State to take half of increased value of land rezoned for housing

Brendan Burgess

Brendan Burgess

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State to take half of increased value of land rezoned for housing

Move is part of far-reaching measures to rein in speculation and cool property market
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The Government is to compel property owners and developers to pay the State up to half of the increase in the value of land when it is rezoned for housing under radical moves to rein in speculation and cool the market.

Very interesting proposal, but will it work?

If I had land, I would probably seek zoning for uses other than housing.

Or just sit on the land rather than apply to have it rezoned.

I think it will need to be accompanied by some form of Compulsory Purchase of land suitable for housing to make sure that the supply of land continues.

Brendan
 
What happens at the moment?

If I have a farm worth €500k as a farm and I get it rezoned for housing and sell it for €5.5m, how is the €5m capital gain taxed?

Is it the normal 33% or is there some other tax on development profits?

Under the new scheme, will I pay €2.5m to the government and then pay CGT on the €2.5m net gain?

Brendan
 
Up to now what was the situation when a person sold (let's say) 10 acres for €5million, a neighbour just a few hundred yards away has the same acerage, but it's not inside the zone and only worth agricultural value. What tax would the lucky farmer have had to pay on the sale for €5mill?
 
Brendan you are assuming that a landowner applies to have land rezoned. In reality this is a local authority decision - although obviously land owners lobby they have no power over rezoning decisions.

In answer to your question about what tax land owners currently pay, they currently pay capital gains tax.
 
Mocame said:
Brendan you are assuming that a landowner applies to have land rezoned.
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A very good point.

So if I am a happy organic farmer with a farm worth €500k and I want to continue my lifestyle, but suddenly the Local Authority rezones it, what happens?

I presume that the "levy" will be paid only if I sell it.

Brendan
 
Mocame said:
In answer to your question about what tax land owners currently pay, they currently pay capital gains tax.
Click to expand...

I had some idea that there was an additional charge for development land? Maybe I am mixing it up with something else.

Brendan
 
It seems we've tried this before.
The National Asset Management Agency Act introduced a “windfall gains tax” on certain Capital Gains. This tax is charged at a rate of 80% in respect of a disposal of development land where both a rezoning and a disposal took place in the period beginning on 30 October 2009 and ending 31 December 2014.
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I'm currently renting and in the market to buy a home. I don't welcome these sorts of pricing interventions.
 
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Trying to construct a supply increasing argument: Does land banking decrease supply? this tax would make land banking less interesting; Hence newly zoned land might be more likely to be developed rather than banked?
 
To increase supply It would need to be accompanied with something to encourage/force folks to sell.

E g.
-high annual wealth or idle tax on zoned land
-zone land for 3 years only (so your opportunity for windfall is time limited)
-zone land and and cpo.


Edit: it seems the plan is to have some use it or lose it clauses
 
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"Draft laws, said to be highly complex, will be published in autumn. Government leaders aim to bring them through the Dáil and Seanad by early 2022."

Ok, I found a hypothesis on how this can have decent short term impact.

Imagine you owned zoned land, you now have a stong incentive to get planning quickly before this legislation is passed.
 
Please read the thread title before replying.

No need for another general discussion of housing.

Off topic posts have been removed.

Brendan
 
SPC100 said:
Imagine you owned zoned land, you now have a stong incentive to get planning quickly before this legislation is passed.
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Substitute 'rezoning' for 'planning' and you have a point. Except, in theory rezoning is not something you apply for - it's something that's done to your land by strategic planners, unswayed by lobbying.
 
"The value uplift on a development site will be tracked from the point at which it was zoned to the point at which planning permission is granted"

My point is that the threat of this tax may immediately increase supply of development land.

If you owned zoned land you now have an immediate reason to act.

From the article quote I assumed planning would be enough to avoid these new taxes. (Aside then the govt can 'declare success' with all these new planning applications)

Although maybe if you owned the land you would need to sell it to fully avoid the taxes.
 
I guess you are implying it will only apply to newly zoned land. And hence will not influence existing owners of zoned land?
 
'In the short term, the system will cover all new residential zoning or mixed-use zoning that includes residential development'

Ok so it will only apply to newly zoned in the short term.

Unless they plan a lot of new zoning, I think it would be better to increase the cost/incentives of existing zoned landowners.
 
Mocame said:
Brendan you are assuming that a landowner applies to have land rezoned. In reality this is a local authority decision - although obviously land owners lobby they have no power over rezoning decisions.

In answer to your question about what tax land owners currently pay, they currently pay capital gains tax.
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But they do. Not just agricultural land but also small parcels of land in urban areas currently derelict or formerly the location of houses or other buildings long since collapsed or otherwise destroyed. Much of these leap in value once rezoned (or PP applied for). I've seen cases locally where a local landowner had very small parcels of land, carved off their own properties, got PP for a decent build, and then sold on. Its a particularly good fundraiser for religious institutions with land to spare.
 
SPC100 said:
'In the short term, the system will cover all new residential zoning or mixed-use zoning that includes residential development'

Ok so it will only apply to newly zoned in the short term.

Unless they plan a lot of new zoning, I think it would be better to increase the cost/incentives of existing zoned landowners.
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The "use it or lose it" stipulation might be more useful, if actually properly enforced. But look around any urban area even in Dublin: the country is littered with invisible dereliction, both land and unused properties.
 
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