How much of the purchase price of a new house is going to the govt as the Prt5 tax

JimmyVik

This came up in another thread but probably worthy of further discussion on its own.

Part 5 is 20% of new houses. I believe some political parties want this to be 30% or even 35%.
This is just a stealth tax on home buyers.

In cash terms if a house cost €300K to build, then all the buyers in the new development are paying €60k tax on the purchase of their new house at the moment and it will be €90k if its increased to 30%.

I believe most people dont actually realize that they are paying for this 20% and this is just one of the costs of new houses.

This also applies to new developments bought for renting. Who do people believe is going to be paying that tax. It is the renters of course.

Anyway, i dont know the exact figures, so was just wondering does anyone know if they are published anywhere? Wouldnt mind know exactly how many euro i would be paying for this stealth tax when buying a new house.

JimmyVik

JimmyVik wrote: »

This came up in another thread but probably worthy of further discussion on its own.

Part 5 is 20% of new houses. I believe some political parties want this to be 30% or even 35%.
This is just a stealth tax on home buyers.

In cash terms if a house cost €300K to build, then all the buyers in the new development are paying €60k tax on the purchase of their new house at the moment and it will be €90k if its increased to 30%.

I believe most people dont actually realize that they are paying for this 20% and this is just one of the costs of new houses.

This also applies to new developments bought for renting. Who do people believe is going to be paying that tax. It is the renters of course.

Anyway, i dont know the exact figures, so was just wondering does anyone know if they are published anywhere? Wouldnt mind know exactly how many euro i would be paying for this stealth tax when buying a new house.

If the tax didn’t exist the house prices would still cost the same.

Browney7

JimmyVik wrote: »

This came up in another thread but probably worthy of further discussion on its own.

Part 5 is 20% of new houses. I believe some political parties want this to be 30% or even 35%.
This is just a stealth tax on home buyers.

In cash terms if a house cost €300K to build, then all the buyers in the new development are paying €60k tax on the purchase of their new house at the moment and it will be €90k if its increased to 30%.

I believe most people dont actually realize that they are paying for this 20% and this is just one of the costs of new houses.

This also applies to new developments bought for renting. Who do people believe is going to be paying that tax. It is the renters of course.

Anyway, i dont know the exact figures, so was just wondering does anyone know if they are published anywhere? Wouldnt mind know exactly how many euro i would be paying for this stealth tax when buying a new house.

The state doesn't get the house for free. The benefit to the state is that they get a "discount".

The housing association or local authority do not get the houses for free they get a discount.

Peregrinus

JimmyVik wrote: »

This came up in another thread but probably worthy of further discussion on its own.

Part 5 is 20% of new houses. I believe some political parties want this to be 30% or even 35%.
This is just a stealth tax on home buyers.

In cash terms if a house cost €300K to build, then all the buyers in the new development are paying €60k tax on the purchase of their new house at the moment and it will be €90k if its increased to 30%.

I believe most people dont actually realize that they are paying for this 20% and this is just one of the costs of new houses . . .

No, no, no. This calculation would only be correct if the developer had to construct the development and then transfer 20% of the housing stock, for free, to the local authority. They'd then have to recover 100% of the cost of the development via the sale of the remaining 80% of the houses. But that's not how Pt V works at all.

As I understand it, Pt V entitles the local authority to acquire 20% of the land to be developed, not for free, but at its existing use value (e.g. farmland) as opposed to its value as development land. The developer is not obliged to construct any housing on the transferred land for free.

That's the basic obligation. Developers can vary it by entering into a Pt V agreement with the local authority under which, e.g., they transfer less than 20%, but they build houses on it. Or, they transfer 20%, and the local authority pays them to build houses on it. Or there are other options.

The exact amount that this will cost the developer varies, depending on the ratio between the existing use value and the development value of the land, and on the ratio between the land cost and the building cost in the overall development, and on whatever is agreed in the Pt V agreement. But in no case will it be 20% of the total development cost, or anything approaching that amount.

timmyntc

Deleted User wrote: »

If the tax didn’t exist the house prices would still cost the same.

If the tax didnt exist there would be more supply for the private market and prices would decrease slightly (or not rise as fast)

JimmyVik

As I understand it its supposed to be cost price. That is arbitrary, because the council go into negotiations with the builder.
Generally it works out to be 20% of the properties at the "cost price", which is inflated by the builder of course.

