned in the short term.

Unless they plan a lot of new zoning, I think it would be better to increase the cost/incentives of existing zoned landowners.


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## lff12 (5 Aug 2021)

Mocame said:


> Brendan you are assuming that a landowner applies to have land rezoned. In reality this is a local authority decision - although obviously land owners lobby they have no power over rezoning decisions.
> 
> In answer to your question about what tax land owners currently pay, they currently pay capital gains tax.


But they do. Not just agricultural land but also small parcels of land in urban areas currently derelict or formerly the location of houses or other buildings long since collapsed or otherwise destroyed. Much of these leap in value once rezoned (or PP applied for). I've seen cases locally where a local landowner had very small parcels of land, carved off their own properties, got PP for a decent build, and then sold on. Its a particularly good fundraiser for religious institutions with land to spare.


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## lff12 (5 Aug 2021)

SPC100 said:


> 'In the short term, the system will cover all new residential zoning or mixed-use zoning that includes residential development'
> 
> Ok so it will only apply to newly zoned in the short term.
> 
> Unless they plan a lot of new zoning, I think it would be better to increase the cost/incentives of existing zoned landowners.


The "use it or lose it" stipulation might be more useful, if actually properly enforced. But look around any urban area even in Dublin: the country is littered with invisible dereliction, both land and unused properties.


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## Mocame (5 Aug 2021)

After the property crash the Department of Housing instructed lots of local authorities to de-zone land which had been zoned for housing where the Dept felt that residential zoning was excessive.  The Dept can do this my ministerial order.  In addition since the planning regulator was set up a couple of years ago he has been very energetic in telling local authorities not to engage excess zoning in or to de zone excess zoned land.  The regulator can also instruct them to do this.

Local authorities are currently working on their new development and they were given an extra year to do this because of Covid.  My feeling is that these will include a decent amount of additional zoning to provide for the increase in population since local authorities' development plans were last revised six years ago, which will come under the auspices of this provision. 

In Dublin all of the industrial and commercial land along the Nass Road are due to be rezoned as residential.  If a 50% tax on the value of the uplift on these sites is applied that will generate a nice chunk of money to sort out Dublin's water infrastructure.


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## Brendan Burgess (9 Aug 2021)

A developer's perspective in today's Irish Times 









						Michael O’Flynn: ‘Land value sharing’ proposals will increase house prices
					

Plans yet another example of decision makers just seeking to make headlines




					www.irishtimes.com
				




_Consider for a moment the central thrust of the Government’s argument- in order to make more land available for housing, we are going to disincentivise its sale and in order to make housing more affordable, we are proposing to heavily tax the sale and development of that land necessary to build that housing.

An ugly populism has developed in the national debate on housing, which sees any measure seen to “punish the developer classes” as a good move, even when there is a blindingly obvious case against its implementation. This latest proposal is borne out of an anti-developer bias that is now distorting policy to the detriment of those trying to buy a home for themselves and their families.

If this idea will mean the delivery of more homes, let them spell out the number of new houses that will be built as a result of its implementation and when.

Michael O’ Flynn is a property developer and chairman and chief executive of the O’ Flynn Group_


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## NoRegretsCoyote (9 Aug 2021)

I thought this part was interesting. It's a trope to claim that "the Kenny Report has never been implemented" but he demolishes this:
_
Significant changes have been introduced since Judge Kenny made his recommendations nearly 50 years ago. Firstly, capital gains tax on the sale of land achieved the purpose of the “betterment” tax recommended in the Kenny report – since 2008, the rate of CGT has increased from 20 per cent to 33 per cent.

Secondly, the “right” to planning permission on zoned land and to compensation in lieu have been abolished.

Thirdly, let us not forget that development levies....were recommended by Kenny and have been in place for more than 20 years._


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