Oireachtas Joint and Select Committees
Thursday, 4 May 2023
Joint Oireachtas Committee on Housing, Planning and Local Government
General Scheme of the Land Value Sharing and Urban Development Zones Bill 2022: Discussion
Paul McAuliffe (Dublin North West, Fianna Fail)
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Apologies have been received from Deputies Matthews and Duffy. Today, we will engage in pre-legislative scrutiny of the Land Value Sharing and Urban Development Zones Bill 2022. We are beginning the pre-legislative scrutiny process. From the Department of Housing, Local Government and Heritage, we are joined by Mr. Paul Hogan, acting assistant secretary, planning division, Ms Karen Kenny, senior planning advisor, and Ms Claragh Mulhern, acting principal planning adviser.
Their opening statements have been circulated to members.
Before we begin, I remind members of the constitutional requirement that they must be physically present within the confines of the place where the Parliament has chosen to sit, namely Leinster House, in order to participate in meetings. Those attending in the committee room are protected by absolute privilege in respect of their contributions to today's meeting. This means they have an absolute defence against any defamation action for anything they say at the meeting. Members and witnesses are expected not to abuse the privilege they enjoy. It is my duty as Chair to ensure this privilege is not abused. Therefore, if witnesses' statements are potentially defamatory in respect of an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that witnesses comply with any such direction. Members and witnesses are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.
I now invite Mr. Hogan to make his opening statement.
Mr. Paul Hogan:
Good afternoon. I will not repeat who we are as the Chair has already introduced us. I thank the joint committee for its engagement with the Department on the development of proposals to bring about significant planning reform.
Since the Kenny report of 1973 on the price of building land, and for some time before that, the relationship between the decisions made by the State to confer development potential on land and the value of that land has been central to the public discourse around the housing market and the planning system. Our planning system permits the State to identify suitable land for development, including housing, thereby allowing for the plan-led delivery of the necessary supporting infrastructure. By zoning land in this manner, local authorities are acting in the common good to meet the needs of the population, including meeting housing targets. This approach also provides reasonable clarity for stakeholders as to what forms of development are likely to take place in any given location over a specified period of time. The decision to zone land for development also confers a benefit on relevant landowners and it is clear that this decision results in an increase in the value of the land in question. Evidence gathered during the course of our work has demonstrated that the initial zoning decision can result in land value multiplying significantly, with further uplift in value accruing when permission is granted for specific development on the land. While landowners may be facilitated to develop their land for a particular purpose, such development is generally dependent on the provision of the necessary supporting infrastructure, including facilities and services, to make the development realisable and sustainable.
Under current legislative arrangements, the principal mechanisms to secure a proportion of the benefit attributable to the decision to zone and permit development on land are via Part V social and affordable housing obligations and through section 48 and 49 development contributions. Development contributions made to the local authority are, however, not sufficient to deliver all of the essential infrastructure, including transport and community facilities, that are necessary to enable housing development and build sustainable communities. Furthermore, these measures apply at the point of grant of planning permission and therefore materialise and become a cost only for the person who intends to develop the land. In contrast, the majority, if not all, of the zoning benefit generally accrues to the original landowner who owned the land at the point of zoning or in some cases subsequent landowners who purchase the land and seek to maximise the return on their investment through the planning process and-or resale. All this leads to competition for land and speculation in the market, which fuels land price inflation and can result in higher costs for purchasers.
There is scope to improve how the planning system can facilitate more active land management in areas which are in need of development or regeneration. Currently, public authorities are reliant on landowners to bring forward land for development. This can result in piecemeal patterns of activity and hampers the effective planning and delivery of infrastructure by public authorities. The current strategic development zone, SDZ, provisions have had mixed results. It is of note that some of the SDZs that have been designated for ten years or more remain unrealised. It is also evident that the SDZ process has not in every case facilitated the effective calculation of the costs and means of delivery of infrastructure required to support the development at the outset. Delivery and implementation challenges are now greater than ever, given the focus on the development of brownfield land in urban areas in order to achieve sustainable compact growth. These areas are often in fragmented ownership and will not generally achieve the same level of consensus from landowners as greenfield sites, given the lack of incentive to relocate or abandon existing viable uses.
Taking into account the Kenny report and more recent publications by the National Economic and Social Council, NESC, and others, it has long been apparent that the State needs an implementation mechanism that can be applied in a fair, equitable and proportionate manner to achieve national housing and urban development objectives. The proposals set out in the general scheme published on 14 April 2023 are the result of significant analysis and engagement undertaken since the publication of an initial general scheme in December 2021.
In particular, the land value sharing, LVS, elements of the proposals have been subject of an economic appraisal and detailed discussion with the Office of the Attorney General and valuation experts and engagement with key stakeholders in order to provide a robust basis for the draft legislation. The aim of the proposal is to introduce a mechanism to ensure that a proportion of the value uplift associated with the decision to zone land for development purposes is shared with the State in the interest of the common good. The legislation provides for a new LVS charge of 30% on the difference between existing-use value and the market value on land that has been zoned for development, including housing. This is intended to be in addition to current Part V and section 48 obligations.
The general scheme sets out in detail the scope of application for LVS; the procedures to establish baseline existing-use and market valuations; details of the rate of LVS; and the means of securing the obligation, with clarity on how the obligation may be spent by the local authority. Exemptions are also provided for in order to ensure that the measure is fair, reasonable and proportionate and that the importance of delivering social and affordable housing is recognised. The measure will also bring greater clarity on land values from the outset of the development process, with publication of a register of valuations by the local authority, subject to necessary compliance with general data protection regulation, GDPR, provisions.
A key challenge in implementing LVS will be in ensuring that the mechanism captures fair value for the State but avoids disincentivising housing supply. The design and timing of transitional arrangements are therefore important to ensure there is a reasonable and proportionate impact on the market and to incentivise a reduction in land prices to account for the obligation arising. The measure has been designed to ensure that, insofar as possible, the valuation process is streamlined, it does not place an undue administrative burden on local authorities and it does not impact on decision-making timelines in the planning process which would otherwise prevent the approval and commencement of development. Overall, notwithstanding the significance of the impacts, we believe the objectives of the measure are clearly in the interest of the common good, the measure is necessary, proportionate, consistent and fair and it will operate with transparency and accountability.
The concept of urban development zones, UDZs, has been developed in conjunction with the LVS proposals, recognising the need to facilitate the more active plan-led management of land for development and regeneration at scale in appropriate locations aligned with compact growth objectives set out in the national planning framework, NPF. It is intended that the UDZ designation will be applicable to large-scale areas in single or multiple land ownership that could include public and-or private lands and transport-led development areas. The concept of UDZs is based on the existing SDZ provisions. However, the need to learn from the practical challenges in delivering on the plan-led approach through those mechanisms has been recognised. Given the need to prioritise the planning and delivery of development in these key areas, the general scheme permits the early identification of potentially suitable sites, followed by the plan-led designation of candidate UDZ sites in the local authority development plan. This affords a key role for elected members and other stakeholders and facilitates early delivery of development once the planning framework for the area is incorporated into the development plan.
Where it is deemed appropriate by the planning authority, a detailed delivery scheme or master plan, including block plans and building height requirements, may also be prepared and adopted for all or part of the area, forming the basis for fast-track consent to be given for compliant development thereafter, subject to formal UDZ designation by the Government. This flexible approach takes into account the experience of SDZs as regards the timescales involved in preparation of the scheme and the lack of flexibility thereafter. Having particular regard to the potential additional challenges for UDZs located in brownfield areas where there may be a multiplicity of landowners and competing interests with development likely to come forward over a longer period than for greenfield sites, the current approach will facilitate development to take place while work is being progressed in parallel by the planning authority.
The safeguarding of critical land required to provide the necessary communal infrastructure to support the development is a key priority and it is recognised that compulsory purchase of land may be required where land is not sold voluntarily by landowners for this purpose. The UDZ designation by Government clarifies the strategic importance of these locations and brings with it a commitment to upfront public investment in the key enabling infrastructure necessary to ensure that development in these important locations can be prioritised for delivery in a timely manner.
In conclusion, as NESC identified in its 2020 report on housing policy actions to deliver change, Ireland must bring about a fundamental change in its system of urban development, land management and housing provision. The LVS proposals have been developed with regard to the need to secure a portion of the uplift in land value arising from zoning as revenue for local authorities to facilitate the provision of key infrastructure, facilities and land to support and enable housing development, while ensuring that the proposed measures do not disproportionately affect a landowner’s constitutional rights. UDZs will play an important role in bringing about the transformational change required to accommodate the needs of our growing population, with the creation of high-quality places and sustainable neighbourhoods for communities. We are confident that the proposals set out in the general scheme go a significant way to responding to the recommendations included within the NESC report and we welcome the opportunity to discuss these important measures with the committee.
Richard O'Donoghue (Limerick County, Independent)
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I thank the committee for allowing me to come in now as I have another engagement to attend. Regarding local authorities with zoned lands, infrastructure for them is non-existent in County Limerick. The lands are zoned under local area plans and the residential zoned land tax is coming in, yet in some cases there is no infrastructure in those towns or villages where the zoned land is located. I had an update from Uisce Éireann on upgrading infrastructure in certain towns and villages around County Limerick. Some of the work is going out to 2030 and it will only investigate, not upgrade any of the infrastructure. That means the zoned lands I am talking about in County Limerick cannot be built on because of infrastructure. There is no forward plan for infrastructure there. It seems those lands will come under the residential zone tax. On planning and zones, will lands zoned without adequate infrastructure or a plan for investment in infrastructure be excluded from land zone taxes? The Land Development Agency, LDA, has issued projections for Limerick. It is examining projects within a 15-minute radius of Limerick city, which excludes two thirds of Limerick county. Outside of that 15-minute radius, there are probably only two towns in County Limerick with room for expansion from a housing perspective, which takes out more than half of County Limerick because of the lack of investment in infrastructure. In respect of the formation of residential zoned lands, has the Department developed a basis as to how much of that land can be developed under local area plans in the first place, either for County Limerick or nationally?
Mr. Paul Hogan:
I will start and perhaps Ms Mulhern may come in on some of the detail, in particular with regard to the residential zoned land tax, RZLT. This is separate from the residential zoned land tax, which is being rolled out at the moment. The residential zoned land tax does not apply to land that is not serviced. If there are no services to your land, you do not pay. You are not in scope and are not eligible, so it does not affect you. It is only if you have a development that is serviced, which the State or whoever has put effort into servicing, that you are liable, because it is zoned, serviced and part of a plan that identifies it as contributing to satisfying housing need in that area. That is why it would come into the scope for the RZLT in the first place.
