Land Value Sharing Bill could exacerbate housing shortage

Property advisor, Savills Ireland has warned that this change will affect supply in the short to medium term, at a time when Ireland is in the midst of a significant housing supply shortage.

In the Bills (LVS and Urban Development Zones Bill 2022), published last Friday the 14^th April, the Government has changed its approach to include a 30pc charge to existing zoned land, as well as newly zoned land.

This means that developers and owners of existing zoned land now need to retrospectively factor in a potential 30pc charge on a significant portion on the value of their land, resulting in higher development costs, which will either make construction unviable, or increase the price of housing – the opposite of what the Government wants to achieve.

John Swarbrigg, Director, Development Land at Savills Ireland commented:

“With viability challenges already prevalent due to construction cost inflation and the higher cost of development finance, this proposal, if it proceeds as drafted, is likely to have a negative impact on supply. There was already uncertainty in the market with the introduction of various new measures by the Government such as the Residential Zoned Land Tax and new proposals on residential density guidelines.

The retrospective element of the Bill – to include existing zoned land – is a major change to what was published in 2021. This is particularly concerning and will likely impact confidence in the market particularly the much-needed international capital required to ensure the Government meets it’s housing targets.

We recognise the need for a fair and equitable land value sharing tax which would capture a percentage of actual financial gain, but this Bill appears to cause more problems than it solves. We urge the Irish Government to reconsider the proposed legislation and work collaboratively with stakeholders in the property development sector to create a more streamlined and efficient policy framework. This should be done with a focus on providing stability and certainty to promote the construction and delivery of new homes, which is vital for addressing the current housing shortage.”