So now ordinary buyers can buy the remaining 80% of the houses/apartments.
We all know how the builders missing profit as well as the cost of the other 20% is going to be made up.
Of course its going to be paid for by the people who buy the remaining 80%.
Thats a stealth tax on the buyer as far as im concerned.
No wonder house prices are going up.

Anyway. are there published figures anywhere on how much the state have paid to a developer for this 20%?
And how much they add to the purchase price of the rest of the houses in the development, because you can be sure that its not the developer who is taking the hit.

Peregrinus

timmyntc wrote: »

If the tax didnt exist there would be more supply for the private market and prices would decrease slightly (or not rise as fast)

Mmm. Characterising the thing as a tax kind of poisons the well when it comes to talking about what it costs housebuyers, though. Any regulation of business activity tends to raise the costs of doing business (since it costs money to comply with the regulation) and so raise the cost to consumers of buying the goods or services which the business produces. But not everything that puts up prices is a "tax"; the characteristic of a tax is that it's intended to raise revenue for the government, and we should probably reserve the word for things that actually do that.

So we'll probably get a clearer, less emotional and more useful discussion of the economic impact of Pt V if we stop trying to bracket it with revenue-raising measures and simply ask what its economic effect is.

And that might be quite difficult to disentangle. As pointed out, there's a cost to complying with it. But this doesn't necessarily fall back entirely on housebuyers. It's an opportunity cost, meaning not that the developer actually pays out money, but simply that he forgoes the opportunity to earn some money. He buys the development site and, left to himself, he could earn a bucket of money by developing 100% of it and then reselling but, as it is, he can only develop and resell 80% — he has to sell 20% to the local authority at existing use value. So he doesn't pay over the profit he would have made from developing and reselling that 20%; he just never makes the profit in the first place.

Does this matter? In this context, yes, it does. It's much more difficult to pass on an opportunity cost of this kind to customers. There's no fundamental economic reason why the customers who buy the 80% of developed land should pay the developer for the profit he would have made on the other 20%, had he developed it; the economic impact of the Pt V requirements falls firstly on the developer. and it may remain with him — he may not succeed in passing it on. To the extent that this happens, the consequence is not higher house prices, but lower profits in the property development trade.

Of course, this is not an either/or thing - it's not the case that either 100% of the opportunity cost is passed on to customers, or 0% is. But actually disentangling what percentage gets passed on and what percentage the developer has to swallow (and what what percentage is borne by landowners, who get a lower price from selling land to developers than they otherwise would, which is another effect Pt V will have) can be quite tricky.

The other point to bear in mind is that Pt V also has some effect on demand for private housing, as well as supply — to the extent that people are housed in public/social housing, there are less people seeking to house themselves through the private market. And, all other things being equal, that should exert downward pressure on house prices in the private market.

Of course, all other things aren't equal and, anyway, this particular factor is probably a pretty minor one in the overall scheme - most people who benefit from social housing wouldn't, at least in the short term, be in a position to compete as buyers in the private market. But, still, if you're serious about identifying the the economic effect of Pt V, you have to allow for this factor.

So, bottom line, it's likely that Pt V will have a number of effects — it will raise prices in the private market; it will reduce returns in the property development business; it will reduce windfall capital gains enjoyed by landowners. Quantifying these effects, and seeing which predominate, would be tricky. But it's important that the task should be attempted, if only so that we can look at such questions as:

— What the cost of Pt V is;

— Whether Pt V is an efficient way of increasing the supply of housing for people not catered for by the private market (e.g. could we do this better just by raising taxes by the same amount as Pt V costs and then spending that tax revenue on buildings social housing?);

— who is bearing the cost of Pt V; and

— whether we think the cost could be spread more fairly with a different system.

timmyntc

Peregrinus wrote: »

Mmm. Characterising the thing as a tax kind of poisons the well when it comes to talking about what it costs housebuyers, though. Any regulation of business activity tends to raise the costs of doing business (since it costs money to comply with the regulation) and so raise the cost to consumers of buying the goods or services which the business produces. But not everything that puts up prices is a "tax"; the characteristic of a tax is that it's intended to raise revenue for the government, and we should probably reserve the word for things that actually do that.

So we'll probably get a clearer, less emotional and more useful discussion of the economic impact of Pt V if we stop trying to bracket it with revenue-raising measures and simply ask what its economic effect is.

