Simon Coveney (Cork South Central, Fine Gael) | Oireachtas source

I move amendment No. 1:

To delete all words after “That” and substitute the following:

“Dáil Éireann, while recognising the adverse social and economic impacts arising from significant rent increases and the need for a comprehensive response to these impacts and while acknowledging the merits of the Social and Affordable Housing Bill 2016 in the context of the broader debate on the housing market, declines to give the Bill a second reading for the following reasons:— it pre-empts the relevant commitments in the Programme for Government and in the Rebuilding Ireland — Action Plan for Housing and Homelessness, particularly in relation to the publication of a strategy for the rental sector by the end of 2016, in which the Government will be considering, in a considered and balanced manner, measures to provide greater rental predictability for landlords and tenants and to improve security of tenure for tenants;

— the measures in the Bill risk negatively impacting on existing and future supply of rental accommodation; and

— the Bill has potential legal and constitutional implications which require careful consideration, including in relation to giving site owners sufficient time to regularise their affairs in advance of becoming liable to the vacant site levy.”

I thank Deputy O'Sullivan for bringing the Bill forward. I always welcome the opportunity to discuss developments in the rental sector and housing market generally, and the Bill covers a number of important areas. The Deputy will be aware that I have tabled an amendment. The Bill deals with three main areas: assessment of compensation in respect of land acquired by compulsory purchase; rent and rent reviews; and the vacant site levy.

I will deal section 3 of the Bill, the main purpose of which is to amend the current rules on assessment of compensation in respect of the acquisition of land for housing purposes by local authorities. This Bill provides for a major departure from the existing rules of compensation for compulsory purchase, whereby the basic valuation of land is that of open market value in favour of a system whereby land valuation would be determined by different mechanisms depending on the circumstances of each acquisition.

In the case of development land acquired, the Bill proposes that compensation for acquisition by a local authority would comprise the cost of such land calculated at current use value plus 25%, rather than open market value.

In the case of distressed land acquired, compensation would comprise the cost of land acquisition, the cost of any improvements carried out and a payment representing a return on the investment in the land concerned. In both cases, subject to the total compensation package, it could not exceed the open market value of the land.

While I understand the intention of this Bill, and I think section 2 is commendable in this regard, there appear to be practical shortcomings with the proposals in terms of its operation and legal shortcomings which put in question its constitutionality. The Bill would discriminate arbitrarily between a landowner who could sell development land at open market prices and those affected by a particular decision of a local authority to acquire their land at the much lower current use value. While not made clear in the Bill, the extent to which lands acquired by local authorities could be passed on to some private developers at reduced prices but not to others could impact unreasonably on competitiveness within the building industry and, again, give rise to fairness issues. As we know, a CPO award incorporates not only the price of land but compensation for damages caused by disturbance, severance and other affects to retained lands. In practice, these can constitute a significant and even major part of the overall award. These grounds for compensation are not affected by the Bill, so the scope for overall cost reduction is overstated.

Part V of the Planning and Development Act 2000 was a serious and well directed intervention in this area. It enables local authorities to acquire up to 10% of zoned housing land at existing use value. This was previously 20%. It has been supplemented by a series of ministerial guidelines to assist local authorities in its implementation. In light of this experience, the proposed section 3 in the Bill before us, on its own, is unlikely to deal adequately with the complexity of compensation for compulsory purchase and help local authorities deliver more affordable housing in a realistic timeframe. The rights of local authorities to acquire land compulsorily are important instruments in facilitating public interest objectives relating to housing, water, roads and general development. It is essential, in the interests of the common good, that we get the right balance between the rights of property owners and those of public authorities. The fundamental question is whether, in current circumstances, this Bill would be an effective and workable response to the issue. I have my doubts.

I will move on to the changes to the vacant site levy proposed in the Bill. The vacant site levy was introduced with the aim of incentivising the development of vacant under-utilised sites in urban areas for both housing and regeneration purposes. As land is a finite resource, there is unquestionably a shared public interest in ensuring the most efficient use of land, especially in urban areas. There was extensive engagement between my officials and those in the Office of the Attorney General in developing the legislative proposals for the vacant site levy. The engagement focused, in particular, on individual property rights. My predecessor was involved in most of those discussions. While in certain circumstances the Constitution allows the State to delimit the property rights of individuals in the interest of the common good, such restrictions on land owners’ property rights must be reasonable and proportionate to the ends the legislation seeks to achieve. In particular, measures such as the vacant site levy must be introduced in line with the principles of fair procedures and administration.

The existing provisions were drafted and enacted on foot of this engagement and to reflect legal advice received. In this regard, the timeframes for the application of the vacant site levy - to be applied in 2019, but in respect of the year 2018 - are intended to allow site owners sufficient time and opportunity to initiate development or, alternatively, to sell their sites to another person to develop in order to avoid becoming liable to the levy, which ultimately facilitates the achievement of the primary objective of the measure. While the proposals in the Bill before us, including the bringing forward of these timeframes, may on initial consideration seem to be justifiable, it is important that an appropriate degree of proportionality and reasonableness is applied. It is considered that the existing timeframes achieve this balance.

