Two key Government housing initiatives, land value sharing and urban development zones, are expected to have significant implications for landowners and developers. They are contained in the general scheme (draft heads) of the Planning and Development (Land Value Sharing and Urban Development Zones) Bill 2022 that was published by Government on 13 April 2023.
‘Land value sharing’ requires a commercial developer to share with a local authority 30% of the increase in the value of land that is re-zoned for certain uses or is situated in an ‘urban development zone’. The developer will pay the sum to the local authority as a levy conditional to a grant of planning permission in respect of that land. The levy will be used for the provision of public infrastructure and services.
The second initiative empowers the Government to order lands be designated as ‘urban development zones’. This is to ensure that land which is not being utilised is made available for development. Once designated, the lands:
- Cannot be re-zoned
- May be compulsorily acquired, and
- Must be subject to a planning framework and delivery scheme within one year of designation
Land value sharing
If enacted, the Bill provides that land value sharing, or LVS, will come into effect on staggered dates for land that has been acquired at varying times, as follows:
- on or after 21 December 2021, LVS to take effect from 1 December 2024
- before 21 December 2021, LVS to take effect from 1 December 2025
- in respect of an application for planning permission on all other land which satisfies the relevant criteria, on 1 December 2026
LVS will only be triggered once planning permission is granted by a planning authority in respect of qualifying land, ie land that meets the relevant criteria. It appears that this will include where An Bord Pleanála grants planning permission following an appeal of a grant made in respect of qualifying land before the introduction of the Bill.
Land that satisfies the relevant criteria is land that is re-zoned:
- Solely or primarily for residential use, or
- For mixed use including residential use, or
- For commercial or industrial uses, or
- Within an urban development zone, or
- Within a strategic development zone.
Calculation of increased value
The calculation of the increased value of re-zoned/designated land will be carried out by reference to ‘existing use value’ and ‘market value’ and may be pro-rated to the portion of land that is subject to an application for planning permission.
Existing use value means the value of land prior to re-zoning/designation and assumes that it would be unlawful to carry out any development in relation to that land, other than exempted development.
Market value, on the other hand, is the value of the land following re-zoning/designation, based on an arm’s length transaction entered by two willing and prudent parties, and shall not factor in any value associated with any extant planning permission in relation to the land in question.
Circumvention of LVS
LVS does not apply to a residential development consisting of less than five housing units, or a commercial development of less than 500 square metres gross floor space. To prevent LVS being circumvented, developers will be required to provide, as part of the planning application, a statutory declaration confirming, among other matters:
- That the application does not attempt to avoid LVS
- Particulars of the legal and beneficial ownership of the land for the five year period preceding the application
- Particulars of any interest the applicant has or had in any land in the immediate vicinity of the proposed development.
It will be an offence to provide any information in the statutory declaration that is false or misleading, punishable by a fine up to €500,000 and/or five years imprisonment.
A planning authority may refuse planning permission if it reasonably believes that two or more persons are acting in concert to try to avoid LVS.
Urban development zones
Creation of urban development zones
Urban development zones will be created by a prescribed process that will require planning authorities or regional assemblies to identify lands suited to development that would be of significant economic, social, or environmental benefit to the State and the common good. Based on submissions made, the Minister for Housing, Local Government and Heritage may recommend that a planning authority commence a process identifying the lands as candidate ‘urban development zones’. This will require the planning authority to identify the lands as an urban development zone in its county development plan, by amendment or otherwise, following public consultation. In addition, the planning authority must also implement a planning framework and development scheme setting out the types of development which may be permitted and other scheme specific proposals.
After the local authority has completed that process, the Government may by order designate all or part of the candidate urban development zone as an urban development zone to facilitate such development.
Compulsory acquisition of urban development zone lands
A planning authority or development agency may compulsorily acquire any land within a candidate urban development zone or within an urban development zone. A prerequisite for compulsory acquisition is that the opinion must be held that the acquisition is required for public infrastructure, facilities and related measures in accordance with the relevant planning framework.
Compulsory acquisition must be done on notice to all affected parties and be subject to an objection process. Where an objection is made, the compulsory acquisition may only be done with the consent of An Bord Pleanála. Once a compulsory acquisition is approved, a vesting order is issued in favour of the planning authority or development agency.
Compensation for compulsorily acquired lands
Any person with an estate or interest or right in compulsorily acquired land immediately before a vesting order is made, may apply to the planning authority or development agency no later than 12 months after the making of the order for compensation in respect of the estate, interest or right. The relevant authority or agency shall pay an amount equal to the value (if any) of the estate, interest or right, less any land value sharing contribution that might be payable.
The LVS scheme will spell the introduction of a further significant planning levy for developers. This will be in addition to existing planning levies, such as financial contributions pursuant to section 48 of the principal act, and agreements pursuant to Part V of the principal act.
Compulsory acquisition of land may be required to ensure that the objectives of the UDZ and the critical land required for infrastructure, identified within the candidate UDZ framework incorporated into the development plan. Provision for the compulsory acquisition of land where a landowner has failed to develop land, notwithstanding the housing need in the area is also included.
As these initiatives will have to follow statutorily prescribed implementation processes, it is likely that that they will give rise to judicial review proceedings in the High Court. This is at a time when the court is already dealing with an unprecedented amount of planning cases.
For more information, please contact a member of our Planning & Environment team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.