This is a separate thing that only applies from a future date when you go to develop land. It will only kick in at the earliest, as proposed at present, from 2024. Timelines, which we may discuss later, are subject to further consideration. This was framed last autumn and timing has moved on. The reality is that if you have serviced land which is zoned and you move to develop, these will apply.
Richard O'Donoghue (Limerick County, Independent)
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I thank Mr. Hogan for his answer. There are lands in different areas of County Limerick, for example, in Croom. At the moment, there is serviced land in Croom but the infrastructure's sewerage capacity only allows for 300 more units but the land zoned for development is for up to 1,000 units. There is serviced land, which has been taken over, but there is also a problem with capacity on an existing serviced land system, which goes back to my question. There are lands which are serviced but capacity in the current systems will not allow for development. Will they also fall under the residential zoned land tax if the services and infrastructure are not there to facilitate the development? Regarding zoning and an urban to rural perspective, I presume most of the urban areas can develop, whereas rural areas cannot because of the infrastructure on zoned land projects. I wish to close the divide, because there is development land but no infrastructure. We are on the back foot when we want to develop and get people into the areas for transport etc. Will the witnesses comment on that?
Ms Claragh Mulhern:
The residential zoned land tax, as Mr. Hogan mentioned, is separate from this but they are intended to work in tandem and be complementary. To take a step back for a moment, in terms of zoning and the approach to zoning, the idea of zoning is, in a plan-led fashion, to identify land suitable for particular types of use. The key focus at the moment is on housing but this measure will apply more broadly to development land. The key to all of that is identifying where the suitable land is and making sure it can be serviced and provide the infrastructure needed to activate it. We are trying to get to a situation in which we can target infrastructure provision in the right locations in order that those lands can be brought forward for development. The RZLT, as Mr. Hogan mentioned, is intended to prompt the activation of land that has already had the benefit of investment and infrastructure, whereas this measure will have a broader scope. It will apply to all zoned development land.
Richard O'Donoghue (Limerick County, Independent)
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That excludes two thirds of County Limerick because of our infrastructure problem. We have development land. Areas have already been targeted that have infrastructure and can be opened up for infrastructure but it wipes out two thirds of County Limerick, which people want to have developed but cannot.
Ms Claragh Mulhern:
An overriding feature of this measure and the intention of it is to allow local authorities to provide more infrastructure to bring those lands on stream for development. As Uisce Éireann obviously is separate from the local authorities now, it is a slightly separate issue. This is aimed to allow local authorities to more effectively deliver key services, infrastructure and community facilities they must provide for existing, established communities in order that zoned lands can be brought forward for development.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I am very interested in both of these propositions. All of my questions are aimed at getting as much clarity as possible in terms of the general scheme.
It would be really helpful to the committee if, in a simplified way, Mr. Hogan talked us through what would happen if the general scheme as outlined were enacted and somebody secured zoning for a residential development on a newly purchased site. I presume only newly purchased or newly zoned sites will apply. How will the process work?
The other tax is obviously a land activation measure. From everything I have heard so far, it is really about raising revenue for investment in infrastructure on the land. Could Mr. Hogan speak to that also as we proceed?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I apologise for interrupting but I wish to restate my question for the sake of clarity. Will the legislation apply only to land zoned after its enactment, be it in a day or year, or will there be a retrospective element?
Ms Claragh Mulhern:
The transition arrangements are staggered. The way the legislation is set out at present is that if you lodge a planning application after 1 December 2024 and your land was subject to a transaction since 2021, you are in scope. However, if your land was subject to a transaction before December 2021, you have an extra year before the measure kicks in. Therefore, it will be the end of 2025 before the scheme applies to a planning application lodged at that point. It will apply to commercial land a year later than that.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Could that be clarified? Notwithstanding the transitional mechanisms, will the process under the scheme be at the point of application for planning rather than at the point of zoning?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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And any land zoned in the future?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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However, the process kicks in at the point of the planning application.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Absolutely.
Mr. Paul Hogan:
It is kind of a measure to counteract speculation in that it is intended that it will have a downward impact on land values in transactions. It would have to be factored into what someone will have to pay for land. Considering that the measure will entail a charge on the land no matter what, it is intended to influence behaviour, especially if the land value information can be made available.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Let us talk through an example. If I purchased land after 2021 and made a planning application after December 2024, what would the process be?
Ms Claragh Mulhern:
What is essential is the provision of clarity on the value of the land in the first instance. One has to work backwards in time to establish what the valuations are. The intention is that next year, based on the dates set out in the general scheme, all planning authorities will be required to publish a map showing the land in scope. The scope is broader than that related to the residential zoned land tax; in the first instance, it is a matter of all land zoned for residential purposes. The authorities will also publish a subset map to target specific landholdings whose owners will be required to submit their self-assessed valuations up front. The reason is that it would be a significant burden for the local authority to do all the valuations at the same time up front. The way it is working is that the landowners will themselves submit self-assessed valuations to the planning authority, and the planning authority will be able to audit those at any time thereafter. The idea is that the planning authority will set up a register. The valuations received from the landowners will sit on the register, unless the planning authority wants to audit them. If there is a disagreement between the two parties on the figure, the matter will go to the Valuation Tribunal, whose outcome will be binding. We hope that as much information as can be published on the valuations will be published and made available, subject to GDPR considerations. That will be very important for transparency around what the obligation will be. That should influence transactions thereafter.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Is there a mechanism under the scheme to update the register in light of the transactions thereafter and the new land values?
Ms Claragh Mulhern:
Not on the basis of transactions. We considered various options and designs for the measure over the course of the past year and concluded the problem with relying on transactions is that they happen outside the local government system. We were also concerned about the potential for loopholes or avoidance. The scheme is based on the valuation of the land with the benefit of zoning. Since it relates to a zoning uplift, it is about ascertaining the difference between the existing-use value of the land – it could be land used for agricultural purposes – and the market value of the land with the benefit of zoning for residential development. It is the difference between those two values that gives the baseline for the obligation.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I absolutely accept what Ms Mulhern is saying about the difference between the market value and the transaction price but she should consider an example from Dublin 8 that involved residentially zoned land with planning permission for 35 residential units, with retail and a restaurant downstairs and owned by a mainstream developer. Another developer, The Collective, came in and paid twice the market value for the land, which had been purchased only recently by the previous owner. It was originally purchased for about €4 million and The Collective bought it for a much higher price. A figure of about €10 million was reported. The decision by The Collective to buy the land had a potential impact on the market value of the land immediately surrounding it because, all of a sudden, it changed the market value and, therefore, the land valuation. How does the register, as described by Ms Mulhern, capture that? The market value is what people are willing to pay on the market, and certain transactions can have a distorting impact on the market.
Ms Claragh Mulhern:
The market value is as the Deputy described it, but we are trying to instil a sense of consistency and balance across the system. As part of this, the valuation experts – we will be providing guidance and are working very closely with the Valuation Office on that – are providing very useful input into how as much consistency as possible can be introduced across the board. We cannot prevent people from paying a certain price for land, but what we can do through the system is introduce a consistent approach to valuations under the measure. Ideally, the information will be published, subject to GDPR, and that will set a baseline. The planning authority can examine the valuations submitted by the landowners and take a view as to whether there is a distortion. It is a matter of a consistent approach. What is important is the provision of clarity on what the quantum of the obligation will be. It is very important that this be done up front and tied to the zoning decision.
Section 48 and section 49 contributions will continue to apply at the point of planning permission, as they do currently. Ultimately, the combination of the two is the uplift in value that results from the initial zoning decision through to the granting of planning permission. We have separated the two of them out.
John Cummins (Fine Gael)
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I will continue on the same subject. The representatives should excuse the simplicity of my questions because I want as simple a breakdown as possible. What is the difference between existing-use value and market value? If we are talking only about land subject to an uplift and if it has been zoned as residential for the past 15 years, does it come into scope?
Ms Claragh Mulhern:
On the Senator's first question, the idea concerns the difference between the existing-use value of the land and the market value of the land with the benefit of zoning. Irrespective of whether land has been zoned for a long time or zoned only last week, we have to have the same starting point for everyone so as to be consistent across the board. It depends on the existing use of the land. If it is land used for agriculture, the existing-use value will reflect that. It is a matter of determining the value of the land for agricultural purposes.
The market value of the land is what would be expected to be paid on the market for it with the benefit of the zoning decision that has been taken. In the example given it would be agricultural use value versus residential development value with the benefit of zoning but not with the benefit of any specific grant of planning permission.
John Cummins (Fine Gael)
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It would still be considered an agricultural land value, despite the fact it is zoned for a period of 15 or 20 years.
John Cummins (Fine Gael)
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It goes back to-----
John Cummins (Fine Gael)
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The register that has been mentioned will form an integral part of this. I always get worried when I hear the phrase "subject to GDPR". What is the anticipation with regard to what can be and what will not be on the register as a result of GDPR?
Ms Claragh Mulhern:
We are still working through this. We would like to be able to publish the existing use valuation and the market valuation of each parcel of land. Obviously, we would not be able to publish personal details, as the Senator would expect, of who submitted the information or details of the land owner. It is an important element of the proposals. If we could not quite go that far, there are other means through conveyancing mechanisms for people who are interested in buying a piece of land and want to know the obligations they will have to pay on it. The register will be in the background and there are other means of doing it. This is what we are looking at as two options.
John Cummins (Fine Gael)
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These would be suboptimal obviously.
John Cummins (Fine Gael)
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Valuations play an integral role. Notwithstanding the principles that will be set out, if three valuers come in to value a parcel of land, house or anything, they will not all come up with the same figure.
Ms Claragh Mulhern:
This is why the planning authority needs to have the ability to be able to look at the information and take a view as to whether it agrees with it. This will require a lot of support from valuation experts, either working in, or on behalf of, local authorities, to take a view and, for example, look at sites that are side-by-side and look at a consistent approach. As I mentioned earlier, working with the Valuation Office we will look to provide guidance for this process.
John Cummins (Fine Gael)
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I will move on to the urban development zones, UDZ. I note the commentary from Mr. Hogan at the outset on the strategic development zones. There is a significant SDZ in my county of Waterford at the North Quays. One of the difficulties with it for several years has been with the upfront public infrastructure required to unlock a site after it has been designated. The urban regeneration and development fund, URDF, has played a key role in this. It is not all the URDF's responsibility, or it certainly was not in Waterford's case where transport was an integral part of it. The premise of an overarching fund that looks after the infrastructure required to unlock a site is something that must be embedded across the board. For a council to engage with so many Departments to try to get funding to unlock a site becomes unwieldy and difficult. It is great that we have managed to overcome the hurdles and we have a contractor on site building public infrastructure. How does the Department see all of these hurdles, bars and gates that must be overcome to get the funding to unlock the sites? It is all well and good saying we want to take the best bits without a UDZ but it comes down to being able to fund the infrastructure. This is what really unlocks a site.
