I wish to share my time with Deputy Burton.
The Labour Party welcomes the publication of this Bill and congratulates the Green Party on its production. It gives us an opportunity of debating in the House issues relating to the planning and development of this country. The Labour Party supports the general thrust of the Bill and will therefore vote for it tonight. There are, however, some points in the Bill with which the Labour Party would have some disagreement. These points could be ironed out if the Government were to allow the Bill to proceed to Committee Stage.
This Bill raises two fundamental issues. The first relates to the ownership of development land and its relationship to the zoning and planning process. The second relates to the zoning process itself. This country has seen massive development over the past 30 years. Towns and cities have greatly expanded, and even rural Ireland has been subject to development which in some cases is more appropriate to an urban context. The biggest beneficiaries from this development have been those fortunate enough to own land close to towns and cities whose land was rezoned for development. The zoning process, which is provided for in our planning and development Acts – an essential process that is basically a democratic provision in our planning legislation – has made overnight millionaires of a relatively small number of landowners. This has happened because the decision of the public authorities to rezone the land has, depending on the land's location, increased its value, in many cases by a factor of between 20 and 50.
In the view of the Labour Party, the potential for such windfall gains from the rezoning of land had a most negative effect on many areas of our society. Rezoning has contributed enormously to the high prices of houses which have prevented many young people on modest incomes from buying their own homes. It has contributed enormously to the added cost to the taxpayer of the provision of essential infrastructure such as roads, public transport, schools and other public facilities. It has motivated pressure on local authorities to inappropriately rezone land in many parts of the country. It is the single biggest factor behind the corruption of the planning process which is now under investigation by the Flood tribunal and which has in turn led to an undermining of confidence in local democracy.
This issue of the price, cost and value of rezoned land was the subject of an official Government report, the Kenny report, in the early 1970s. The issue was never dealt with. The only attempt to implement the Kenny report since its publication was a Private Member's Bill which was submitted to Dáil Éireann by my colleague, Deputy Quinn, in 1980.
The biggest effect of the windfall gains from the rezoning of land is to be seen in the price of houses. It is generally accepted that the cost of a site now amounts to almost 50% of the price of a house. This means that the purchaser of the average new house is now paying between €100,000 and €150,000 to whoever originally owned the site, which was probably worth little more than €1,000 in its original agricultural use.
The Housing Statistics Bulletin issued by the Department of the Environment, Heritage and Local Government graphically illustrates the changes. Using a 1991 base of 100, the bulletin compares the indices for private new house prices, the average earnings of adult workers, house building costs and consumer prices. Throughout the early 1990s, these indices were consistent, although house prices had begun to open a slight gap by 1996. Comparing 1995 with 2002 the following are the indices: In 1995, the CPI stood at 111 and by the end of 2002, it was 139. Average earnings in 1995 stood at 116, while for the latest date for which figures are available, the figure is 155. The house building cost in 1995 was 114. At the end of 2002, it stood at 170. The house price index stood at 116 in 1995, but by the end of last year had risen to a whopping 296. These figures tell us that house prices, which in the mid-1990s were consistent with inflation, earnings and the cost of building, have increased disproportionately against all three indices. The average price of a new house has increased in that period of time by more than five times the rate of inflation, more than four times the increase in average earnings and by more than three times the cost of building houses.
The most significant comparison here is with the cost of building. There is an urban myth that high house prices are due to the high earnings of bricklayers and others in the building trade, the increased cost of building materials, or even to the profits made by builders. This is true only to the extent that the increase in the cost of building exceeds the increase in average earnings. The real story is the outrageous gap which has opened up between the price of new houses and the cost of building them – a whopping 126 points according to the indices of the Department of the Environment, Heritage and Local Government. This gap is accounted for primarily by the price of building land. These official figures tell us that those who have profited from the high house prices over the past six or seven years have been the owners of building land, and those who have been speculating in building land.
At the very least, one would expect a Government which cared at all for the housing needs of its people to use taxation as its instrument to restore at least some of these windfall gains to the public, in the process calming the profiteering from housing. Instead, the present Fianna Fail-Progressive Democrats Government went in the opposite direction and reduced from 40% to 20% the capital gains tax on these super-profits from development land. The owners of development land have ended up paying a lower percentage in tax than many of the builders' labourers working on their sites.
The conclusion that profiteering in building land results in high house prices is not new. It was highlighted in the report of the Labour Party commission on housing in 1999. Some 30 years ago, the same conclusion was reached by the committee on the price of building land, which was chaired by Mr. Justice Kenny.
The Taoiseach recently indicated that he wants the issue of building land to be addressed by the All-Party Committee on the Constitution. What is required is not an examination of the issue by the committee chaired by Deputy O'Donovan, but a decision by Government as to whether it intends to do anything about the price of building land. If the Government is not prepared to accept the proposal made by the Green Party this evening, or the argument made by the Labour Party that the Kenny Report or some variation thereof should be implemented, it should introduce specific legislative proposals to deal with the issue.
I wish to refer to two points in the Bill presented by the Green Party about which I have some doubt. One relates to section 2 where it is proposed to remove the provision that there would be no presumption that land which is already zoned could not be changed in a subsequent development plan. As I recall, that provision was introduced to allow local authorities to downgrade the zoning of land without the fear of having to pay compensation. Prior to the introduction of this provision, if land was already zoned in a previous development plan which the owner had not developed and a local authority wanted to revisit the zoning, it could not do so without the fear of compensation. This is an issue that might need to be re-examined.
The other issue about which I have reservations is the provision for the variation of a development plan. There is already a provision whereby the agreement of three quarters of the members of a local authority is needed to make a material contravention. If we are moving to something higher than a simple majority, it should be at least consistent with what already applies to material contraventions. As regards a variation, is it a good idea to straitjacket a local authority in this way for a five year period? For example, in implementing a housing strategy a local authority might want to vary a development plan to meet the requirements of that strategy where there is considerable resistance to the provision of social or affordable housing in a certain area. It might be very difficult for a local authority to reach the type of threshold provided for in the Bill. Is it a good idea to remove that flexibility from a local authority?
