Sir, - While the Environment Minister's new proposals for zoning property development should increase the housing supply, the proposal to confiscate (for that's what it is) developers' land for low-cost housing looks like a quick fix gimmick for the next election.
This confiscation will have many negative consequences. Obviously, it will alienate the housing building industry, the last thing the country need at a time of a housing supply crisis.
It will mean postponement of marginally profitable housing developments until the builders' margin of profit necessary for development is restored. This will put upward pressure on house prices until confiscation costs are offset.
Even in profitable housing developments, as developers' profits are reduced to the extent that the confiscation costs cannot be passed through to the home buyer, fewer houses will be built. Some people may feel that developers can well afford the confiscation. That may be so for many big developers but nonetheless fewer houses will be built.
In the long run, the cost of the confiscation will be passed through to the house buyer, adding maybe as much as 10 per cent to house prices in areas such as Dublin, where land prices may contribute as much as two thirds of the total cost of a house. Should this cost be borne disproportionately by new house buyers, often financially struggling young families, instead of taxpayers in general?
The proposal will add considerably to regulatory costs for land valuations in both the private sector and local government. Given that development land and land in built-up areas suitable for redevelopment represent a considerably proportion of national wealth, a lot is at stake in these valuations. In the case of urban land, valuing land at its use value is very complicated, so sophisticated land valuation services and related legal services will be in great demand.
One likely effect of valuations is that land owners will have an incentive to change the use value of land merely to improve the confiscation price. Such activity, and any government attempts to regulate it, will add further to regulatory costs.
A simple alternative to this misguided proposal beckons: increase the capital gains tax on development land by, say, 10 percentage points and distribute the increase to the councils for building low cost housing. This would be fairer and far less arbitrary as land taxes levied in prosperous parts of Ireland could be distributed to the less prosperous parts. - Yours, etc.,
Patrick J. Slattery, Belgrave Road, Dublin 6.