And that might be quite difficult to disentangle. As pointed out, there's a cost to complying with it. But this doesn't necessarily fall back entirely on housebuyers. It's an opportunity cost, meaning not that the developer actually pays out money, but simply that he forgoes the opportunity to earn some money. He buys the development site and, left to himself, he could earn a bucket of money by developing 100% of it and then reselling but, as it is, he can only develop and resell 80% — he has to sell 20% to the local authority at existing use value. So he doesn't pay over the profit he would have made from developing and reselling that 20%; he just never makes the profit in the first place.

Does this matter? In this context, yes, it does. It's much more difficult to pass on an opportunity cost of this kind to customers. There's no fundamental economic reason why the customers who buy the 80% of developed land should pay the developer for the profit he would have made on the other 20%, had he developed it; the economic impact of the Pt V requirements falls firstly on the developer. and it may remain with him — he may not succeed in passing it on. To the extent that this happens, the consequence is not higher house prices, but lower profits in the property development trade.

Of course, this is not an either/or thing - it's not the case that either 100% of the opportunity cost is passed on to customers, or 0% is. But actually disentangling what percentage gets passed on and what percentage the developer has to swallow (and what what percentage is borne by landowners, who get a lower price from selling land to developers than they otherwise would, which is another effect Pt V will have) can be quite tricky.

The other point to bear in mind is that Pt V also has some effect on demand for private housing, as well as supply — to the extent that people are housed in public/social housing, there are less people seeking to house themselves through the private market. And, all other things being equal, that should exert downward pressure on house prices in the private market.

Of course, all other things aren't equal and, anyway, this particular factor is probably a pretty minor one in the overall scheme - most people who benefit from social housing wouldn't, at least in the short term, be in a position to compete as buyers in the private market. But, still, if you're serious about identifying the the economic effect of Pt V, you have to allow for this factor.

So, bottom line, it's likely that Pt V will have a number of effects — it will raise prices in the private market; it will reduce returns in the property development business; it will reduce windfall capital gains enjoyed by landowners. Quantifying these effects, and seeing which predominate, would be tricky. But it's important that the task should be attempted, if only so that we can look at such questions as:

— What the cost of Pt V is;

— Whether Pt V is an efficient way of increasing the supply of housing for people not catered for by the private market (e.g. could we do this better just by raising taxes by the same amount as Pt V costs and then spending that tax revenue on buildings social housing?);

— who is bearing the cost of Pt V; and

— whether we think the cost could be spread more fairly with a different system.

I take your point, but mine was less about developers passing off the cost to consumers, and more about general supply and demand in the market. When 20% of development is offered only to the government, it constraints supply in the rest of the market - and prices will increase.

The government has the finance and landbanks to build on its own - forcing developers to offer 20% of stock to the government also is lazy but also constrains supply to the private market.

Peregrinus

timmyntc wrote: »

I take your point, but mine was less about developers passing off the cost to consumers, and more about general supply and demand in the market. When 20% of development is offered only to the government, it constraints supply in the rest of the market - and prices will increase.

The government has the finance and landbanks to build on its own - forcing developers to offer 20% of stock to the government also is lazy but also constrains supply to the private market.

Not necessarily. As you point out, the government has finance of its own and, if it doesn't wish to build on its landbank (e.g. because it doesn't want social housing to be physically segregated) it can go out and compete with private developers to buy development land. That would constrain supply to the private market just as much.

JimmyVik

Simple question though.
Is PArt5 increasing the cost of housing to ordinary buyers?
If so, by how much?

Peregrinus

JimmyVik wrote: »

Simple question though.
Is PArt5 increasing the cost of housing to ordinary buyers?
If so, by how much?

The question is simple but, for the reasons pointed out in my post #8, the answer is not.

The calculation you offer in post #1 is, for the reasons pointed out in my post #5, certainly wrong.

The economic cost of the Pt V measures is hard to quantify. And, even if we quantify it, the cost is likely shared between housebuyers (through higher prices), developers (through lower profits) and landowners (through lower sale prices) in proportions that are hard to establish, and that probably vary from development to development. So its impact on house prices is another thing again.

It may well be that somebody has done or is doing the research to nail all this down. If nothing else, those with an interest in opposing Pt V (i.e. property developers) would have an interest in commissioning that research. Or it might be the kind of thing the ESRI would take on. Either way, the research wouldn't be simple or quick.

