The government's updated draft for the Planning and Development (Land Value Sharing and Urban Development Zones) Bill 2022 proposes a 30% Land Value Share charge on designated development land. Its purpose is to discourage land speculation and minimize the impact of property prices on buyers. This article examines key provisions, including the Land Value Sharing mechanism (LVS) and Urban Development Zones (UDZ). The LVS requires developers to pay an additional planning levy of up to 30% of the land's value increase for commercial planning permission. The UDZ designation grants the government authority to allocate unused land for future development. Stakeholders should monitor the bill's progress and seek expert guidance for potential project and investment impacts.
Ireland: The Planning and Development (Land Value Sharing and Urban Development Zones) Bill 2022 – A Recent Update
The government's new draft Planning and Development (Land Value Sharing and Urban Development Zones) Bill 2022, which was updated on 13 April 2023, provides for a new Land Value Share charge of 30% on the difference between existing-use value and the market value of land that has been zoned for development by planning authorities. The revised Bill is set to have a significant influence on land transactions in Ireland with the aim of reducing land speculation that has been cited as being an influence on property prices and can result in higher costs for purchasers. In this article, we will delve into the key provisions of the Bill, its objectives, and the potential impact on landowners, developers, and shareholders.
1. Key Provisions of the Bill
Land value sharing mechanisms are central to the Bill and are designed to capture the increases in land values resulting from public investments in infrastructure and services. The revised draft proposals include several significant changes to the Land Value Sharing contribution, which were informed by an independent economic appraisal of the original proposal released in December 2021, as well as input from the Office of Attorney General, the Valuation Office and other shareholders. The LVS scheme will see the introduction of a further planning levy for developers, which will be in addition to existing planning levies, such as development contributions under section 48, and agreements under Part V, of the Planning and Development Act 2000 (as amended). This revision is contrary to the original suggestion that the charge would replace existing development levies.
The payment of the LVS contribution would be a condition of a planning permission for a commercial developer, and the rate of contribution would be up to 30% of the uplift in the overall value of the land. The proposed LVS Bill is expected to apply to all lands that are zoned for residential use or mixed-use, and will act as a statutory charge on zoned development land. The initial General Scheme of the Bill referred to newly zoned land and Urban Development Zones (“UDZ”); however, it is now proposed that LVS will apply to all types of lands, and therefore will extend to commercial and industrial development zonings over time.
The assessment of the increased value of re-zoned or designated land will take into account the existing use value of the land prior to re-zoning or designation and the full market value of the land following re-zoning or designation. The valuation of the lands may be pro-rated based on the portion of land subject to the planning permission application. The local authority will conduct a valuation of the land’s current use value prior to re-zoning or designation. In the event that a developer lodges a planning application for the lands, they will be required to provide a market report that includes the current market value as part of the application. The planning authority will conduct its own valuation based on the current use. If the planning authority decides to grant planning permission or attach a planning condition, the developer will be required to contribute up to 30% of the increased land valuation.
The Bill proposes that land value sharing will come into effect on staggered dates for land acquired at different times. For land acquired on or after 21 December 2021, LVS will take effect from 1 December 2024. For lands acquired before 21 December 2021, LVS will take effect from 1 December 2025. The Department of Housing anticipates that from March 2026 onwards, the LVS requirements will be extended to lands zoned for commercial and industrial use.
The second initiative under the General Scheme empowers the government to designate lands as Urban Development Zones (“UDZ”) to ensure that unused land is made available for future development. UDZs will be identified by the relevant planning authorities based on specific criteria such as the availability of land, the potential for future growth and development, and the need for infrastructure and services in the area. After the land has been designated as a UDZ, the land cannot be re-zoned and may indeed be subject to a compulsory purchase order. The lands must comply with the planning framework and delivery scheme within one year of designation as a UDZ.
The Minister for Housing will require planning authorities and regional assemblies to identify potential candidate UDZ sites. The process involves submitting initial proposals with information including the location of the site, the indicative quantum of development and the indicative intrastate requirements. The Minister will issue a recommendation for proposals that are potentially suitable for candidate UDZ designation. The relevant planning authority will then designate the land as a candidate UDZ, with a candidate UDZ planning framework as part of the adopted development plan. Approval may then be sought for a government order to designate the area as a formal UDZ. The planning framework will establish the key principles for development including zoning, objectives for the overall area and sub-areas, indicative quantum of development, key infrastructure requirements, critical land required for infrastructure, and likely infrastructure delivery mechanisms. These proposals are a significant departure from existing Strategic Development Zones (“SDZ”) provisions provided for in the initial draft of the Bill.
The Planning and Development (Land Value Sharing and Urban Development Zones) Bill 2022 contains several key provisions that will shape the future of urban development in Ireland. The LVS scheme has received mixed commentary with many in the development sector arguing that with the existing uncertainty in the property market, the new proposals set out in the 2022 Bill may lead higher development costs, making construction economically unviable resulting in disruption to the supply of much needed housing. Developers will need to factor in the LVS contribution in addition to the existing Part V contribution and development levy costs when planning their projects. However, it is worth noting that the exclusions for small developments and social, cost rental, or affordable housing schemes may provide some relief for developers. As the Bill continues to progress through the legislative process, stakeholders should keep a close eye on further developments and seek expert advice to navigate the potential impacts on their projects and investments.