Mr. Paul Hogan:
The idea of the UDZ is that more information would be available prior to designation about the scope, potential and cost of infrastructure to serve. This will mean that a more informed decision can be made about designation. It will also feed into decisions on what might be appropriate to apportion to the developers based on a particular land value sharing, LVS, contribution, and to the State for extraordinary infrastructure over and above even what we would expect several developers co-operating to contribute. There are different levels of infrastructure. There is common co-ordinated infrastructure and extraordinary infrastructure, in line with what the URDF has done in some of the SDZs, certainly in Clonburris and Waterford. We agree with this type of provision. Perhaps it could be identified through a national plan such as the revision of the national planning framework.
John Cummins (Fine Gael)
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It would be a UDZ fund. If a site is designated but over and above this a piece of infrastructure must be funded to unlock it, is this something the necessary Department could feed into? For example, the Department of Transport could give X amount to the fund and the Department of Housing, Local Government and Heritage could give another amount. I am just trying to tease it out with the Department.
Mr. Paul Hogan:
The concept is that a relatively small number of strategic priorities sites in the State would be identified for development. This is what the SDZs were originally intended to do. Sites with high potential for delivering at scale would be identified and supported. They would need to be endorsed locally by the local authority and by the Minister, as proposed through the UDZ process. Ultimately the co-ordinated funding would come from the Exchequer. Rather than each Department having an allocation, perhaps it would be done more directly through a fund such as the URDF or a future iteration of it. We need to see the scale of what is required. It is worth mentioning that Ms Murray has been working on transport-oriented development proposals and opportunities in Dublin and other cities in line with national objectives to identify sustainable development opportunities.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I thank the witnesses for coming before the committee. I have a number of questions. Is the market valuation of a site based on the average for the type of site or area or is it what the landowner paid for the site?
Ms Claragh Mulhern:
It is not to do with transactions. It is to do with the valuation of what would reasonably be paid for the site were it to be put on the market, having regard to the zoning decision that has been taken. It is a case of looking at the development plan, the location of the site and various factors that will be set out in the guidance we intend to bring forward.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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If someone paid what might be considered over the odds, which in a way it is not because it is a market transaction, the full over the odds price will not be captured by this. It would be a baseline below it. This is quite difficult. Whatever someone pays is, by definition, the market price.
Mr. Paul Hogan:
I was thinking about this point because Deputy Ó Broin asked a similar question. If someone overpays for a site beyond the valuation but does not develop it, that site will be revalued at the next iteration of a development plan. The LVS obligation will be recalculated. Perhaps what was paid would set the future value. The logic would suggest that someone who overpays would want to be prepared to develop it. This is projecting it ahead.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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With regard to existing use value, and to follow up on the previous question, it goes the whole way back.
I think for most zoning, the first development plans were in the 1960s. Is that correct? It was before my time. The first Dublin development plan zoning came in around that time. We are talking about cases where the land has never developed, going the whole way back to that existing zoning.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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It is tied to the most recent zoning decision.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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It is the current development plan that is relevant.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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A question about 15 years ago does not apply because the current development plan is relevant.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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The existing use value is off the current development plan.
Ms Claragh Mulhern:
It is the existing use value on the date of the zoning decision being made. If, for example, land is being used for agricultural purposes currently, and that is what it was in use for on the date of the zoning decision, that is the baseline in terms of existing use value. If land is, for example, zoned for example, the market value applies. The difference between those two is used as the-----
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Everything that is currently zoned as residential in current development plans will not-----
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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It is in scope.
Ms Claragh Mulhern:
It is. Let us take, for example, a development plan that was adopted last year. If this comes in on the dates we are proposing, the valuations that need to be undertaken are to reflect the situation on the date that zoning decision was made, that is, last year. We consider the existing use value of the land at that point and the market value of the land on that date.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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If a development plan begins in 2020, it is the rezoning that happened-----
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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-----in 2019, going into 2020.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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That is captured.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Okay. We could be going back a few years in terms of zoning decisions but the scenario of considering the situation 15 years ago simply would not apply because they are all-----
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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That is quite a different answer from the one I understood to have been given previously.
Ms Claragh Mulhern:
I think the earlier question from Senator Cummins came from a different angle. The question in that case was about the market value as opposed to the existing use value. It is about the existing use value on the date of the zoning decision regardless of the fact the land may have been previously zoned as residential.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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If land was agriculture in 2019 and was rezoned as residential in 2020, it is within scope. However, previous development plans are not within scope.
I am interested in the whole area of active land management because there are massive benefits to it, not only in the timely delivery of housing but also in the timely delivery of infrastructure. Done well, it can also have an impact on affordability. If we look back at how active land management was done in this country and city, the Wide Streets Commission was doing it hundreds of years ago. George's Street Arcade was the result of active land management through an Act of Parliament 200 years ago. There were the compulsory purchase order, CPO, powers in place to buy up and develop the buildings. In my constituency, Coolock, Edenmore, Artane, Harmonstown and Kilmore were subject to CPOs and active land management. The Northside Shopping Centre was put in as part of those plans. The entire thing was subject to CPOs. It was all done directly. This, as active land management, is a far more indirect way of doing things. We used to use very extensive CPOs. Now with UDZs, we are only talking about CPOs in respect of critical infrastructure or critical pieces of land. As a country, we used to use CPOs extensively to do active land management and that approach has been successful in countries such as The Netherlands. Strong CPOs do not have to be used but they are a strong negotiating tool. They allow for the ability to take in the whole land bank, put in the infrastructure and parcel it back out, often to the original landowners, for development. Why has that far more direct model been ruled out? Why is it not being consider and why is this more complex and indirect approach being examined? I have a fear that the more complex, indirect models of doing things are less effective.
Mr. Paul Hogan:
In preparing this measure, we looked at the Kenny report and its considerations. It proposed something a bit more direct. The Kenny report was of its time and this is a different situation. We are not talking about the early 1970s when all the development plans the Deputy has mentioned were first put in place. We need to focus now on both greenfield and brownfield sites, where there is a multiplicity of ownership. The reality is that a balance is required. We need to work with all types of developers. One of the concerns is that the more the State gets involved, the more it ties up land and makes it unavailable for private sector developers who would otherwise develop it. One of the issues the Kenny report examined was when money was made available through Dublin Corporation in the late 1960s and early 1970s to acquire land for this purpose. That starved developers of opportunities to build and it could not be recycled quickly enough by the State to deliver as required. It had an unintended consequence, despite the best of intentions. Things have moved on considerably. We cannot propose something we know could not be delivered or that would not realise the intended objectives. It would not achieve what we want to achieve.
Ms Claragh Mulhern:
We earlier referenced critical land for infrastructure, and UDZs in particular, for the purposes of compulsory acquisition. There is nothing to stop the State using existing powers of compulsory acquisition. In the review of the planning Bill, there is some streamlining of the processes in that regard. The Law Reform Commission has been examining this area. Compulsory acquisition powers are there and can be used. As the Deputy mentioned, sometimes they are not actually necessary and the threat of their use might be enough. We are trying to call out that providing not only the actual infrastructure but the land that is required for the infrastructure is crucial for the successful delivery of UDZs. Perhaps that is reflective of some of the lessons we have taken away from SDZs. From the outset, we need to identify where we need to put the transport infrastructure, parks and schools. It is about reserving those lands for those focused areas. For UDZs, with their scale and potential for delivery, such an approach is crucial to ensuring they can be delivered on the ground in a timely manner. Prioritisation, funding and governance arrangements are required. Everybody must get around the table, including Uisce Éireann and whoever else needs to be there for transport and so on.
More broadly, outside UDZs, CPOs can also be used by local authorities. They are being used by several local authorities for more small-scale projects. We would certainly welcome their use, where necessary, beyond that. There is nothing to prevent the use of CPOs. It is just that we are calling it out specifically in respect of the critical land for infrastructure and UDZs.
Mary Fitzpatrick (Fianna Fail)
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I thank Mr. Hogan for his presentation and I apologise for being late. There is broad welcome for this legislation. The idea of a land tax has been talked about for decades, as has the idea that the State would share in the benefit of any increased value brought about through the rezoning of lands. The move will be broadly welcomed. If those funds can then be used to accelerate, or at least contribute to the acceleration of, the delivery of social and affordable housing, there will, I hope, be broad support for the measure.
I have some specific questions to clarify matters. The witnesses outlined that the proposed 30% tax will only apply to the incremental value increase. I also understand there are some proposed exemptions. Will they talk through what those exemptions will be and the thinking behind allowing for them?
Mr. Hogan mentioned in his opening statement that an economic appraisal was completed. Is that available? He also mentioned a tribunal.
How will it operate? What will be its make-up and how it will be accessed?
The proposal for a register in the draft legislation, as I understand it, is that each local authority will operate a register. What is the thinking behind the registers being held and managed locally by each local authority? In an era of shared data, it seems a little outdated, but perhaps there is information the officials could share that will help with our understanding of that.
Ms Claragh Mulhern:
I will try to cover as much as I can, and the Senator might follow up if she has more specific questions. On the exemptions, the intention is to ensure the measure is reasonable and proportionate for landowners. Currently, for Part V provisions in the planning Act, there are thresholds. The provisions apply only for developments of five or more units and that is the intention here. Because we are also bringing in mixed-use land, where commercial development could end up coming forward, there will also be a threshold of 500 sq. m of commercial development. Anything below those two thresholds will be exempt because, in the context of maximising development potential, they are quite a low level of development and it is proportionate to allow a certain degree of development to take place without this obligation arising. There are, in the general scheme, measures to deal with potential avoidance of the thresholds by subdividing plots.
The other key exemption is social and affordable housing. We all recognise the absolute priority of delivering social and affordable housing throughout the State, so we have been keen to make sure that will be exempted from land value sharing obligations. In particular, that will give the local authorities and the affordable housing bodies the ability to engage more freely in the market. If they know they will not have to pay this obligation when it comes to the granting of planning permission, it will be of significant benefit to them in getting a reasonable price. Those are the exemptions, in high-level terms.
As for the economic appraisal, we are considering releasing a redacted version because some commercially sensitive data are contained within it. We hope we will be able to share a redacted version with the committee. We will revert to it on that.
The Valuation Tribunal has been established and deals with matters under, for example, the vacant site levy. I must confess I do not know the details of who sits on it, but it is an established tribunal and, therefore, the intention is to rely on it rather than setting up another, separate arrangement for this.
The intention behind the register relates to each planning authority’s administrative area, zoning and development plan. They are the experts in receiving information, cross-checking what is on the register and so on. Nevertheless, as we have done for the residential zoned land tax arrangements, we have worked closely with the local authorities to publish maps that show the entire country, and we intend to do the same here. The intention is to assemble all the information from each of the 31 local authorities and display it publicly as one data source.
