LAST UPDATE | 26 Sep

THE ECONOMIC & Social Research Institute has said the proposed residential zoned land tax should be implemented without delay.

The ESRI today released its Quarterly Economic Commentary for Autumn 2024 and noted that the land tax has been identified as a means to target “land hoarding in the residential market”.

It said that reducing the cost of residential land is “one practical way the Government can improve the efficiency and productivity with which housing is supplied to the market”.

Residential Zoned Land Tax will be targeted at unused land, which has been zoned or classified as a site for housing.

The tax would include mixed-land sites, where other services may also be built on the site, and the rate is set at 3% of the land’s market value.

The market value is self-assessed by the landowner.

While Green Party leader Roderic O’Gorman last month acknowledged that the 3% rate was significantly high, he added that it is designed to make it so those who are seen to be “hoarding” land pay a fee on the unused land, develop housing on the site or sell it on to someone who will develop the land.

However, farmers believe that the fee unfairly targets them as some of their land may go unused for particular portions of the year.

The measure was announced in Budget 2022, and there was a long lead in time to allow landowners to be out on notice.

It was planned for the new tax to kick in in February, with bills coming due next May.

However, Taoiseach Simon Harris last month said “no active farmer is going to pay a residential land tax” under his Government, and warned that further delays in implementing the tax were possible.

Harris said the Government will collectively decide on the approach taken to the matter in the Budget on 1 October.

In its Quarterly Economic Commentary, the ESRI acknowledged that some debate has “focussed on the difficulties which some farmers may experience if the tax were to go ahead, as they would be liable for the tax on land used for agricultural purposes”.

Despite this debate, the ESRI said it is “crucially important that the implementation of this tax proceeds immediately”.

It said that addressing land prices is “arguably the only way policymakers can significantly reduce the cost of supplying a house”, as most other cost elements, such as labour and materials, are broadly outside the control of the Government.

“By addressing possible land hoarding, the price of land can be targeted, thereby potentially reducing a cost of production which, typically, accounts for approximately 15 to 20 percent of the cost of a residential unit,” said the ESRI in its commentary.

Speaking on RTÉ’s Morning Ireland, co-author of the report Kieran Quinn said it’s important that the tax is “brought into being as quickly and as efficiently as possible”.

“That would facilitate land to come on stream, and ultimately that would have an impact in terms of reducing the cost of housing and providing housing and that’s a key policy issue at the present time, to deliver as much housing as we can.”

Asked by The Journal this morning about the ESRI’s remarks, Green Party leader Roderic O’Gorman said that he welcomed the research group’s support for the measure.

“I don’t have any detailed update other than engagements with the Department of Finance and indeed, the Department of Housing are ongoing,” he said.

Asked if the tax will be included in this year’s budget, O’Gorman told The Journal: “It’ll have to be part of the budgetary package. Yes.”

Includes reporting by Muiris O’Cearbhaill