On 14 April 2023, the Department of Housing, Local Government and Heritage released an update to the General Scheme to the Planning and Development (Land Value Sharing and Urban Development Zones) Bill. The draft rules with respect to the Land Value Sharing (“LVS”) contribution mechanism include a number of significant changes following an independent economic appraisal of the original proposal released in December 2021. The updated rules also reflect input from the Office of the Attorney General, the Valuation Office and other stakeholder engagement. Jim Clery and Carmel Logan of our Real Estate team explain the update in detail below.
Land Value Sharing: Features retained
Before considering the proposed changes to the LVS mechanism, it is worth highlighting many of the features of the original December 2021 version of the General Scheme of the Bill that are retained in the latest release. These include:
- The LVS contribution is intended to capture some of the uplift in value of land created by actions of the State, including zoning decisions.
- The payment of this contribution would be a condition of a grant of planning permission to develop the land.
- The rate of contribution would likely be 30% of the amount of the uplift in value targeted for capture.
- Phased payment arrangements may be entered into. A planning authority may also facilitate the transfer of land or the development of infrastructure by a landowner in full or partial discharge of LVS obligations arising.
- Local authorities would be charged with maintaining a register of lands subject to the LVS rules.
- Amounts received by local authorities under the contribution will be ringfenced as capital for the provision of public infrastructure, facilities and related measures.
Proposed revisions to the draft Bill
However, the updated proposals differ in a number of crucial ways, the effect of which is to expand the scope of the rules, introduce transitional rules, and change the interaction of the LVS contribution with existing State-imposed costs such as Part V obligations and development levies. Key changes in this regard include:
- Whereas the original General Scheme to the Bill had intended to capture the uplift in value associated with both the decision to zone land for residential use (or mixed use including residential) and the grant of planning permission, it is now proposed that the amount of the uplift would only relate to the uplift in value associated with the zoning of the land. The amount of the uplift would be determined by the following formula:
MV – EUV
- MV is the market value of the land, determined using capital gains tax principles, as at the valuation date without regarding to any extant planning permission in relation to the land, and
- EUV is the value of the land as at the valuation date assuming it would have been, and would thereafter have continued to be, unlawful to carry out any development in relation to that land other than exempted development (e.g., minor development for which planning permission is not required).
- The valuation date is the latest date that the lands have been zoned in a local area plan or county development plan, or designated as a Strategic Development Zone (“SDZ”) or Urban Development Zone (“UDZ”).
- 30% of this uplift would then be captured via the LVS mechanism. The proposals also include a mechanism whereby the Minister for Housing may, with the approval of the Houses of the Oireachtas, amend the rate having regard to a range of rates being not lower than 20% and not higher than 30% of the uplift.
- Whereas the original Bill had applied only to lands zoned residential, mixed-use including residential or Urban Development Zones, the revised Bill would also apply to lands zoned Commercial or Industrial, or designated as a Strategic Development Zone.
- In addition, the revised Bill would apply to zoned land regardless of when that zoning decision takes place (i.e., not just newly zoned lands).
- Transitional measures have been introduced such that the charge will first apply:
- For in-scope lands (other than those zoned Commercial or Industrial) acquired since 21 December 2021, with respect to planning applications lodged from 1 December 2024.
- For in-scope lands (other than those zoned Commercial or Industrial) acquired before 21 December 2021, with respect to planning applications lodged from 1 December 2025
- Applications to develop lands zoned Commercial or Industrial will fall within scope from 1 December 2026.
- The charge may also arise not just with respect to the first instance of lands being zoned in-scope. Rather, the charge would appear to be “refreshed” in each instance where lands are appropriately zoned in a new or revised local area plan or county development plan, or designated as falling within an SDZ or UDZ. It is not relevant whether the lands were previously so zoned or designated. The underlying liability associated with each contribution would then form a statutory charge on the land from the date the relevant zoning criteria to fall within scope of the charge are met (i.e., with the publication of each new local area / county development plan, etc.).
- However, it is worth noting that although a new charge would appear to arise with respect to each new or revised local area / development plan etc., such amounts would only fall due and payable in conjunction with a grant of planning permission to develop the lands, where its payment will form a condition on the grant of planning permission. A mechanism for voluntary prepayment of the LVS contribution before the grant of planning permission is also available.
- Whereas the Housing for All plan and original Bill had suggested that the charge would replace existing development levies, the updated Bill confirms that it will apply in addition to existing Part V and development levy costs.
- The revised Bill includes proposed exclusions from the charge for certain small developments. Specifically, the charge would not be imposed with respect to planning applications that relate to fewer than 5 residential units or commercial developments of less than 500sqm gross floor space. Provisions to prevent abuse of this exclusion are proposed.
- In addition, the charge should not apply to developments for social, cost rental or affordable housing schemes, or the conversion/reconstruction of an existing building to create one or more dwellings, provided that at least 50% of the existing external fabric of the building is retained.
- Local authorities will draw maps to highlight areas that meet the zoning criteria and which are identified as “substantially undeveloped”. Owners of such land will be required to submit a self-assessment of the EUV and market value of the site on the valuation date, as described above. The first of these maps will likely be published on 30 May 2024 (though it may be published earlier, depending on when the Bill comes into effect). As noted above, it appears that this requirement will likely be refreshed with each publication of a new or revised local area or county development plan.
- Although amounts received by local authorities under the contribution will be ringfenced as capital for public infrastructure, facilities and related measures, the requirement that such improvements and amenities be in the “vicinity” of the development in question appears to have been removed.
Significant increase in revenues predicted
The explanatory memorandum to the updated General Scheme of the Bill highlights that economic experts predict the LVS will result in significant increased revenues for local authorities, with greater than 50% of the combined uplift in value from zoning and planning permission likely to be captured on occasions via a combination of LVS, Part V and development levy costs.
The General Scheme of the Bill and its explanatory memorandum can be accessed via the Department of Housing, Local Government and Heritage website here. Alternatively, the documents can be accessed below.
Get in touch
If you have any queries on the possible impacts of this update to the Land Value Sharing Bill, please contact your KPMG client service team, or alternatively Jim Clery or Carmel Logan of our Real Estate team. We'd be delighted to hear from you.
Partner & Head of Real Estate
KPMG in Ireland
KPMG in Ireland