Mary Fitzpatrick (Fianna Fail)
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In a virtual sense.
Mary Fitzpatrick (Fianna Fail)
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The general scheme refers also to creating capacity to apply a land value sharing tax at a future point to other changes in land zonings. Why not include that from the outset?
Ms Claragh Mulhern:
This is quite a significant change and it will take time for the local government system and landowners to transition into. There was a recognition, therefore, of the need to introduce it on a phased basis, the priority being housing and enabling housing development. Moreover, it is fairer to landowners. Landowners of commercial development land also benefit from the zoning decision that has been conferred on them, so that will need to be brought in over time. It is a phased intervention to allow the system to get up and running.
Mary Fitzpatrick (Fianna Fail)
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To return to my earlier question about the economic appraisal, did it capture or identify any potential negatives arising from this phased approach?
Mr. Paul Hogan:
At the time of the appraisal being conducted, the advice from the Office of the Attorney General was that this should apply generally as opposed to selectively because that would be more proportionate and fairer. That is the logic behind it. We are still considering the timing and it could certainly be looked at.
The Senator might remind me of her other question.
Mary Fitzpatrick (Fianna Fail)
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I had asked about whether negative unintended consequences might arise from the fact the land value sharing tax is proposed, in the initial instance, to apply to changes in land zoning to residential use. Did the economic appraisal identify any potential for reactions in doing that and not introducing a tax also for other land zoning changes?
Ms Claragh Mulhern:
Yes, we did consider that. In terms of zoning for housing, we looked at both straightforward residential zonings and mixed-use zonings including residential, and a strong consideration of that was that we did not want it to result in displacement or priority being afforded to development in place of housing, whereby commercial development would take place instead of housing just because it was more economically advantageous. That was factored in in respect of the mixed-use zonings and will apply across the board. Even if land were being brought forward for commercial development within a mixed-use zoning, which would be quite appropriate and would be for the planning authority to determine whether it was appropriate on a given site, there would still be an obligation to pay LVS for those lands.
What is slightly different about commercial development zonings is that they are specifically commercial. Broadly speaking, it is offices and industrial spaces. It is unlikely a specific developer would decide they wanted to build a factory instead of a housing estate, given they are very different purposes. In that context, we considered it as part of the design of the measure.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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To clarify, at the point of establishing the register, there will be an existing-use valuation and a market valuation based on the existing use and the market value at the point at which the land was last zoned, which will have been in the most recent round of development plans. If there was a piece of land that, prior to that zoning, was agricultural use but was then zoned for residential but which was still being used as agricultural land notwithstanding the residential zoned land tax, the valuation on that land and its existing-use value would be agriculture and its market value would be residential.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Perfect. To return to the issue of changing values, that means that in, for example, South Dublin County Council, which the Leas-Chathaoirleach and I know well, a development plan was approved last year, so whenever the Bill is enacted, whether next year or whenever, it will relate to the 2022 market value.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Is the anticipation, therefore, that the valuation will be updated only with each development cycle review, or what is the mechanism? Even within the two or three years between when the land was last zoned and then becomes valued, the values may shift depending on what is going on. One could imagine that in the Clonburris SDZ, for example, now that the infrastructure is being built in funded through the URDF, there might be a slight increase in the market value of the land and an increase in the number of transactions. At what point is that going to be revalued or reassessed?
Ms Claragh Mulhern:
Yes, it is tied in. The idea is to have a zoning lift. The question is what the benefit of the zoning decision is to the landowner. As it is tied to the zoning decision, any changes and reviews are then tied to any subsequent zoning decision. If there is a situation where there is an urban development zone designation between the development plans, that designation is also a reason for a revaluation because that brings with it a different potential for development.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Imagine a four-year period starting from the point of valuation. The uplift in the value of the land could be considerably different four years on from the period of zoning. Is there a mechanism for capturing the uplift at a particular point?
Ms Claragh Mulhern:
We looked at that. Part of the problem here is trying to get the balance right. What came back clearly as part of the economic appraisal was that clarity and certainty are required in the system for landowners as well as the local authority. Having an obligation with an unknown quantum which may arise at some point in the future, and is uncertain or may change, creates a significant risk for housing supply and delivery. What we need to build into the system, and have tried to do with the redesigned measure, is to introduce that clarity and certainty. The idea is that we know from the initial zoning decision what the quantum of the obligation will be. It is fixed for that development plan cycle.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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After the transitional mechanisms, that will also apply, subject to the passage of the planning and development Bill, to a ten-year planning development cycle.
Ms Claragh Mulhern:
Working forward, we will clearly need to consider that as part of future arrangements. As the proposal stands, it is six years. The idea is that the quantum is fixed for that six-year cycle and we know what the obligation will be. It is also important that we are allowing landowners to pay upfront if they want to. They do not have to wait until they get to the point of planning permission, which is important.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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This was my next question.
Ms Claragh Mulhern:
We are trying to incentivise that in a way by saying that if people pay upfront, it is fixed and they have discharged their obligation, whereas if they do not pay it upfront, it gets to the next review of the development plan and if the valuation is different and the quantum of the obligation goes up, they will have to pay more, essentially.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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At the point of valuation, there is the existing-use value and the market value. The tax liability is calculated based on 30% of the difference between the two. In another instance, at the point of valuation, if that land had previously been residentially zoned and was rezoned as residential or the zoning was left even though no development had taken place, how is the gap between the existing use and the market value calculated in that case?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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In the first example, I used land that had been previously agricultural and was rezoned as residential. At the point of valuation, the existing use was agricultural and the market value was for it being zoned as residential. If that land had been previously zoned as residential and was just waiting to be developed, and in the latest development plan its zoning was continued or carried over, what is the existing use calculation at that point in time? The market value is the market value for residentially zoned land at that point in time.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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To be crystal clear on this, at this point in time, the land that had been previously zoned residential was rezoned residential. It was not actually being developed but was not being used for agriculture. It was just vacant, uncommenced, residentially zoned land. What is its existing use calculation? Is it the last time it was actually in existing use?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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As vacant land-----
Mary Fitzpatrick (Fianna Fail)
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It was zoned residential.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I apologise if I am not being clear. Let us take the South Dublin County Development Plan 2022-2028 because it is an easier, concrete example. When that development plan was approved it was zoned residential, so it is the market value for residentially zoned land at that point in time. If that land had been in the previous development plan and the development plan before that and was also residentially zoned, and did not have an existing use for active agriculture or such, how is the existing use of that land calculated if it previously had six or 12 years of residential zoning? Does Ms Mulhern see the question?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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The witnesses are saying the valuers will have a mechanism to determine what the existing-use value of that is.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Perfect. I am crystal clear on that.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Sure. We have our existing-use value and our market value. As the witnesses said, the owner of the land can discharge responsibility or liability for 30% of the difference between the two valuations. Many developers will say that upfront costs are one of the most significant barriers to development. Let us imagine that many landowners who are also developers are unlikely to want to pay that upfront. At what point do they have to pay it? Is it at the point of planning or commencement completion?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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It is still at a relatively early stage of the development process, particularly for larger pieces of land. In some cases, that would be a large financial liability in an early phase, whether they do it at the point of-----
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Those are the transitional arrangements. Post transition, when we do the next round of county development plans, will it be a similar process? When the new development plans are approved, at the point of approval, a new valuation process will kick in-----
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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-----based on the same one but without the time.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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That makes the process clear. One concern about this is whether it might contribute to future land price inflation. It is not for the stuff that has already been zoned and valued but future prices. Has there been any assessment, study or attempt to examine whether there could be an unintended consequence of contributing to land price inflation? A seller of land who is not a developer, but who, as Mr. Hogan said, is trying to capitalise on land values, increases the overall price in order to compensate for the loss. How does that interaction work both for the seller of the land and the buyer of the land once this tax becomes liable for future zonings or rezonings?
Ms Claragh Mulhern:
Mr. Hogan might want to speak too but the intention of this and the reason we have taken this approach in the revised general scheme is to try to influence transactions. The idea is that where there is clarity about the quantum of the obligation, with an existing-use value and market value, one knows what the difference is between the two and can work out the 30%. That should influence transactions thereafter. We are trying, as much as possible, to target the original landowner, who ultimately gets the maximum benefit from the zoning decision that has been taken. The idea is that it brings it as early in the process as possible to remove the risk that might happen down the line with regard to actual delivery.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Under the terms of the scheme, if the land is transacted at a later stage, is the existing land value-sharing tax still the liability of the seller of the land at the point of transaction or the new purchaser of the land within the first phase of assessments?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Whoever owns it at the point of implementation has to pay. Has an assessment been done to ensure, to the best possible extent, that this mitigates against land price inflation and its potential impact, particularly in high-demand areas?
Mr. Paul Hogan:
The Indecon assessment addressed this.
One of the key changes from the original general scheme to where we are now was to mitigate that risk on foot of Indecon's assessment. We concentrated on the early stage - the zoning uplift - as opposed to the permission uplift. We had intended to roll the zoning uplift and the permission uplift into one. The key change was that by focusing only on zoning, it becomes a transparent known charge at the outset. That is a charge on the land that is known and that applies only at the point of zoning. There is a further process to do with permission, so that was-----
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Which are the development contributions.
Mr. Paul Hogan:
Those that mitigate that. It is also worth saying that it formalises for developers the ability to provide land or infrastructure, which is another means of discharging the charge as calculated. In certain development areas, it may be relevant to them where they might want to get on with developments without public procurement rules. Developers can do some things in respect of the required specification and standard more quickly and efficiently, particularly if they have a very big site. That possibility is there as well.
John Cummins (Fine Gael)
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I will keep going in this vein. A developer could provide the infrastructure in lieu of the contribution, namely, the 30%. For example, let us say that €1 million is determined as the figure for s site. The developer can apportion €1 million of infrastructure costs to unlock that site and discharge its responsibility in that regard. What is the process for that in practice or what is envisaged in that regard?
John Cummins (Fine Gael)
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Who would it be determined by?
John Cummins (Fine Gael)
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The same could be said for the likes of a local improvement scheme or a community involvement scheme in terms of road infrastructure. The financial contribution could be in lieu. It could be the residents contributing. Another example could be a builder putting in drainage and discharging his cost. I assume this is a simplistic version of what would be envisaged.
John Cummins (Fine Gael)
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Of course. I assume there would have to be a confirmation of costs on same, which can be determined. What the witnesses said is perfectly correct. There is far more value for money to be achieved by a developer outside the public procurement process. A developer may be able to get a kilometre of road done rather than half a kilometre through the public procurement process. In terms of getting that infrastructure developed, that seems like a sensible approach.