No one would rather introduce a levy earlier more than I would. We are trying to get sites moving. However, I am not going to introduce something which I know is, according to the advice of the Attorney General, not legally sound. People will simply challenge it and we will lose. Everyone wants to end the hoarding of land for the purpose of increasing margins and profits while we have a huge demand for housing. That is what we are trying to do, but we are doing it as quickly as is reasonable and legal. That is the advice we have received. If I felt we could make the legal case for what Deputy O'Sullivan has sought, I would do it in a heartbeat, but I would need to have sound legal advice that we could do it. If we are going to levy or tax someone for inactivity on sites, we have to give them an opportunity to ratchet up activity, get finance and planning permission in place and go through tendering processes etc. Those things take time. We are trying to streamline all these things to try to ensure the time involved is shortened, but we need to be realistic about the idea that we could introduce a levy overnight and expect to get away with it legally.

The Bill also proposes to increase the rate of the levy from 3% to 5% of the market value and to restrict the circumstances where a reduced or zero rate of the levy may apply. This approach appears to be overly punitive. In a similar way to the timeframe provisions, the current rate of the levy is considered proportionate to the levy's objectives. The provisions relating to the application of reduced or zero levy rates were included to help alleviate the financial burden faced by owners of vacant sites which are subject to a site loan. In some cases the loan is greater than the market value of the site such as where there is a negative equity situation or the loan is greater than 50% of the market value of the site. Those site owners who purchased sites at peak prices in the boom years that have since reduced in value arising from the property crash in the late 2000s are examples of those likely to be particularly affected. Again, the intention of the provisions is to ensure that the levy provisions are fair and proportionate. I do not have a whole lot of sympathy for those who are buying on a speculative basis now. I have some sympathy for those who bought at the height of the market and are trying to develop but cannot make the numbers add up because of the amount of money they owe and are looking to repay. However, even those people will be affected by this levy and will potentially have to sell on land to someone who can afford to develop it.

Part 3 of the Bill deals with a number of issues in the rental sector. I know that Deputy O’Sullivan is committed to reform in this area and had significant involvement in the early stages of the Residential Tenancies (Amendment) Act 2015. A strong and viable private rental sector can play an important role in the housing market and our wider economy. It can provide a housing option to those who either cannot enter or choose not to enter the owner-occupied market but who still have sufficient means to meet their own accommodation needs. It can provide a housing option to meet rising demand and can promote flexibility and better alignment to a more mobile labour market, making it easier for individuals and families to pursue job opportunities or adapt their accommodation to changing family circumstances.

I hope the Government's strategy, which has been influenced by a consultation process that many of the parties in this House have contributed to in a pretty significant way, will be published next week. I need to get Government approval for it next Tuesday. It is not realistic for me to support a Bill in this House when we believe we will have a more comprehensive policy commitment that will involve some legislative change next week. My priority is to try to get a difficult balance right. We have to recognise that our core problem is a significant deficit in supply.

For this reason, significant increases are required in the number of social housing units and the number of properties available in the private rental market. We are starting to see some momentum in the property market. The number of planning permissions and commencements has increased, as has the number of properties coming into the market. The industry is gearing up in a way we have not see for some time. While we must manage this in a sustainable manner, we must also dramatically increase output from approximately 12,500 housing completions in 2015 to a figure of between 30,000 and 40,000 housing units per annum. We are a long way from achieving that target.

The danger is that excessive intervention in the rental market has the potential to undermine the growing appetite to invest in bringing vacant properties back into use and building new properties. At the same time, we must recognise the extraordinary pressures many tenants are under and I accept the arguments that are made in this regard. Nevertheless, I must try to balance intervention with the need to avoid killing off supply, as otherwise we will, year after year, introduce more and more emergency measures to address a lack of supply. In the political debate, we often hear only one side of this argument because there are more people involved and many tenants are under severe pressure from unsustainable rent increases introduced in the past two or three years. We are trying to listen to all perspectives and we will seek to strike the right balance next week. Deputies will have an opportunity to debate the rental strategy after we launch it next week.

Sinn Féin has introduced three housing Bills in recent months and weeks. The Labour Party Bill before us is also comprehensive and focuses solely on protecting and supporting tenants. While this is an important part of what we need to do, it is not the complete picture. We must also introduce supply measures which ensure the growth in the private rental market of the past 20 years can continue. The number of people in the private rental market has doubled in the past two decades and it will probably double again in the next two decades. If we do not meet this accelerated demand by providing new properties, pressure on the system will build. We are trying to reduce this pressure.

We have seen an over-reliance on the private rental market for social housing solutions. For this reason, we must build much more social housing and bring many more vacant properties into social housing use. We will have purchased more than 1,000 properties for this purpose by the end of the year, at a cost of more than €200 million. Almost 4,300 additional social houses will be provided this year through acquisitions, bringing voids back into use and building new social housing. This is a significant increase and more than 17,000 social housing solutions will have been put in place this year, many of them in the private rental market through the housing assistance payment and other provisions.

I look forward to introducing next week what I hope will be viewed by other parties as a reasonable balance in terms of what we are trying to achieve from the point of view of continuing to encourage supply and landlord investment, while at the same time supporting and recognising the pressures many tenants are under.

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