Property developer warns of 'unintended consequence' of new land tax impacting house prices 

“We haven’t taken these appeals lightly. I think that there’s an extra layer of work on developers, and on the local authorities, and now An Bord Pleanála, and all of these add to the cost of housing,” he said.

Moreover when the tax itself – known as the Residential Zoned Land Tax (RZLT) - is applied next year, developers whose sites fall within its scope will be forced to pay 3% of their market value. The new tax is aimed specifically at lands which have benefitted from investment in services and are capable of being developed for housing, but remain idle. Where lands are taxed, that cost is also likely to be passed on by developers to the end-purchaser.

Mr O’Flynn, who heads up the O’Flynn Group, said while he supported the new tax in principle, it was becoming a tax on residential development.

“In principle, I welcome the tax as it was meant to be a tax on hoarding land. If land is zoned, it should become available, and on that basis – as land is our key raw material - why wouldn’t I be in favour of this tax?

“However the way this tax is being implemented, it’s becoming a tax on development, which is only going to add further to the end-purchaser buying houses. This was never intended, nor should it be.” The O’Flynn Group is among a number of big property developers to have lodged multiple appeals with An Bord Pleanála challenging the inclusion by local authorities of their lands in maps which designate sites on which the new tax may be imposed from next year. Unsuccessful appeals could lead to costly judicial reviews.

Asked if he was considering seeking leave to apply for a judicial review in the Naas Road case, Mr O’Flynn said: “We’re currently considering the implications of the decision and what options, if any, are open to us.” The group was granted 10-year permission to develop the c18 acres on the Naas Road in April 2021, which will deliver more than 1,100 apartments upon completion. The group bought what is known as the former Nissan site about 15 years ago.

In considering the Naas Road appeal, the board’s inspector said that the land “is within an established urban area with services available and no capacity or other reasons have been identified that would prevent the development of these lands for residential purposes”.

However Mr O’Flynn said the Naas Road site had “serious infrastructure difficulties”. Failure to get it excluded from the tax would cost him in the region of €1m per annum, he said.

While his group has succeeded in getting the bulk of its sites delisted, the planning board has yet to adjudicate on three of its Cork sites. They include land at the adjoining Drake’s Point/Bridgewater schemes in Crosshaven; land at the group’s Ballinglanna scheme in Glanmire and land off the Ballyhooly Road in Ballyvolane where the group has permission to build c280 units.

In relation to the Crosshaven land, Mr O’Flynn said it was “open space which we believe should never have been included, the developments are finished”. Both schemes delivered more than 200 homes apiece in the Crosshaven area, with plans to add 24 townhouses to the Drake’s Point scheme under appeal.

In relation to the proposed Ballyvolane scheme, the developer said the land in question was “road reservation land” and therefore should not have been included in the site-designation maps. 

The Ballinglanna land, Mr O’Flynn said, was “primarily to do with open space”. More than half of the 600 units planned for Ballinglanna have been delivered.

Mr O’Flynn said the group believed none of the three Cork sites should have been included in maps designating sites on which the new tax should be imposed. Decisions on all three appeals are currently running more than a month behind schedule. Mr O’Flynn said he is hopeful the appeals will be successful.

The developer also said there was a need for greater streamlining in how the new tax is applied, as he believed there was a lack of consistency in how different local authorities were implementing it. The tax also failed to acknowledge that not all development land is viable, he said.

“Viability is a big issue for some of these developments. If they’re not viable, we can’t develop them. And if they are not viable and you are paying a tax on them, they become less viable every year.” Sometimes developments were held up by infrastructural difficulties or phasing challenges he said, ie if all the homes couldn’t be built in one go.

A spokesperson for the Department of Housing said the issue of development potential of phased land which is identified in a statutory land use plan “has been raised by a number of stakeholders and this matter is currently being examined in detail by the Department and the Department of Finance, having regard to the need for a consistent approach to be applicable across the State.” Mr O’Flynn, who is a member of the government’s Housing Commissions, said while the concept of the tax is good “and it will help bring some land onto the market, I think it’s causing difficulties for the industry that were never anticipated”.

He added that landbanking is “an accepted practice in Ireland” but it had been “confused with the practice of speculators who purchase land and don’t intend developing it”.

“This was never meant to catch developers who are in the planning system, who are waiting for infrastructure, or held up for some reason or other. These are unintended consequences,” Mr O’Flynn said.

Responding to the developer’s concerns that the new tax could add to the cost of new homes, the department spokesperson pointed out that the government had announced measures earlier in the year to reduce the cost of house building, “by scrapping the development levies required to connect new homes with roads, water and other services, and subsidising development levies, saving up to the value of €12,650 per home on average”.

As regards the new tax, which falls due next year, it will be managed by Revenue, and charged each year on land that is zoned for residential use and has access to necessary services such as water supply, roads and lighting, but remains idle. As of February 1, 2024, owners of land designated to fall within the scope of the tax must make an RZLT tax return by May 23, 2024.

The tax was proposed under the government’s housing policy, Housing For All, with the aim of activating vacant land for residential purposes as part of the pathway to increasing new housing supply.