John Cummins (Fine Gael)
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It would be required as part of-----
John Cummins (Fine Gael)
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I have a further question about the UDZ and how we avoid a stagnation effect. If I own a parcel of land within a UDZ that is being designated as part of this and an overall master plan is being devised that will allow X height and state that there should a mix of X, Y and Z and I was ready to go with a development of 300 apartments, do I stop and say that it is going to take 12 months, 18 months or two years for a UDZ to be developed and teased out and so could result in stagnation of sites? How do we avoid that?
Mr. Paul Hogan:
The way it is constructed is that rather than having to wait until everything is done to a great degree of detail, it is incorporated in the development plan at the outset. That is important for a lot of reasons, one of which is that if it is in the development plan, it means that nobody is held back. They are subject to the normal planning rules but if they are operating in accordance with the overall direction of travel for the area, they can come forward and work through normal planning. There is also an option to do a more detailed scheme. In taking the candidate UDZ forward, you can do it as a more specific scheme that will then lead to fast-track planning for all or part of the site. The person who wants to go ahead does not necessarily have to wait for that to happen because it has already been incorporated into the plan.
John Cummins (Fine Gael)
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In practice, could we see something happen whereby a local authority is developing a UDZ and the framework for same and when an application comes in, it is the determination of the planner that this may be inconsistent with something that is under consideration?
John Cummins (Fine Gael)
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Because if that is a possibility, and I think it is, it can or will create a vacuum of development on sites.
Ms Claragh Mulhern:
There are provisions in it that allow for permission to be refused on the grounds of prematurity. What we are keen to ensure is that we get the balance right. If the local authority and the State ultimately in terms of investment in infrastructure have a long-term vision for this area, we would not want some developments to come forward that might frustrate that overall plan-led development. There does need to be some mechanism for the planning authority to take a view on that. However, if it is development that is not likely to conflict with the planned intentions relating to the site, there is no reason for the planning authority to refuse permission. The planning authority will be the expert when it comes to making the judgment as to what development is likely to be appropriate with the longer term vision in mind and what is not so it is about getting the balance right.
John Cummins (Fine Gael)
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I am flagging a concern because I can see an issue. If I took the north quays in Waterford as an example, it is fantastic because all of it was qualified with some elements acquired under CPO. It is all under one ownership. However, if I split the north quays into eight different parcels with eight different owners, which is the case with many brownfield sites, and I was looking to master plan for that area, I would be looking at putting in elements like pocket parks. However, if, in the view of the local authority, my parcel of land is suddenly to be a parkland, it is going be inconsistent if I am looking to develop something residential on that land. We could be faced with a situation where the owner of a parcel of land who will not co-operate and engage with the wider framework that is in place is looking to bring forward a short-term residential development. That development would be lost on the basis of something that could potentially happen in ten years' time. I am just flagging this because I can see that to which I refer happening. It is fine if there is a single owner of an entire UDZ, but that is not a reality.
Mr. Paul Hogan:
That is a perennial problem in planning. To be honest, one of the weaknesses in area planning for us is the fact that property rights tend to override planning objectives, particularly where there is a multiplicity of landowners. We are not saying that someone would not be fairly compensated where critical land is required. Take the example of a UDZ. It is really important that if an area needs parks, schools and roads in certain places in order for everyone to be able to get around optimally, there is a mechanism to be able to deliver that because we have not been able to do that to the extent that is necessary. People are still compensated where maybe there is a conflict. One of the advantages of the LVS mechanism, however, is that it does set a new set of ground rules for value as well, so the LVS contribution would need to be factored into that compensation.
John Cummins (Fine Gael)
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We could keep going on this for a long time. I want to ask one more question before I conclude. For social and affordable housing, the LVS tax does not apply. The Department does not see a potential issue in encouraging solely social developments or affordable developments in areas where a mix may be appropriate. A mix is the most appropriate of all, particularly where we have a mix of private, affordable and social housing in one area. However, if we say that in order to avoid this tax it will apply to social and affordable housing, we are not allowing for that private provision to be provided and we are then creating communities based on income.
Ms Claragh Mulhern:
I completely agree with the Senator. Mixed tenure developments are absolutely where we need to be going. The intention with this is that if we have a mixed tenure scheme, and there are numerous good examples of them out there currently, then this obligation would not apply to the social and affordable elements of that scheme. It is not intended that it would result in mono-tenure developments.
John Cummins (Fine Gael)
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If there is a mix of 50% private, 30% affordable and 20% social, 50% would be exempt from the tax and the other 50% would be levied. However, if we are saying that is the optimum or a version of that is the optimum, if anyone is looking to avoid the tax, if 100% social housing is provided then they not have to pay the tax. Does that not become an issue?
Ms Claragh Mulhern:
That is where the planning assessment piece by the planning authority comes in. As it currently stands, and notwithstanding LVS and what may apply here, obviously, providing appropriate housing depending on the context and keeping in line with the housing strategy for that local area is what the planning authority will need to consider. LVS is an obligation that flows from whatever development has been permitted, but the planning assessment and the housing strategy that has been adopted for a local authority area will form the basis for determining what is appropriate on any given site.
John Cummins (Fine Gael)
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Again, I would caution that there is a potential pitfall and issue whereby we will not actually realise what the optimum is, which is mixed tenure, as a result of what we are doing here.
Steven Matthews (Wicklow, Green Party)
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I thank the Senator. It is worth noting that since the passing of the Affordable Housing Act 2021, it is possible now to have mixed tenure and mixed income and they are different things. I call Deputy O'Callaghan.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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On there being a multiplicity of landowners, there are issues in terms of master plans. The way they deal with that in the Netherlands is that when a CPO is imposed on land, if part of that land is designated by the landowner to be parkland, he or she gets compensated at an average price on the basis of what is being paid to the other landowners in that area where it might be a residential development. That is why I made the point earlier about a multiplicity of landowners.
We might look back 200 years to the Wide Streets Commission in this city. The reason we have O'Connell Street, Dame Street and D'Olier Street is because there was a multiplicity of landowners involved. The city was never going to be able to get agreement to widen those streets and erect new buildings so it effectively imposed a CPO on the lot, came up with a master plan and did it. That is why we have the kind of city centre we all recognise and know today. It simply would not have happened otherwise. I marvel at the ability to be able to do that in the city 200 years ago. When it comes to housing now, however, we are not able to do it.
More recently, the CPOs I referenced earlier were in respect of social housing. In Kilbarrack, a CPO was imposed to take the land from private landowners. It actually had planning permission in place for private housing and the city council still managed to CPO the land to put in social housing and other infrastructure. That was done under the current Constitution by the State. These powers have been used extensively to deliver housing and infrastructure at the scale that is needed. That was all done constitutionally. I am surprised then when we are told it cannot be done because it has been done in Ireland. That is the point I was trying to make.
I have a quick question on the way will potentially be done. A farmer may have farmland that is zoned residential and the site value tax is now being applied to that land because it is zoned as such. The farmer can apply to get that rezoned to agricultural land because that is what he or she uses and wants it for. That then potentially puts the farmer at a disadvantage because while that land is not currently liable for land value sharing tax, it will be in the future should it get rezoned again from agricultural to residential. That would be an incentive against people looking for the zoning to fit their current use, which is one of the incentives of the site value tax. Do I have that right? I appreciate that there might not be a huge number of those situations but there certainly are some around the country.
Ms Claragh Mulhern:
I am assuming the Deputy is referring to the difference between the two. The RZLT is the one currently being rolled out. It is due to come into effect next year. What is happening is that we are going through the process of the maps being published and landowners making submissions. Some of them are farmers, as the Deputy pointed out. As part of that process, they did have the ability to request from the planning authority the rezoning of their land to take them out of scope. Those requests need to be considered by the planning authority. It has to look at what its obligations are to meet its core strategy, housing supply targets and where the land is located in relation to other lands, for example. Very clearly, the message is that in respect of those requests, it is for the planning authority to make a judgment as to whether those lands should be changed in zoning from residential to agricultural. Each planning authority will need to make its judgment, as appropriate, in that case.
In terms of the follow-on question, if they are successful in some of these cases, for example, in changing their zoning to agriculture then they would also be out of scope for this measure. Obviously, however, if at some future point in time they are then rezoned for residential use, they would hypothetically fall back into scope for both the RZLT and LVS.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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On the option of infrastructure being provided instead of the 30% contribution or instead of land, Ms Mulhern said that is easier to apply where there is a local area plan or UDZ. It could be applied anywhere, however. There does not have to be a UDZ or local area plan. Is that correct?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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The general scheme is fairly vague around the timing of that. It just talks about the planning authority setting conditions. I have a concern. When we had the previous crash, a significant number of development levies were not paid. They were subject to conditions. Much housing was built, but development levies were not paid. We do not want to be in a situation in a future scenario where a developer goes bust after much of the housing has been put in but the infrastructure promised as part of these conditions has not been provided. Will the timing of the delivery of that infrastructure be written anywhere into legislation? It can often be seen in other countries that all the roads, path, drains, public lights, parks and playgrounds are put in by the developers because they have schemes like this and then they start putting in the housing. They have to provide that infrastructure up front, however. Is there any consideration around the timing?
Mr. Paul Hogan:
It is an enduring charge. Therefore, from the moment of zoning, it is an enduring charge on the land. There might well be an attempt to discharge it through a proposal to do with infrastructure and a condition. If that falls or is not delivered, however, the charge remains. In some ways, it counteracts the risk of an economic downturn or things not being delivered. It is one way of doing it. Clearly, on a site-by-site basis, that can arise. Our preferred scenario for larger sites and bigger areas is the more upfront delivery in line with the master-plan approach, and some State involvement as well for the really big areas.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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We all prefer upfront delivery, but regarding the legislation and the general scheme, will that preference for upfront delivery be worked into the legislation? I have a fear that, at a national level, this will all be set out well, but then when it comes down to local authorities, and the agreements, decisions and conditions they make, it could be too loose in some scenarios.
Mr. Paul Hogan:
Obviously, strengthened governance through development agency roles in terms of urban development zones, UDZs, are identified as well. We have the Land Development Agency as well and there is a potential role for it. A lot of it will depend on this becoming an embedded part of the system. If one can imagine a scenario where we are not trying to get over this kind of hurdle of stepping up to this, and it becomes a normal part of the system, there will be a greater element of revenue for local infrastructure for communities through these contributions in local authorities. This would then be recycled into funding for works where they are most required. It speaks to what we were saying earlier about identifying infrastructure deficits at the outset regarding development, where development is likely to take place and is needed, and then applying the available funds to that.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Could Mr. Hogan tell us more about how UDZs differ from strategic development zones, SDZs? What are the changes there, and the learnings from the SDZs?
Mr. Paul Hogan:
First, work has to be done at a local level before it becomes a candidate UDZ. There has to be some understanding, prior to designation, of what it is we are talking about. That is really important because, at present, what is designated is very basic and a lot needs to be worked out after the designation, as opposed to the designation being more informed.
