Proposed new legislation would impose a charge of up to 30% on landowners who benefit from a decision by a local authority to rezone land for housing.

The local authority would take a share of the difference between the original value of the land, and the value after rezoning.

The measure is contained in the general scheme of the Land Value Sharing and Urban Development Zones Bill 2022, which the Government has approved for publication.

The bill also provides for the designation of Urban Development Zones that have potential for significant development for housing and other purposes.

Revenue ring-fenced

The Department of Housing says that the plan is expected to result in “significant increased revenues” for local authorities. The extra revenue will be ring-fenced for spending on infrastructure to support housing.

“Under this legislation, communities will get a greater benefit from State zoning decisions,” said Minister for Housing Darragh O’Brien.

“Land Value Sharing will also influence land transactions, with the aim of limiting the speculation that affects land prices, and by extension, the cost of housing,” he added.

Infrastructure

An explanatory memorandum published by the Department of Housing states that “it is evident that the benefit conferred by the zoning of land for residential development results in significant uplifts in land values”.

It points out that the State is, however, responsible for developing much of the infrastructure that makes development of the land sustainable.

Under current arrangements, the State recovers some of the benefit attributable to the rezoning of land through social-and-affordable-housing obligations and development contributions.

“These measures apply only at the point of grant of planning permission, and therefore only materialise and become relevant only for the person who intends to develop the land,” the memorandum says.

Residential use

It adds that most of the benefit generally accrues to the original landowner, or subsequent landowners.

The bill proposes that the new Land Value Sharing (LVS) charge will apply to all land that is zoned for the purposes of residential use or mixed-use including residential (where residential is permitted in principle).

This will reflect only the increase in value associated with the initial decision to rezone.

Minister can amend rate

The rate of LVS is proposed to be “up to 30%”, but the bill includes a mechanism allowing the Minister for Housing, with the approval of the Houses of the Oireachtas, to amend the rate within a band of between 20% and 30%.

The measure will come into effect in respect of applications lodged from December 2024.

The department says that it will be extended to commercial and industrial development zonings from 2026.

Development contributions that are linked to the grant of planning permission will be retained.