Key Contacts: Angelyn Rowan – Partner  |  Hugh Cummins – Partner  |  Laura Mullen – Senior Associate

What is coming down the tracks on land value sharing and new ‘Urban Development Zones’ in 2022? Our construction team take a closer look.

In December 2021 the Minister for Housing, Local Government and Heritage published the General Scheme of the Land Value Sharing and Urban Development Zones Bill 2021 (the “Bill”). This Bill is a key part of the Government’s ‘Housing for All Plan’ to increase the supply of housing up to 2030.

According to the Bill one of the key purposes is to provide for the sustainable development of new and regenerated communities, well served by amenities, facilities and services. These gains will be enabled through the sharing of any increase in land value that occurs as a result of re-zoning decisions, so that the State retains a share of the increase.

Land value sharing

It is proposed that under the Bill, up to 30% of the value of the uplift will be retained by the local authority for the delivery of social and physical infrastructure. In practice, this will operate such that land zoned for residential use after the enactment of the legislation will be subject to a process whereby the market value of the land immediately prior to the re-zoning will be recorded in a public register and notice of same given to the landowner. This is referred to as the “current use value”. There will be an appeals process whereby the landowner can challenge the current use value attributed to the land. When a planning application is submitted to develop the land, the market value of the land will be assessed at that point in time (it appears from the definition of ‘market value’ that this will be assessed on the assumption that planning is granted). This value can also be appealed by the landowner. The Bill then provides that the planning authority may, when granting a permission for development on the land, include a condition requiring the payment by the landowner of the land value sharing contribution for “public infrastructure, facilities and enabling works benefitting development in the area”. This is a contribution equivalent to a percentage (up to 30%) of the difference between the current use value and the market value. The Bill allows for the transfer of land or the development of infrastructure by a landowner in full or partial discharge of the land sharing contribution.

This potential 30% value of the uplift that will be secured will be in addition to the existing Part V requirement that 20% of housing stock on a development is to be set aside for social and affordable housing under the Planning and Development Act 2000 (the “PDA”). The net result of the Bill in practice will be the capture by the local authority of up to 50% of the overall uplift in land value (i.e. land value ‘sharing’). The Department of Housing has stated that the percentage of the value uplift is being further examined through a detailed economic appraisal of the proposed measures. This appraisal will consider the potential for a range of proportions depending on the particular circumstances of different parcels of zoned land at locations across Ireland.

The Bill also broadens the current definition of ‘public infrastructure and facilities’ under section 48 of the PDA upon which development contributions can be spent by local authorities to include:

  1. the provision of green infrastructure to support decarbonisation initiatives and blue infrastructure to support flood defences and sustainable water management solutions;
  2. the provision of sites for healthcare, childcare facilities and centres for social, economic, recreational, cultural and environmental purposes;
  3. the general development of the community and for facilities for the elderly and for persons with disabilities;
  4. education, training and skills development to provide employment opportunities for the local community; and
  5. public realm works.

Urban development zones (“UDZ”)

Under the Bill, UDZs will comprise significant urban areas that are suitable for redevelopment or regeneration including housing. These designations will operate on a similar basis to the existing ‘Strategic Development Zones’ with an expedited process for planning approval. However, an UDZ will involve an infrastructure appraisal as part of the designation process and will be subject to a land value sharing mechanism similar to that described above.

An UDZ will be designated by the Government following receipt of a proposal for development by a local authority, the Land Development Agency or a designated activity company (otherwise referred to as a “Development Agency”) – in effect a master plan demonstrating the vision for the potential UDZ. The following are some features of UDZs under the Bill as currently drafted:

  • A Development Agency will be empowered to use statutory powers to compulsorily acquire land to deliver communal infrastructure in the UDZ;
  • An owner of any land within an UDZ cannot sell that land to another party without first notifying the relevant Development Agency of their intention to sell. The owner will be obliged to provide a right of ‘first refusal’ on the purchase of the land to the Development Agency;
  • Where land has been identified as ‘critical land’ in a planning and delivery scheme that has been adopted for the UDZ, the landowner is obliged to transfer the ownership to the relevant Development Agency with arrangements for compulsory acquisition and vesting where they do not comply. ‘Critical land’ is land identified by a Development Agency as being required for the provision of public infrastructure, facilities and enabling works in the UDZ.

A new ‘national register of zoned land’

The Bill also provides for the development of a national register of zoned land. This register will identify the uses for which land around Ireland is zoned and will include:

  • the ‘current use value’ relating to each parcel of land that a planning authority has freshly zoned for residential / mixed use residential development; and
  • the ‘current use value’ relating to each parcel of land situated within an UDZ.

The future of the Bill

It remains to be seen what form the Bill will ultimately take when

it is enacted as once it is laid before the Houses of Oireachtas for scrutiny it is likely to undergo significant amendment prior to enactment which is expected to take place before the end of 2022. One would expect that any scheme to allow for the operation of land value sharing between landowners and local authorities is likely to be the subject of much debate. The explanatory memorandum accompanying the Bill says that in developing these measures the State is “seeking to balance the rights of the individual to develop land with the exigencies of the common good”. Engagement with key stakeholders, expert advisory and a full economic appraisal of these measures will take place during 2022 with the development of the national register of zoned land taking place in the second half of 2022.

Philip Lee will provide further updates as the Bill works its way through the legislative process.