The second thing is that the concept of understanding what is required to deliver development follows through at an early stage. When deciding whether to move forward, that has to be factored in. The development plan element is important as well to enable what we were saying earlier about certain developers who are in a position to go forward, and who are likely to be in compliance with the intentions for the area. The fact that it is considered in the development plan is also really important, because it means that it is not a separate thing which follows on. It is very much there, enabling people to go forward.
Some elements are the same. If a detailed scheme is done and it goes before the council, it can be appealed to An Bord Pleanála. There can be the fast-track planning element. We have also strengthened provisions for the role of the development agency as well.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Is there any documentation that compares or explains SDZs and UDZs?
Ms Claragh Mulhern:
There is the published regulatory impact analysis, which we can circulate again to the committee. It is probably the most comparable, because what we have done in it is set out different options. Option 2, I think, in that document is an evolution of SDZs, whereas option 3 is what we are bringing forward as the current proposals.
To summarise what Mr. Hogan outlined, we have turned the designation process on its head, whereas at the moment SDZs start with a Government order, and then the detailed masterplanning happens after that. Then it becomes part of the development plan, but nothing can happen on the ground while all of that is happening. Instead, we have turned it around so that one is doing the planning work upfront, involving communities and elected representatives, and doing all of the assessments which are required to identify what can be development, and, importantly, what is required with regard to infrastructure to make that happen so there is very early clarity regarding what is required for infrastructure provision, and the money which is associated with that, but also regarding the flexibility of how it then operates.
That piece around embedding it within the development is really important at the outset, because that is what allows development to happen more freely and much more speedily, that is, as long as it is in line with the planning framework included in the development plan, and also the detailed works of the masterplanning bit which we are more familiar with, regarding block plans and building heights. That does not all have to be done upfront, because in particular for large-scale areas within our cities, and brownfield lands, it could take a very long time to get to that level of detail for the entire area. The planning authority might want to pick and choose a few different locations to focus on for the detailed scheme, so it is much more flexible in how it operates. That is the key difference.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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The development plan can designate a whole area for a UDZ, and within that, the planning authority can say "detailed" in some of this. A particular owner or applicant can go ahead and start applying for planning permission anywhere within that UDZ, or if it is being designated for detailed-----
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Then they have to wait until that detailed scheme is done for that.
Mary Fitzpatrick (Fianna Fail)
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I would like to clarify whether the land value sharing, in its initial introduction, will apply only to lands where the zoning is changed to residential.
Ms Claragh Mulhern:
It also applies to where the zoning is currently residential. It is based on the most recent zoning decisions. If one has land that is currently zoned in a development plan, the intention is, subject to the transition arrangements that we covered earlier regarding when land was transacted, for example, at which point in time the obligation kicks in for those landowners, that it will work back to the most recent zoning decision. Where there is existing zoned land, it will apply there also.
Mary Fitzpatrick (Fianna Fail)
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I guess most local authorities are really going to welcome this, because they will see it as an opportunity to collect some new funds, and generate some income for the local authority, which they can then invest, potentially, in improving infrastructure, etc. However, what scope will the local authorities have to determine how those funds are spent? Will larger local authorities have scope to ring-fence whatever funds are collected in one area to be spent in that area?
Mary Fitzpatrick (Fianna Fail)
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They are ring-fenced for the local authority, but it is a sticking point with a lot of local authority members. Within the local authority, what scope will elected members have? I am not great at geography, but I am thinking of maybe Cork County Council, which is a big county council. Is there an area for, let us say, west Cork, or Clonakilty, for example?
Mr. Paul Hogan:
We get the point. How we address this, whether it is through regulation or guidance, will be important. However, as a principle, given what we are talking about here, and particularly for a UDZ scenario where there is a lot of development taking place, we feel the model which operates, for example, in an area like Dún Laoghaire-Rathdown where there is a county-wide scheme, and then a kind of SDZ scheme for a particular area, is quite useful because it means that an element is for the particular area, and another element is for the county. That may be a way of looking at it. In principle, and this is the principle rather than the detail, because of what we are talking about here, it is to enable development. It is to ensure that things happen in a given area, at scale and quickly. The priority should be for the particular area. Depending on the size of the county, and the nature of the local authority, it could well be an adjacent wider area as well. Then, of course, there is the whole of the local authority as a further element.
There has to be a degree of prioritisation and a degree of applicability, but it is really important that a significant element relates to the particular area. One can see, even when we are talking about offsets for the delivery of infrastructure that is necessary, how that is very much related to that particular development. That is quite an extreme to something else, somewhere else in the county.
Mary Fitzpatrick (Fianna Fail)
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I agree with Mr. Hogan, obviously, that any funds coming into the local authorities should be used, as a priority, for the area for which they were intended.
We all live in the real world. Sometimes there can be other competing priorities and it may make sense, because of other funding streams coming in, for the funds to be diverted. What is critical for the local authority members is that theirs is a strategic role and that they would have a power of influence at a strategic level. When it comes to that decision on how the funds will be used, but also the decision on whether it will be a cash payment to the local authority or a payment in kind, be it other infrastructure or other housing, it would be very important that the local authority members would have an approval function in that process. Is that the intention?
Mr. Paul Hogan:
It would relate to the section 48 development contributions scheme, which is one of the things that needs to be reintegrated with the planning Bill. One of the reasons why it had not been included in the draft was that it was being addressed through this. Initially, we had expected to roll the whole thing into one but now, while we will still have section 48 as it exists, the mechanism for the local authority to approve how this will work should still be through the contributions scheme.
Mary Fitzpatrick (Fianna Fail)
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Okay. In terms of the penalties, Mr. Hogan said the charge is enduring. To clarify, it is enduring but not escalating. Is that correct?
Mary Fitzpatrick (Fianna Fail)
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When it is collected, it is collected at what rate?
Mr. Paul Hogan:
When it is collected, that satisfies the obligation and it is discharged, essentially. One of the things we would like to try to encourage is early payment by it being known upfront from day one, and it being something that can be discharged as a benefit on that particular piece of land.
Paul McAuliffe (Dublin North West, Fianna Fail)
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I have some questions before we move to the next round. The objective of this is to encourage development but it also brings a new focus on decisions by local authorities to apply a particular zoning. I am thinking about the mixed ownership Mr. Hogan spoke about in strategic development regeneration area, SDRA, type developments. Where an old industrial area, for example, a Dublin industrial estate, was zoned as Z14, which is for mixed-use and predominantly residential, does the zoned land tax then apply to those owners who continue to carry out commercial activity in those areas that have been newly rezoned as Z14?
Paul McAuliffe (Dublin North West, Fianna Fail)
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Yes.
Paul McAuliffe (Dublin North West, Fianna Fail)
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What about the difference between a vacant or idle site and a vacant or derelict building?
Ms Claragh Mulhern:
This is something we have been looking at and, obviously, there is a lot of focus on dereliction at the moment. There are differences between them. If land is on the derelict sites register, then it is not subject to residential zoned land tax, RZLT, because we have to avoid double taxation. If it is not on the derelict sites register and the site has been determined to be vacant or idle for the purposes of the legislation, then it is in scope for RZLT.
Paul McAuliffe (Dublin North West, Fianna Fail)
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In those areas mentioned by Deputy Cian O'Callaghan where there is a degree of active land management but something might be required, we are essentially saying that if people continue to use their premises for commercial or industrial use, there is no levy or tax being applied to them in the context of trying to encourage them to put that to residential use. Is that fair?
Paul McAuliffe (Dublin North West, Fianna Fail)
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Under both.
Ms Claragh Mulhern:
Under RZLT, it depends on the zoning. In the first instance, if it is residentially zoned, then regardless of whether it is in use at the moment or not, the tax will apply, subject to the other criteria being satisfied; in other words, it is serviced and it does not benefit from any exemption. If it is mixed-use zoning, it is only if it is vacant or idle that it is subject to RZLT. If it is in active commercial use, then it should not be designated as being in scope because it is not vacant or idle.
This measure will apply much more broadly than RZLT. We have been focusing mainly on the residential zonings so far this afternoon. However, the idea is that if it is mixed-use and if residential is permissible within the zoning matrix and within the development plan - if it is acceptable in principle – then, in theory, this applies. Nonetheless, it only becomes payable if they want to develop the land for another purpose. At that point in time, it becomes payable.
Paul McAuliffe (Dublin North West, Fianna Fail)
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So not during the time when it might continue to operate as a business.
Paul McAuliffe (Dublin North West, Fianna Fail)
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It applies only at the point of redevelopment.
Paul McAuliffe (Dublin North West, Fianna Fail)
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Okay. I call Deputy Emer Higgins.
Emer Higgins (Dublin Mid West, Fine Gael)
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I thank the witnesses and apologise for missing the first half of the meeting as I had a prior engagement. The Leas-Cathaoirleach's question dealt with what I was going to ask. In particular, it is in regard to the land value sharing elements for what was rural land when it is still being farmed. In short, is that an exemption?
Emer Higgins (Dublin Mid West, Fine Gael)
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In situations where the local authority members may make the decision on the basis of guidance from the local authority that that piece of land is currently being farmed and is currently zoned RU, or rural, it would make sense if we included it in a local area plan, LAP, and, therefore, would make sense if we included it in a development plan. Where the owner or the farmer is not requesting rezoning, they are still liable for a tax bill at the end of it if they continue to farm it.
Emer Higgins (Dublin Mid West, Fine Gael)
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My apologies.
Ms Claragh Mulhern:
Not at all. It is useful. Obviously, RZLT and LVS are intended to work together but they have different criteria and scope, so it is probably useful to distinguish them. I will start with RZLT because that is a tax in a more straightforward sense, in one way. The way it works for lands that are zoned for residential purposes and mixed-use, as we were just discussing with the Chair, is that if the lands are vacant or idle, then they will be required to pay an annual set tax.
Emer Higgins (Dublin Mid West, Fine Gael)
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But only if it is serviced.
Ms Claragh Mulhern:
Only if it is serviced. That is until the land comes forward for development and then they can seek an abatement of payment at that point in time.
To go back to the Deputy’s specific example of agricultural land, that is land that has been identified by the planning authority, including the elected members in their capacity to adopt their development plan or local area plan, as being suitable for housing. Notwithstanding what the existing use of it might be, it has been determined to be appropriately located and required to meet housing supply targets. In that case, it is subject to the residential zoned land tax unless, obviously, the members subsequently decide to amend the zoning to remove it from scope, for example, to change the zoning to agriculture. Equally, for this measure, the scope is different because it is much broader; it is not just zoned and serviced land. It is all zoned land for residential purposes, that is, residential and mixed-use.