Casati

House prices in an open market economy are based on simple economics of supply and demand. A developer can only price houses at a level that the market will bear

JimmyVik

Casati wrote: »

House prices in an open market economy are based on simple economics of supply and demand. A developer can only price houses at a level that the market will bear

Nothing simple about the economics of house prices in Ireland
Of course the government going in and buying up and leasing houses (bidding against the ordinary buyer) is going to effect supply and therefore house prices.

DubCount

Casati wrote: »

House prices in an open market economy are based on simple economics of supply and demand. A developer can only price houses at a level that the market will bear

Agreed, but this does impact supply. If a developer's cost of development exceeds the potential market price, they wont build - this limits supply and puts upward pressure on house prices.

Government intervention does impact on development cost - and not just in terms of Part v. What about Local Authority charges for connecting utilities, or VAT, nutty planning processes, building regulations or minimum wage? All these interventions increase the cost of development.

There is no point banging on about affordable housing, and at the same time having policies which makes affordable housing uneconomic to build.

Just in terms of part v. Its hard to calculate the impact, but it increases cost of development and it therefore impacts on supply, and the ordinary punters pay a price. In Ireland, we should be well used to this - we pay higher mortgages to fund the wont pay brigade.

Peregrinus

But government intervention also serves to reduce the cost of housing - property owners receive a substantial subvention from the state in the form of road, public transport, local schools and other services that serve their properties and enhance the value of those properties. If property owners had to pay the full cost of the services that enhance the utility of their properties, properties would be much, much more expensive.

I don't think you can squeal about government interventions that burden you but treat government interventions that benefit you (and, n.b., for which others pay) as a simple entitlement. If you're serious about quantifying the effect of government interventions on house prices, you have to factor in all government interventions.

I think analysing Pt V in terms of of its effect on the price of private houses is (a) very difficult, as already pointed out, and (b) not really the point. The point of Pt V is to improve the supply of affordable and social housing. Even if you could identify the impact on house prices of Pt V, you'd meet the response that (a) that's maybe an impact that, societally, we should be happy to bear in order to achieve the outcomes that Pt V achieves, and (b) private householders who benefit so massively from tax expenditure funded by all, including those who don't own houses, are not well-positioned to complain about the comparatively modest adverse impact of Pt V.

JimmyVik

Peregrinus wrote: »

But government intervention also serves to reduce the cost of housing - property owners receive a substantial subvention from the state in the form of road, public transport, local schools and other services that serve their properties and enhance the value of those properties. If property owners had to pay the full cost of the services that enhance the utility of their properties, properties would be much, much more expensive.

I don't think you can squeal about government interventions that burden you but treat government interventions that benefit you (and, n.b., for which others pay) as a simple entitlement. If you're serious about quantifying the effect of government interventions on house prices, you have to factor in all government interventions.

I think analysing Pt V in terms of of its effect on the price of private houses is (a) very difficult, as already pointed out, and (b) not really the point. The point of Pt V is to improve the supply of affordable and social housing. Even if you could identify the impact on house prices of Pt V, you'd meet the response that (a) that's maybe an impact that, societally, we should be happy to bear in order to achieve the outcomes that Pt V achieves, and (b) private householders who benefit so massively from tax expenditure funded by all, including those who don't own houses, are not well-positioned to complain about the comparatively modest adverse impact of Pt V.

Many people looking to buy houses and paying high rents now would not agree.
Government intervention does not reduce the cost of housing one bit. It make it more expensive. That goes for rents too.

All those things you mention are paid for by the tax payer. As well as part5.

Peregrinus

JimmyVik wrote: »

Many people looking to buy houses and paying high rents now would not agree.
Government intervention does not reduce the cost of housing one bit. It make it more expensive. That goes for rents too.

All those things you mention are paid for by the tax payer. As well as part5.

Yes, I know. But they're paid for by all taxpayers, homeowners and non-homeowners alike. And to the extent that those taxes pay for services which enhance home values, that's a subsidy from non-homeowners to homeowners.

Take the DART. When the DART line was opened, there was a measurable increase in property values along the DART line, with the increase being pretty directly correlated to the distance of each property from the nearest DART Station. That meant that the lucky property owners could now sell their properties for more, or rent them out for higher rents than they could previously get. Which means that (a) there was a substantial transfer of wealth from the taxpayers generally to these property owners, and (b) if you didn't own a property in the area, but wanted to, you were now going to have to pay a lot more for one. (This last group were particularly unfortunate; they were being taxed to fund a policy - construction of the DART - which was going to raise the price of houses for them.)

