Michael Noonan has warned property developers that they could be hit with a more aggressive levy for failing to build new homes, as Nama revealed that land worth billions of euros was lying vacant when there was a critical shortage of housing.
The government has committed to introducing a levy equal to 3 per cent of the market value of vacant sites next year, but it is understood that it could hit developers with a more onerous penalty to tackle the issue of land hoarding. The finance minister said yesterday that he agreed with the suggestion that the levy should be “reasonably punitive”.
“The test is that it has to be proportionate to the social ends that you’re trying to achieve. Something notional wouldn’t achieve that. It will have to be measured very carefully so that it’s proportionate to the ends we want to be achieved and that it is sufficient to make sure that people are no longer sitting totally on an asset but they’re [also] sitting on a tax liability.
“There are aspects of the market which is making it more worthwhile to hold on to land in certain circumstances than to put it out there for building,” Mr Noonan said.
His comments followed the revelation by Nama that developers were sitting on land worth billions of euros that could be used for 50,000 new homes.
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Brendan McDonagh, the chief executive of Nama, the state’s bad bank, said there was a “huge issue” of developers hoarding land in anticipation of it increasing in value.
He said just 3,220 new housing units, or 6 per cent of the 50,000 homes envisioned when the land was sold, were completed or under construction.
“Everyone says Nama should release more land but we’ve released a huge amount of land and only 6 per cent of it is being built on,” Mr McDonagh said.
Since the beginning of the year, local authorities have been required to establish a register of vacant sites in their areas. The Urban Regeneration and Housing Act 2015 introduced the vacant site levy of 3 per cent which will apply from the beginning of 2019.
Simon Coveney, the housing minister, has said that the levy was designed to stimulate the construction of new homes. Sites on local authorities’ registers at the beginning of 2018 will be liable for the first year of the levy.
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The housing crisis has worsened over the past year with the failure to build new homes leading to annual price increases of 9.6 per cent. The average cost a new home was €249,444 in the 12 months to March.
Home ownership slipped to its lowest level since 1971 while the number of people in emergency accommodation rose 20 per cent over the last 12 months to 7,680 in April.
Mr Noonan said constitutional rights had prevented the government from introducing the levy sooner. The attorney general advised that a levy could not be introduced at short notice as it would infringe on developers’ constitutional property rights. “Notice has now been given,” Mr Noonan said yesterday.
Catherine Murphy, co-leader of the Social Democrats, said that the proposed site levy did not go far enough and called on the government to support an amendment to the legislation which would ensure developers would face higher levies.
“The Social Democrats have published a bill that would deal with land-hoarding. Our bill would mean that owners of vacant sites would face higher levies the longer the land remains undeveloped. It would also get rid of loopholes which currently allow landowners with high loans to avoid paying the levy,” Ms Murphy said. She criticised Nama for not attaching conditions to the sale of land. “Nama’s statements highlight the completely flawed role that it plays on housing supply. Nama’s role should be changed.
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“There is no point in Nama selling land off to the highest bidder and then complaining that it’s not being built on. Why on earth has Nama not set conditions to such land sales in the first place?” she said.
The Simon Community, a housing charity, has said the levy presented no deterrent. “The 3 per cent levy on derelict sites should be increased to deter further dereliction and to promote the reintroduction of these properties into productive use,” a spokesman said.