As we mentioned earlier, we are quite keen that we incentivise early payment where possible, so, at any point after the valuations have been undertaken, we would be encouraging landowners to pay up and discharge their obligation, knowing that it will need to be paid ultimately at the point of implementing a permission for redevelopment. However, only at that point does it have to be paid. To go back to the example of somebody who is farming their land, if they do not have an intention of bringing forward the land for development, they do not have to pay land value sharing upfront but it will need to be paid ultimately by whoever is seeking to develop the land.
Emer Higgins (Dublin Mid West, Fine Gael)
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When decisions are being made about zoning, the Department is not dealing with specific sites usually but a large sale of land. It is coming at it from the bird's eye perspective of the land being capable of being serviced and that it could go ahead rather than from the planning perspective, and examining everything from sight lines to how close it is to the other, and all of those issues. Those considerations come in at the time of planning permission.
Emer Higgins (Dublin Mid West, Fine Gael)
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What is the position if a site zoned residential is refused planning permission?
Emer Higgins (Dublin Mid West, Fine Gael)
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For both.
Ms Claragh Mulhern:
For RZLT, that is the tax that will apply. The land has been determined to be appropriate for residential use, but as the Deputy mentioned, the next layer of assessment happens at the development management stage. There may be particular reasons why development is refused but the underlying principle of residential development is still acceptable, so the tax will continue to apply.
We were very careful in designing that measure. The whole purpose of it is to try to activate land to come forward for development for housing purposes as quickly as possible. Submitting an application is not enough to get one out of the tax loop. It is only when someone gets permission and then starts to build it that he or she can abate his or her liability.
The same principle to zoning applies here. A decision has been taken by the planning authority to zone that land for residential use. The valuation is looking at what is the difference – to go back to the Deputy’s example – between agricultural use versus the value of the land with a residential zoning, but not relating to the details of any specific grant of planning permission. It is just the principle of a residential zoning and what that might entail in terms of its market valuation. It is only at the later development management stage at the point of assessing the planning application that the extra level of detail happens. At that point, the applicants have to pay the tax when they are looking to implement the planning permission. For this, they do not have to pay it until they are developing out their consent for permission. In that case, if it had been refused, they would not have to pay this.
Emer Higgins (Dublin Mid West, Fine Gael)
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Would they still be-----
Emer Higgins (Dublin Mid West, Fine Gael)
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Yes, that makes sense. I thank Ms Mulhern.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I am afraid I still have quite a lot of questions. What was the rationale for a 30% charge on the uplift value?
Mr. Paul Hogan:
I mentioned Part V a couple of times. In looking at models for community gain and how we might enhance the ability of local authorities to support infrastructure and facilities to service development, we were looking at different models and different ways of doing it, in the same way as Mr. Justice Kenny did. There are loads of different ways we can tackle this. If we root it in Part V, as a kind of established principle, one option is to extend the logic of Part V, which is 10%, 15% or 20% depending on where and when. The question is how far to go with that. There is a certain logic to sharing, which is 50:50. That is where the term "land value sharing" comes in, as opposed to "land value capture", which is used elsewhere. The principle of no more than 30% was when we combine it with the 20% Part V, the 30 plus 20 leads to 50%, which is almost like a kind of shared basis on which to go forward in terms of development land in the future.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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For the benefit of the committee, I know the Part V legislation has a mathematical formula to help determine the discount. I have always understood that in very simple terms, in that the core element of the discount and the purchase price of the Part V on the land is calculated at existing use value rather than market value. I appreciate what has been said about 20% and 30% but the real value of Part V is not the 20%; it is the discount on the existing use value of the 20%, whereas this is 30% of the entire site. Was it really just a simple case of 20 plus 30 makes 50, and that sounds okay?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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No, that is fine.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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My next question then is if in those more detailed considerations with the consultants, live or test examples of inner urban core lands, suburban land and county land were used? Without asking Mr. Hogan in any way to reveal any commercial confidentiality, could he give us some examples of what kind of value uplift we are looking at in an inner-urban or suburban site in Dublin and what does the 30% look like in monetary terms? I presume some numbers were run on actual sites.
Ms Claragh Mulhern:
The consultants looked at hypothetical examples and behind that they would have had real-life examples. In terms of what is in the assessment to try to look at a logical approach, we needed to know how it would land on the ground. We are also working on some real-life examples ourselves currently. We would be happy to share those with the committee when we have fully worked through them if that would assist also. Again, they will have to be anonymised, as the Deputy would expect, and no details provided-----
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Absolutely.
Ms Claragh Mulhern:
-----of anything commercially sensitive. There is a theoretical start point to this, but then we need to understand what it actually looks like on the ground. As Mr. Hogan has mentioned, we tried to understand the interaction between this and other contributions such as section 48, Irish Water, or Uisce Éireann as it is now called, and Part V. That was all looked at in terms of the overall mix and going back to the crucial element of being fair, reasonable and proportionate, it being absolutely essential to get the balance right between the State taking a fair share on behalf of the community but also not ending up in a situation where we distort the market to an extent where development does not come forward for housing purposes.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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This leads me on to the next question. As we know, Mr. Justice Kenny was not necessarily a great fan of development taxes and benefit contributions. One of his criticisms of the 1947 Act on which a lot of these measures are based is that ultimately they end up being passed on to the purchaser of the home. I am thinking of a situation where a landowner who is also a developer whose land was rezoned or continued to be zoned in the previous development plan has now secured planning and is intending to go on site next year or the year after. All of the costs that were knowable at that point in time had been factored in and we are now saying to them that there is an additional cost. To what extent has that cost been gamed out or modelled in because invariably development levies and benefit taxes are ultimately passed on to the purchaser? That is not necessarily an argument against them, depending on someone’s point of view, but at a time there are all sorts of constraints in terms of commencements, how well has that been analysed and what would the witnesses say if I was that landowner or developer who is already struggling with viability and the Department is now going to hit me with an extra additional charge?
Mr. Paul Hogan:
I think it is important to point out, which is what I was saying at the beginning, that this was drafted in the autumn of last year. This is the earliest possible timeline within which it could be introduced. That is the start point as published but there is a commitment to review it again, subject to political direction. We are reviewing the timelines in particular because a lead-in is required.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I appreciate that, but my question is not so much about the timeline, because even if we change that, the scenario still arises. This is not an argument against it. I am just trying to understand it. Because the levy applies effectively from the point at which the zoning was granted, which is a year or two years ago, depending on where one was in the planning cycle, whether I was due to commence next year, the year after that or the following year, given that in particular with large-scale projects it is a four- or five-year development timeline, there is now an extra charge. My question is less about whether the timeline is too short or long, and more about the extent to which the additional charge has been factored into the viability challenges that the development sector is telling us exist.
Mr. Paul Hogan:
This is articulated in Housing for All. That articulation probably looks at a slightly longer timeline and lead-in. It is described as a "use it or lose it" mechanism on the basis that if people have planning permission, land or are in a position to secure planning permission, they may wish to think about how they move forward in the next few years, in advance of this mechanism being introduced. It is a market signalling exercise.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Is Mr. Hogan saying that, even with the existing timeline, there is potential for someone to accelerate a development? If a person were to get in and commence prior to the establishment of the register would the levy be avoided? My understanding is that the levy will apply from the point of zoning. Is that not correct?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Okay.
Ms Claragh Mulhern:
This is why the timelines are quite important. As Mr. Hogan mentioned, we are conscious of the current challenges. As the Deputy will expect, that is something we are alive to. Under the timelines set out in the general scheme, a planning application lodged after December next year on land that was transacted since 2021 falls into the net. That is the first round.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Anyone with existing planning permission is not in any way affected.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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In that sense, it does not add any additional cost to anyone who has existing zoning and existing planning permission if they ensure they get it built out before the next re-evaluation.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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As long as that permission was granted before December 2024 under the transitional mechanisms.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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They would be liable and, therefore, in theory it should not place any additional cost on the developer or purchaser of units which have planning permission granted before December 2024.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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That is irrespective of when they acquired the land or when it was zoned.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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It does not matter if they commence in 2025, 2026 or 2027.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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In some senses, the valuation is the point at which the zoning is set-----
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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-----but the liability is triggered from when the planning is granted, post 2024.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Okay. That is clear.
I am also keen to understand the interaction with the development levies. At an earlier stage when we were dealing with the planning and development Bill, it was suggested that when we did pre-legislative scrutiny on this, the legislation underpinning this scheme would be published but then worked into the Bill. Is that still the intention or will the Department integrate the development contributions into the final version of the planning and development Bill but keep this as stand-alone legislation? Has that been decided yet?
Mr. Paul Hogan:
As things stand, it is an evolving scenario. We received the report from the committee on the pre-legislative scrutiny today so clearly that has to be worked through. The likelihood is that the planning and development Bill will not be completed before the summer, so the reality is that, whatever about that Bill, this legislation will follow through into the autumn. There will be an opportunity for the two to be brought together on Committee Stage.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I am not trying to press the witnesses to commit one way or another. It sounds like a decision has not been made as to whether these will be two separate Bills. The Department might still integrate this legislation into the planning and development Bill.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I will go back to one of Senator Fitzpatrick's questions to be clear about the matter. The rate of the levy will be set in the legislation. That means the money will come into the local authority. The capital programme of the local authority will decide how that money will be spent, which means the elected members will not have any role in the actual expenditure. Mr. Hogan suggested that there may be regulations or guidelines, but as the general scheme stands - I might have a different view from Senator Fitzpatrick on this, but it is important it is clear - the money will be collected, it will go into the capital budget of the local authority and the capital programme as presented to the elected members by the executive will distribute those funds as the chief executive sees fit. Will there be something in the legislation or subsequent regulations that will constrain how it can be spent or has that been decided?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Is there any shape to that yet or is it just the principle that there will have to be some ring-fencing? Will it be decided at a later point?
Ms Claragh Mulhern:
It is the principle. This is where the interaction with section 48 comes back in. The idea is that this would be aligned with the section 48 development contribution scheme as part of integrating the development contributions into the planning and development Bill. That is an element we are looking at. There are also section 28 guidelines on development contributions from 2013 which will also need to be updated in this broader space. There are various means.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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For those of us who are not as familiar with how the expenditure of development contributions is ultimately decided, as it currently stands, what role do elected members have in the process of making the decision as to how and where that money is spent?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Yes.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Is that separate to the capital programme of the local authority?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I am not familiar with that process. From my brief time on South Dublin County Council, I know that the capital programme is a decision of the chief executive and the executive who present it to the elected members. Is it the case that the development contribution scheme takes a separate portion of the capital spend that has to approved by elected members or is it that there a more general in-principle agreement on schemes that could be funded through it?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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There is no formal role for elected members to say this money in capital spend should be spent on X in the development contribution scheme as it stands. The witnesses are talking about a set of rules and-or guidelines that try to apportion some spending to the immediate area where this levy has been raised and the rest to wherever the executive decides under its capital programme.
