I thank the Chair and the clerk to the committee for allocating time for detailed scrutiny of the Urban Regeneration and Housing (Amendment) Bill 2018. The Bill was introduced on First Stage in June 2018 and passed Second Stage in July 2018 where it was supported by all Opposition parties and Independents. The Government did not oppose it at that time.
I also thank both Professor Drudy and Mr. Reynolds for agreeing to act as stakeholders and I look forward to their presentations. I also thank Mr. Oonan, who wrote the Bill. The Bill amends the Urban Regeneration and Housing Act 2015, which I will hereafter refer to as the 2015 Act, which introduced the concepts of the vacant site levy and vacant site register to deal with the problem of land hoarding. At the time, the introduction of a levy and a register for vacant sites was encouraging, however the subsequent legislation to enact the levy was inadequate and full of loopholes. This amendment Bill seeks to plug some of these holes.
Overvalued development land has been having a detrimental effect on how we supply housing in Ireland for over half a century and I have experienced it at first hand. I set up my own building company in 1989 and began purchasing land in the mid-1990s. To give the committee an example of the land increases we saw during the Celtic tiger, in 1997 I bought a fifth of an acre site in Dublin for £150,000. In 2004, I bought another fifth of an acre site in Dublin for €4.8 million. In seven years, the price of development land in our capital city had increased more than thirtyfold and, unfortunately, land prices are getting back to similarly exaggerated levels. The site I bought in 1997 was in a so-called better area than the one for which I later paid €4.8 million.
The purpose of the Bill is to disincentivise landbanking and land hoarding with a view to addressing the overall problem of the price of development land in Ireland and the effect it has on the property market. The main provisions of the Bill provide stricter definitions for what constitutes a vacant or idle site, increase the vacant site levy and remove certain exemptions in relation to the levy, remove three of the four appeals allowed under the 2015 Act and provide an option for the owner of the site deemed vacant to enter into negotiations with the relevant local authority or State agency to sell the site for a percentage of its value. We received correspondence to the effect that we may be subject to a money message because of that last provision. That was included to ease the pain for people who are sitting on sites so that, rather than pauperise them, they are given an out that is financially fair if they find themselves in financial difficulty.
Section 4 of the Bill amends section 5 of the 2015 Act and provides for stricter definitions for what constitutes a vacant or idle site. Sites will now be deemed vacant if they meet the following criteria: a site where planning permission for a development has exceeded 12 months and no commencement notice for development has been issued; a site where a commencement notice for a development has been issued and 36 months have elapsed without the completion of the site in question; a site where any unauthorised use or unauthorised development is occurring; and a site which is being utilised on an authorised temporary basis for an activity other than development.
Fianna Fáil pointed out in the Chamber that the criterion for a site where a commencement notice for a development had been issued and 36 months have elapsed without the completion of the site in question might cause a difficulty because a development could genuinely take more than 36 months to complete. The phrase "substantial completion" could be inserted to capture a situation whereby people start a site but make no effort to finish it because they do not want to build out that site at that particular time. We want to catch those in the net because that is, obviously, a form of land hoarding.
Section 4 is the most important section of the Bill. The 2015 Act states that a site is vacant if the majority of the site is vacant or idle. It sounds almost Kafkaesque. This broad definition has been taken advantage by site owners and has made it difficult for both the local authorities and An Bord Pleanála to determine vacancy and I will give two examples of this at a later stage.
Section 11 amends section 16 of the principal Act and provides that the vacant site levy shall be 25% of the market value of the vacant site. The exemptions in section 16 of the principal Act have all been removed. Those state that where the value of the mortgage or other security on the site is greater than the market value of the site - in other words a negative equity situation - a zero rate of levy shall apply, or where the outstanding amount of the site loan is between 75% and 100% of the market value of the vacant site on the date of its determination, a reduced rate of 0.75% levy shall apply, or where the outstanding amount of the site loan is between 50% and 75% of the market value of the vacant site on the date of its determination, a 1.5% rate of levy shall apply. The levy of 25% is applied regardless of whether there is a loan, mortgage or security on the site in question.
The first point to note is that following the enactment of the Planning and Development (Amendment) Act 2018, on 19 July 2018, these exemptions relating to a loan or mortgage have been removed. That is a welcome action by the Government. Perhaps they listen to us sometimes after all. At the time the 2015 Act was debated, I repeatedly told the Government that no good business person has a site that is not in some way mortgaged or used as security, and worse still, there is anecdotal evidence that site owners availed of these exemptions by using different companies under their control, in essence, to loan themselves money, thus becoming exempt from the levy and this has come to fruition through the sparse numbers on the vacant sites register, something that Mr. Mel Reynolds might touch on during his submission.
This means that the main amendment now to section 11 is the increase of the levy to 25%. The levy currently sits at 3% and will move to 7% in 2020. Some may consider that 25% is too high a levy, but the goal of this legislation is to disincentivise, and 3% or even 7% will not force land hoarders to make use of their land.
As well as increasing the levy to 7% in 2020, the Government has also introduced a clause giving the Minister power to vary the levy rate by way of regulations having regard to increases or decreases in the CSO property price index and such regulations must be approved by both Houses of the Oireachtas. However, any increase in the levy rate above 7% must be subject to further primary legislation. This basically means the Minister can lower the levy but not increase it. If this Bill were to reach Committee Stage, an amendment allowing the Minister to vary the levy of 25%, by either by decreasing or increasing it, having regard to the current state of the economy, should alleviate some concerns about the rate of the levy.
