Mick Wallace (Wexford, Independent) | Oireachtas source

We have previously discussed the principle of this amendment, at which time I made the argument that any land purchased for the purpose of landbanking should be taxed. I was taken aback by the Minister of State's response on the last occasion when he said that the objective of this Bill is not to put levies on sites but to stimulate activity. In terms of the housing market in Ireland over the past 30 years, landbanking has been the biggest problem. The Minister of State said a levy on landbanking is being introduced to stimulate activity. In my opinion, the desire of Government should be to stop or, at least, discourage landbanking.

It was mentioned earlier that not only do we have land banking, but we have shadow landbanking which is long term. In many cases, people are buying land at just above the agricultural price and holding on to it for between ten and 15 years. If this issue is not addressed now, we will face similar problems in the future. As long as landbanking continues unhindered by Government policy, it will be encouraged and the result will be a small cartel of people controlling the price of sites. That, to me, is a major problem.

During the height of the boom, an apartment cost up to €400,000, some €200,000 of which was the site value with the remaining €200,000 being the construction cost. Even though it cost only €200,000 to build the apartment, the builder or developer had to charge more than €400,000 to cover the cost to him of the site. That is a fact. A site that had planning permission for 20 apartments cost €4 million, which equates to €200,000 per site per apartment. For the developer to make a profit, he had to charge €400,000 per apartment. If it had not been possible for him to sell the apartments at that price, the bank would not have given him the money in the first instance.

The Government needs to take on board that the biggest problem in this area is landbanking. To the best of my knowledge, the Kenny report was published in 1974, which is a long time ago. One of the proposals in that report was that one could only charge 25% more than the price for agricultural land for any land. That would be difficult to apply. I believe it is possible to apply a ruling to the effect that only double the price of agricultural land could be applied to any land. This would require the Government to establish a market price for agricultural land, with double that price being applied to land that was earmarked for zoning or already zoned for development. In refusing to regulate this area, the Government is driving up the cost of property in Ireland.

Reference was made to all of the great bargains in the property market during the recession, which was the case to a degree. However, as members are aware, the market is quickly recovering. We are once again in a situation whereby most young people cannot afford to buy a home. Last night, I referred to the impact of the Central Bank ruling in that regard. I agree with that ruling, which is sensible and sustainable. It ensures that people are not able to get crazy mortgages that they cannot afford. I do not disagree with the Central Bank on that point. However, the State must examine the effect of the Central Bank ruling in the context of the landbanking issue. The price of land now will not be cheap because of the huge prices people paid for it in the past. This is one of the reasons there is little activity in the private sector. If, five years ago, I obtained planning permission for 50 apartments on a particular site at a cost of €100,000 per site per unit, I could not possibly build on that site today because to do so would be to acknowledge that I paid too much for it. Taking into account the cost of the site and the cost of building each apartment, I would not get any return for my money. The only thing I can do is sit on that land. If I cannot meet the interest repayments, the bank has to make a call on whether to repossess the site and fire sale it or nurse me through the problem until such time as I can pay. That is a decision for the bank.

The Government could address the issue of landbanking by way of the introduction of a measure that would, at least, stop more land going into this golden pot which allows the price of property in Ireland to escalate. The current price of an apartment is between €250,000 and €350,000, the knock-on effect of which is high rents. If I own 20 apartments that are worth X amount, I might also owe X amount on them and as such I will be under pressure to charge sufficient rent to meet the repayments on what I owe. The price of housing has a direct impact on the rental market. This is all part of our housing crisis. The problem starts with landbanking. The Minister of State said the focus of this Bill is to stimulate activity. The Government needs to think again about how it is going to address the issue of landbanking. I am aware of the problems highlighted in the Kenny report around property rights in the context of the Constitution. However, this issue needs to be addressed.

I am not saying it will be easy. On the contrary, it will be a challenge to deal well with the issue, but we must start somewhere. Whoever does it, whether this Government or the next, there will be a great deal of opposition from vested interests. As we all know, challenging vested interests is never easy, but somebody has to do it. Until that happens, we will continue to have periodic housing crises. That is a given.

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