Mr. Paul Hogan:
Yes. I cited the example earlier of one of the schemes in one of the Dublin local authorities that has a more specific scheme for that SDZ area. That area has a higher rate on the basis that some of the revenue goes to the countywide scheme for things that are perhaps outside the SDZ and benefit a wider area, such as a motorway junction, link road or something like that.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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It is always useful to think of the UDZs in real examples. I am a fan of SDZs. Mr. Hogan and I first met at the early stages of the Clonburris SDZ. Is the UDZ another way of doing very large 3D master planning? We have the City Edge Project. There is lots of work. Is the notion behind the UDZ to give something like the City Edge Project between Dublin City Council and South Dublin County Council a more formal framework? When the Irish Planning Institute originally floated the idea of UDZs, I got the impression it was a more flexible instrument in that it could apply to big, medium or small sites, that it would not take as long or be as cumbersome, and that it could be a valuable tool, especially in Dublin city and the parts of the suburbs where we want compact growth and to translate brownfield sites into mixed use residential, commercial and amenity uses. Separate to the process, which the general scheme outlines well, what will this planning scheme apply to?
In the drafting of the general scheme, what were the witnesses thinking in terms of practical examples or hypotheticals?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Such as an existing industrial estate that might not be the best strategic use of that land.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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The witnesses had things like that in mind. It is to give planning authorities and landowners flexibility such that they are not restrained by the requirement to wait until the end of an SDZ process and things can start moving in portions.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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That makes sense. I am a fan of the concept and the current development of cities' edge. Was consideration given to also applying a UDZ concept to geographically smaller sites that are still strategically important? Again, this is more an issue for Dublin city than it is for us in the county. Senator Fitzpatrick might have been on the council a couple of years ago when there was a proposition to rezone a number of brownfield or commercial sites in Dublin city. There was disagreement between the officials in the housing section and the planning section on the appropriate way to do it. I have always liked the idea of a nimble urban development zone concept that could also be applied to those kinds of sites. The sites might be geographically small but could yield a high density. There is value in having those big master plans but all those smaller sites that might benefit from that kind of three-dimensional master planning and fast tracking. That could be an interesting instrument. Was consideration given to that? It would not feature on a State-wide map of strategically important zones.
Mr. Paul Hogan:
The revised area plan arrangements in the planning Bill should be more focused on that sort of thing. Outside cities in particular, local area plans have become overly focused on zoning, which is not their purpose. The revised area plan arrangements, known as priority area plans, would be appropriate. They would enable that finer level of detail. We have not applied fast-track planning mechanisms as are possible for UDZs and have been possible for SDZs to area plans. It could be considered in future but the recent history of fast-track planning suggests it cannot easily be widely applied without concern locally. It has, perhaps, contributed to the prevalence of judicial review.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Even though the SDZs were intended to be fast-tracked, there is nothing fast about an SDZ. It is an incredibly slow and cumbersome process. That is not a criticism, by the way. Clonburris, for example, took a long time but it was approved in 2018. The slowest part of the development of Clonburris was not the development of the a three-dimensional master plan; it was what happened afterwards.
Mr. Paul Hogan:
Exactly. One of our colleagues stated that SDZs are great but you do the plan and then spend the next ten years arguing about who will fund the infrastructure. That remark was obviously tongue in cheek but it has been an issue. The reality is that when they get going, they move very fast. I am familiar with Adamstown. The early iteration of it, from 2004 to 2007, moved incredibly fast. It stopped thereafter but it has come back quickly again. A significant amount has happened on that site in the past three or four years. Where the conditions are right and things are in place, they can be very effective. It is about trying to replicate those conditions more readily.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I have a couple more questions but I am over time.
Mary Fitzpatrick (Fianna Fail)
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The Deputy is over time but I want to be reasonable. How many more questions does he have?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I have three more questions.
Mary Fitzpatrick (Fianna Fail)
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Can I prevail upon the Department?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Mr. Hogan does not have to be brief. I have two more questions on this issue. We have not discussed the miscellaneous provisions at the end of the general scheme of the Bill. I cannot let the witnesses leave without explaining them properly because a couple of them seem significant.
To go back to the issue of the levy and its impact on development costs, Mr. Hogan explained that it will not have an impact on sites that have current planning permission but it will affect sites granted planning permission after December 2024. In the economic analysis carried out by the Department or Indecon, was there an attempt to ascertain, per unit of accommodation in an urban core or in a suburb, what additional costs are liable to be passed on in terms of all-in development cost and, ultimately, the purchase or rental prices?
Ms Claragh Mulhern:
Not on a per-unit basis. To go back to the work that was undertaken by Indecon in looking at typical examples, it considered a potential development scheme or planning application. Within that, it probably considered development contributions, water connections and all the rest. It is often extrapolated from unit costs. In terms of the figures we have, we would need to consider how it all breaks down in order to be able to ascertain the unit cost. I do not have that answer today. On the specific question regarding how much of that would be passed on to the purchaser, the idea of the design of the measure and the work we have undertaken in the past year, as we have been explaining this afternoon, is to try to bring it back to the zoning decision so that it is embedded within what is paid for the land up front. That reduces the risk that it becomes a cost at the end of the process.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Whatever the cost of the land, whether that is market value or market value plus tax, it will find its way into the all-in development cost for the developer. There are arguments for and against that. I am not arguing against it. If we take development contributions and water connections, for example, the unit cost can be between €9,000 and €25,000, approximately, depending on the local authority. The announcement by the Government last week referred to an average of €12,560 or €12,650. Will the Department similarly attempt to understand in the context of the all-in development costs - not just the construction costs but the land and the land value levy - what the potential cost is? A developer who acquires land and gets planning permission after December 2024 will add in all the development cost, including the levy liability, into the eventual purchase price. I presume there has been an attempt to calculate what that could look like. Whether it is passed on is a separate matter but, at a time when house prices are going up, we do not want to add to those costs. In general, betterment taxes and development levies are ultimately paid by the purchaser or renter.
Ms Claragh Mulhern:
To take it back to first principles, it is probably not possible to say what is going to be passed on as the Deputy has acknowledged. The actual cost was considered as part of the analysis done by Indecon. In terms of the further detail we are doing on the specific examples, which we will share with the committee when we can, we can try to isolate that out in terms of a per-unit cost.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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My second question is related to that point. How will this relate to the development contributions? When we all realised there was no mention of the development contribution scheme in the draft planning and development Bill, some of us got the impression this might replace it, whereas clearly the two are remaining.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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One is a levy on the land uplift or a portion of it and the other is a development contribution for the grant of planning. When did that change from a decision that the two were merged to them now being stand-alone and separate? What is the logic of that?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I promise I have only one more question after that.
Mr. Paul Hogan:
On the question regarding uplift, it is worth bearing in mind that the level of uplift from greenfield to development will be far higher than in a brownfield scenario, for example, where there may already be value because of industrial or office uses.
It is also a pro-compact growth measure in the sense that there will be less of an uplift or charge on the land where it is already close enough to services and things like that. It is important to bear that in mind as well. Indecon gave us a general indication of the value of the scheme as opposed to-----
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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At this point in time, there is no point in asking Mr. Hogan to share that value of the scheme.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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On its relationship with the development contributions, basically they will be two separate calculations, that is, development levy and charges and the development contributions will continue as is.
Ms Claragh Mulhern:
Yes. This is separate. It was during the course of last year, in the work we were undertaking with Indecon as to not only the rate but also the design of the measure, that this change came about. The autumn probably was the turning point where we got to the stage of the issues we outlined, with the unknown element of what the quantum of the obligation would be. If you were leaving it to the end of the process, it would be a significant issue. Therefore, we separated them out and have now a zoning uplift and the development contributions.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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What was the rationale for having only one and what is the rationale that settled on keeping them separate?
Ms Claragh Mulhern:
For having one, the original intention in the 2021 version of the general scheme was that we would get rid of section 48 contributions where this would apply. There would still be section 48 contributions for other forms of development, obviously, because there is not just residential. This would replace them and there would just be one that would cover the two together, that is-----
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Both issues.
Ms Claragh Mulhern:
-----zoning plus the granted planning permission. The issue that came with that was the uncertainty about the quantum of the obligation, not knowing it until the very end of the process and what that would mean for housing delivery. That is why we changed to the current approach.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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The original idea was merging the two to one. In theory, there was still the same cost of having two, but you would not have known what that ultimate cost was at the end. Whereas, at least with this one, you know the land value sharing bit at the beginning and it can be paid at that point.
Ms Claragh Mulhern:
In theory, yes. As we had set out to do originally, the section 48 contribution would have fallen away and so the way of calculating the section 48 requirement would have also gone with that. What this was looking to do originally was look at the difference between, as we were calling it at that time "current use value", which is essentially existing use value, and the market value of that land with the benefit of planning permission. So actually, that is a different thing.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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There was a slightly different calculation, but they were trying to do the same thing.
There are number of unrelated, miscellaneous amendments at the end, a number of which relate to section 50 of the exiting Act. That has exercised the committee greatly in the pre-legislative scrutiny and the witnesses will see all the recommendations.
I wish to put this point on the record because it is important and sometimes these miscellaneous things get lost in the scrutiny. In this scheme, there are seven miscellaneous amendments. I am particularly interested in having the officials explain amendments Nos. 11 and 12 in Part 4. If they could give a brief summary of them for the record of the committee, that would be useful.
Mary Fitzpatrick (Fianna Fail)
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Is there an explanatory note on those miscellaneous amendments?
Mary Fitzpatrick (Fianna Fail)
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I am conscious that, as the Deputy said, it was an issue that engaged the committee. While both of us could benefit-----
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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If we get something on the record, members can read that. If there is an explanatory memo, send that as well.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Unfortunately, sometimes for a good reason and sometimes for reasons that some of us question on the floor of the Dáil Chamber, stuff often comes in as miscellaneous amendments. They are often presented as very technical and they are very significant and profound – good, bad or indifferent. I ask, at a minimum, whether our committee, as part of the pre-legislative scrutiny of this Bill, can get an explanatory memo explaining each of those amendments. It is not to give the officials extra work; I know they are super busy. It is important that we do not miss anything in our scrutiny of this.
Mary Fitzpatrick (Fianna Fail)
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If we can get a technical explanation, I think we have a way forward here.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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It is the technical that often have the most significance. That is not to say they are good, bad or indifferent.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Perfect.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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A short note to add an additional explanation for those two section 50 amendments would be very helpful.
Mary Fitzpatrick (Fianna Fail)
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On that basis, we will adjourn the meeting. We will meet in private session next Tuesday at 11 a.m.