Development must be encouraged to fix housing crisis
Ireland’s housing shortage is well documented, and it is universally accepted that we need to dramatically increase our housing output, and quickly. As reported by the CSO in January, it is very disappointing that just over 30,000 homes completed in 2024, a decrease on the 32,695 units delivered in 2023 and some way short of the 40,000 projected pre-November election. In a local context, Cork City and County attributed to a combined 3,554 new completions in 2024, a slight increase from an already low base of 3,102 units in 2023. It is also worth noting that of the 30,000 homes completed, only a third were available for sale in the private market.
The new Programme for Government contains a mixed bag of proposals and recommendations, all with a view of ramping up the sector to build over 300,000 new homes by the end of 2030, to fall in line with the revised housing targets. This indicates the need to increase our housing output from 30,000 to 50,000 units a year, every year for six consecutive years. No easy feat given the record in recent years.
With a new Minister for Housing now in place, our elected representatives need to be brave and earnest in making the correct political and policy decisions, some of which may not win universal support.
On the positive side, the expansion of the First Home Scheme, the continuation of the Help to Buy Scheme, and the commitment to development land audits are to be welcomed, while in 2025 we will see more affordable purchase and cost rental schemes finally being delivered. However, some proposals may potentially impede housing delivery and prove counterproductive.
The Residential Zoned Land Tax (RZLT) is a new measure introduced by the Government and it came into effect on the 1st February this year. The aim here is to ‘encourage’ owners of land deemed suitable for housing development (principally land zoned and serviced for residential use, not affected by physical constraints) to essentially, either build homes on it, sell it to someone who does, change its zoning, or commence a non-residential development. The landowner ‘incentive’ is an annual tax of 3% of the market value of their land until they do so.
Cork City and County councils along with all the other local authorities produced maps identifying land that fits the criteria for RZLT, and said maps will be updated on an annual basis. The first liability date was 1st February 2025, and this is then payable by 23rd May 2025. Understandably owners of residential zoned land will need professional advice on land values and examine their options.
The logic behind RZLT has been likened to a carrot-and-stick approach: the stick is the tax to push landowners into action, with the carrot being the profits from housing development, to motivate them to follow through. In theory it makes sense, but the reality is far more complex. Rather than solving the problem, could RZLT become another obstacle in the uphill struggle to increase housing supply?
Viability and Planning Owning land is one thing, however developing it into viable housing is another. Viable housing projects require predictability, which in turn depends on a reasonable time frame to manage risks and costs. Ireland’s planning and infrastructure system, however, is overloaded, with approval for housing schemes often taking 3–5 years, or longer if planning is refused. During this time, costs can increase, and demand can shift, which threatens the viability of projects.
While the Residential Zoned Land Tax (RZLT) aims to boost land sales, it will likely increase the pressure on an already strained planning system, leading to more delays and additional costs for landowners and developers. Developers may also face an unexpected 3% tax on land they hadn't planned for, while dealing with the uncertainty of a 3 to 5 year build-out period.
Given the many existing taxes and costs associated with housing development—such as Stamp Duty, VAT, and Development Levies—adding another tax could potentially hinder the goal of increasing housing supply. The RZLT aims to combat land hoarding, but developers are more concerned with having enough viable land, not too much. Expanding the supply of zoned land would be a more direct solution, helping to lower land prices and reduce hoarding.
Ultimately, the impact of RZLT will become clearer in the next few years. If Ireland had a more efficient planning and infrastructure system, RZLT might make sense, offering a simple incentive to use land or pay for it. But in its current state, it may add complexity and costs to an already challenging process.
The real goal should be to make housing development easier, creating an environment that encourages building. This could include streamlining planning processes, supporting developers, and attracting investment. A more ambitious strategy, like the one Ireland used to attract global companies, could involve progressively incentivising landowners and developers to build the homes the country so desperately needs.
David McCarthy is Divisional Director, Sherry FitzGerald Commercial Cork
