Mr. Donald MacDonald:

I am director of Hooke and MacDonald and a member of IPAV. I am joined by Mr. Davitt, chief executive of IPAV. I thank the committee for its invitation. We are pleased to be here to contribute to its scrutiny of this critically important Bill.

Housing for All contains some very good ideas. A proposal to capture and share in part of the uplift in value from improving the land value of holdings from a lower to a higher use value is a good one, provided it is properly structured and the benefits accruing can be utilised for funding critical local infrastructure. It is our belief the contents of the Bill, as presently structured, would not achieve the desired outcome.

In fact, it is going to impede the supply of new homes throughout the country. Viability, the complexity of housing delivery and funding are major factors in preventing thousands of new homes from being constructed around Ireland. The delays in the planning system, increasing building regulations and increasing costs are making the sector unworkable. The proposed measures would add a tax to lands that are already overburdened with non-construction expenses in the delivery of houses.

From a review of the market and activity in cities and towns around the country by IPAV member firms, it is evident that although there is a critical shortage of homes for sale and rental, the building industry has been overtaxed and over-regulated. Small builders, many of them long-established, reputable family businesses are being forced to close and cease building. Their expertise and commitment to housing delivery are being lost. Their workforces are being disbanded. It is no longer feasible for them to acquire sites and fund construction.

Two of the markets that our firm has carried out research on are Kilkenny and Galway. This review clearly shows that the delivery of new homes has been impeded not just by delays and difficulties in obtaining planning permission, but also by factors which are making land and sites unfeasible for them to be acquired and built on. Both in Kilkenny and Galway successful new industries have been attracted from home and abroad. Yet both, like other areas of the country, are unable to provide houses for the employees of these companies and risk losing out on future investment. The land value sharing Bill, as presently constituted, will unfortunately add further negativity to this predicament.

Like many areas of the country, there is a strong demand for houses in Kilkenny from first-time buyers, people trading up, people trading down and renters. There were only 194 new estate houses built in Kilkenny in 2022 and 660 were built in a five-year period to 2022. That is an average of 132 houses for a population of over 100,000. In the five-year period to 2022, there were only 198 apartments built in the city and county, fewer than 40 apartments a year, yet many sites have a requirement for high-density housing as a result of national planning policy.

There are a number of unintended consequences of the land value sharing Bill. It will distort the land market, which is needed for housing supply. It will create more uncertainty, overburden development projects with more taxation, increase non-viability, reduce housing commencements and increase the cost of housing for first-time buyers. The land value sharing Bill exploratory memorandum states: “a key challenge in implementing LVS is ensuring that the mechanism captures fair value for the State but avoids disincentivising housing supply”. As currently drafted and based on the current crisis in the housing development sector, the proposed measures will further disincentivise housing.

We have been here before. Less than ten years ago, there was an 80% capital gains tax on land that was rezoned. It was removed by the then Minister, Michael Noonan, in order to stimulate the supply of housing. Now we are going backwards. Only in the last six weeks, the Government reduced levies on a temporary basis to stimulate housing supply. This land value sharing Bill is doing the exact opposite of this. The land value sharing Bill explanatory memorandum states, “Overall, it is considered that the measure is necessary, proportionate, fair/consistent, effective, and will operate with transparency and accountability”. We do not believe that this is the case and we do not believe that the process to get to this point has been either. There are a number of technical points relating to the Bill, which we addressed in the note we submitted in advance of today's meeting. We do not have time to cover them all in this verbal opening statement, but we would be glad to discuss them at any stage.

What would we suggest? We would suggest that we put a pause on the current process and allow for additional engagement with the relevant parties in order that the various stakeholders, the Government, the Oireachtas, the charitable and private sectors can fully understand the consequences - including unintended ones - of the proposals and adjust the proposed legislation, if necessary, to ensure it is equitable and workable at a practical level and not an impediment to future housing supply.

Last, we suggest that the Indecon report is published to allow various stakeholders to understand the arguments behind the changes to the proposed tax and contest them through future discourse and various stakeholder engagements.