Eoin Ó Broin (Dublin Mid West, Sinn Fein) | Oireachtas source

I have a brief follow-on question, and it is more to do with the economics of land. In looking at land markets, for example, in European or OECD countries over the past 30, 40 or 50 years, the less taxes we placed on land and the less restrictive the markets in land, the greater the price rises and price volatility. It seems we have forgotten that part of the reason we have, for example, development levies as distinct from VAT is that they are a way for the local authority, and therefore the population, to capture some of the value increase in land that comes from everything surrounding it.

There is also a value in thinking about how we constrain the rising values of land. For example, in Adamstown, and Clonburris beside it, there is no shortage of residentially zoned land. Our difficulty has been either lack of finance or lack of purchasers because of lack of income to meet the cost. Part of the difficulty in those areas is land prices. A significant developer has bought a very large piece of agriculturally zoned land in the same local authority area just across the road from Clonburris and Adamstown. While the argument will be that this is about increasing the supply what we will see is the value of that land, and therefore the ultimate price of the houses, will rise rather than reduce if that land is rezoned. That is not an argument against zoning. It is merely that one of the bits of the economy we understand least is land. We have lost the ability to understand what influences the price.

It is the same with supply. There are growing bodies of evidence that show increasing the supply of housing, in and of itself, does not reduce the cost because the cost of housing units is not only determined by the numbers of buyers. It is also determined by the cost of land, the cost of finance etc. In the Celtic tiger period, when housing output was at the highest level in the history of the State, the number of families on the local authority waiting list and the number of families dependent on subsidised private rental accommodation also dramatically increased. This was because, despite the fact that we were producing between 60,000 and 90,000 houses over three years, the price of housing, both in terms of renting and buying, also increased. I am not saying supply is not important. I am saying the simplified idea that merely increasing the supply, as a result of making it more viable for developers, will automatically result in affordability is flawed and we need a more informed debate about how we make sure we not only increase supply but at the same time increase affordability. Here is the problem. If we do not do that, the other section of the organisation these guys work for will have a different problem, which is, because they cannot get affordable housing, they will be demanding increased wages which will affect the viability of businesses and the competitiveness of the economy as well. That is why some of these debates are too limited.

Deputy Casey is correct. Of course, reducing VAT increases the viability of the development because if one knocks €10,000 or €15,000 off the VAT of that €320,000 price, that goes into the pocket of the developer, if that is the way the developer plays the reduction. In fairness, the Central Bank and some of the larger banks have advocated this as a supply viability measure, not as an affordability measure. My concern is, if we keep reducing the ability of the State to invest in the infrastructure that people need around those houses by reducing the tax take and at the same time there is no increase in affordability, that is not a good deal for the public overall. While it might be a good deal for individual developers and increase supply, it is not necessarily the kind of supply that we need.