Section 12 inserts a new section, which provides that where a site has been deemed vacant, the owner or owners of the site in question, prior to paying the 25% levy, may enter into negotiations with the relevant local authority or State public body, to sell the site for up to 60% of its value, as determined by section 12, if the relevant local authority or State public body deems the site viable for the supply of housing within its remit. The owner or owners of the site in question, after paying the 25% levy for year one, may again seek to enter into negotiations with the relevant local authority or State public body to sell the site for up to 40% of its value.
On Second Stage, the Minister of State, Deputy John Paul Phelan, appeared to put this option in the category of compulsory purchase orders, CPOs, but that is not the case. It is merely an option for a site owner to explore selling their site to a local authority or a State body, but importantly, both parties must agree.
In terms of examples, as I have stated, a key problem of the 2015 Act related to what constituted a vacant site. The definition simply said a site is vacant if the majority of it is vacant. This has allowed both public and private site owners to be creative when they met with a request by a local authority with regard to a site in their possession. I will give two examples of this, one in public ownership and one in private.
A site adjacent to Central Bank currency centre in Sandyford and owned by the bank was placed on the vacant sites register by Dún Laoghaire-Rathdown County Council in 2018. The site is described as being irregular in configuration and relatively flat, it covers an area of 4.67 ha and is valued at €22.5 million. The site is bounded to the north by sports pitches and to the south by the M50 slip road. To the west, the site is adjoined by existing residential development and to the east by the main complex of the currency centre. There are no structures on the site and it is zoned objective A to protect and-or to improve residential amenity in the Dún Laoghaire-Rathdown County Development Plan 2016-2022. The Central Bank appealed its inclusion on the register to An Bord Pleanála and argued that: "The site creates a security buffer enabling surveillance particularly of adjoining public roads and therefore are not vacant or idle but serve a very clear and critically important purpose and rationale for treating this part of the holding in a different manner to other undeveloped parts of the landholding which also form security buffers is unclear." Unfortunately, An Bord Pleanála accepted this argument, indicating it was bound to interpret a vacant site under section 5 of the 2015 Act. If stricter definitions were to apply to what constituted a vacant site, an argument such as this would not be successful. Making the argument that the site is used as a security buffer would fall under the category of "unauthorised use" in our Bill under section 4. This example also highlights the worrying approach of a State entity to land under their control in the midst of a housing crisis.
With respect to the Irish Province of the Order of the Carmelites, the second example relates to a site owned by the Carmelites, valued at €21.5 million, approximately 3.46 ha in size, located to the east of Ballinteer Road. The site is largely flat with level changes to the north and is adjacent to and to the rear of the property known as Gort Mhuire, which comprises a large period property. The Order of the Carmelites argued that it had planning permission for a car park on the site and it was, therefore, not vacant. The car park in question is currently not in use and does not cover the majority of the site. Although it was accepted by An Bord Pleanála that the car park was not in regular use, it stated it still had planning permission, and added that due to the inclusion of a permitted car park area within the boundary of the vacant site, the board considered that it was appropriate that a notice be issued to the planning authority to cancel the entry on the vacant sites register. Under our Bill, the car park would fall into the category of "authority temporary basis for an activity other than development" under section 4.
These two sites, which continue to lie vacant in a housing crisis, highlight the problems with the 2015 Act. Arguing that a site is in use because it acts as a security buffer or contending that an unused car park means a site is in use illuminates the current loopholes available to site owners with a bit of imagination and it does not require much.
As always with legislation concerning private property, constitutional issues arise. This is due to the prominent place private property holds within our Constitution under Articles 40.3.30. Unfortunately, the Government constantly hides behind both articles when legislation concerning property rights is presented by Opposition Deputies. During Second Stage, both the Minister of State, Deputy English, and the Minister of State, Deputy Phelan, stated: "Previous legal advice received, indicates there are significant concerns about the constitutionality of specific provisions of the Deputy's Bill, which propose to dramatically increase the levy from 3% to 25% of the market value of a site, remove the important and fair appeals provisions in particular circumstances...". This statement would appear to show that the Ministers of State are using previous legal advice to interpret my Bill, which is never a good idea, and I note neither specifically referred as to whether advice was received from the Attorney General.
We have secured legal advice with respect to the Bill from Mr. Paul McGarry, SC, former chairperson of the Bar Council, which I have shared with committee members. I will not attempt to bring them through the advice, but the basic premise of it is that none of the provisions could be labelled as unconstitutional, and with regard to the imposition of a 25% tax on site value, Mr. McGarry states:
It seems to me that the issue is not about whether the provisions constitute an unjust attack on the right to private property. This is because the issue of valuation is linked, not to ownership, but to the concept of "development". Permission for development is granted by a local authority or An Bord Pleanála
...that value has already arguably been inflated by the grant by the State of the permission to develop or possibility to develop. Any infringement argument has to be seen in this context. Since the authorities state that licences or permissions come with the proviso that they may be interfered with in the common good (and subject to the principle of proportionality), there should in my view be no difficulty in justifying the measure.
We are all aware of the infamous money message, which under Dáil Standing Order 179(2) provides that if a Bill involves the appropriation or revenue or other public moneys, "Committee Stage ... shall not be taken unless the purpose of the appropriation has been recommended to the Dáil by a Message from the Government." It appears the Ceann Comhairle has determined this Bill requires a money message, due to the provisions of section 12. As I have outlined, the section is entirely optional and can only be exercised with the agreement of both the site owner and local authority. I ask the committee to examine this ruling by the Ceann Comhairle, as it would be unfortunate if the Bill were not to progress due to this one element, as the key provisions of the Bill - stricter definitions of what a vacant site is, removing the multiple appeals, and increasing the levy - must be implemented if the vacant sites levy is to achieve its goal of putting an end to land hoarding.
I thank the Chairman and the members for their attention and I will gladly answer any questions they have.