And, if you think about it, something similar happens with all government actions that provide services or benefits to properties. It's not just the DART; the owners of houses served by any form of public transport are being subsided by taxpayers who don't own houses, or who own houses not served by public transport. Same goes for other transport links; I construct or upgrade a road or a bypass; property values served by that new infrastructure are enhanced. and their owners benefit at the expense of other taxpayers. And it's not just transport links; people pay more to buy or rent houses that are convenient to good schools, recreational facilities, etc, so taxpayer expenditure on establishing or running those facilities involves a transfer of wealth to the adjacent homeowners from all other taxpayers.

The combined effect of all this is massive[/]i; very probably far bigger than the effect of Pt V. So be careful what you wish for, when it comes to objecting to government interventions that affect the price of houses.

This isn't a uniquely Irish thing; it happens in nearly all countries. In other countries they offset it to some extent with value-based property taxes; if the value of your house goes up, the amount of your annual rates/property tax/whatever it's called in that country automatically goes up too, so the taxpayer recoups at least some of the value transferred to homeowners, so the net subvention is lower. But we have set our faces against that in Ireland, so Irish homeowners enjoy an unusually large subvention from taxpayers.

(Which of course drives up the price of houses; because if you don't already own a home and so benefit from this scheme, you have to pay to buy into it.)

JimmyVik

Peregrinus wrote: »

Yes, I know. But they're paid for by all taxpayers, homeowners and non-homeowners alike. And to the extent that those taxes pay for services which enhance home values, that's a subsidy from non-homeowners to homeowners.

Take the DART. When the DART line was opened, there was a measurable increase in property values along the DART line, with the increase being pretty directly correlated to the distance of each property from the nearest DART Station. That meant that the lucky property owners could now sell their properties for more, or rent them out for higher rents than they could previously get. Which means that (a) there was a substantial transfer of wealth from the taxpayers generally to these property owners, and (b) if you didn't own a property in the area, but wanted to, you were now going to have to pay a lot more for one. (This last group were particularly unfortunate; they were being taxed to fund a policy - construction of the DART - which was going to raise the price of houses for them.)

And, if you think about it, something similar happens with all government actions that provide services or benefits to properties. It's not just the DART; the owners of houses served by any form of public transport are being subsided by taxpayers who don't own houses, or who own houses not served by public transport. Same goes for other transport links; I construct or upgrade a road or a bypass; property values served by that new infrastructure are enhanced. and their owners benefit at the expense of other taxpayers. And it's not just transport links; people pay more to buy or rent houses that are convenient to good schools, recreational facilities, etc, so taxpayer expenditure on establishing or running those facilities involves a transfer of wealth to the adjacent homeowners from all other taxpayers.

The combined effect of all this is massive[/]i; very probably far bigger than the effect of Pt V. So be careful what you wish for, when it comes to objecting to government interventions that affect the price of houses.

This isn't a uniquely Irish thing; it happens in nearly all countries. In other countries they offset it to some extent with value-based property taxes; if the value of your house goes up, the amount of your annual rates/property tax/whatever it's called in that country automatically goes up too, so the taxpayer recoups at least some of the value transferred to homeowners, so the net subvention is lower. But we have set our faces against that in Ireland, so Irish homeowners enjoy an unusually large subvention from taxpayers.

(Which of course drives up the price of houses; because if you don't already own a home and so benefit from this scheme, you have to pay to buy into it.)

You would think everything is free the way you describe it.
Reminds me of the time i went to hire SDS drill in a hire shop.
The guy in the shop said "Its €30 for the drill, or €35 with a free bit".


All i really want to know is how much does the part5 tax add to the price of the rest of the houses in the development.
I think they should make that transparent so that we all know what we are paying for when we buy a house.

Peregrinus

JimmyVik wrote: »

All i really want to know is how much does the part5 tax add to the price of the rest of the houses in the development.
I think they should make that transparent so that we all know what we are paying for when we buy a house.

You either haven't read the previous posts in this thread, or you haven't understood them.

Thee isn't a "Part 5 tax". As long as you insist on framing the question in these terms, you're asking a loaded and misleading question to which no satisfactory answer can be given.

There is an impact of Pt V on house prices. It's very hard to identify, and at best we could only identify it as overall average figure affecting house prices generally, or (perhaps) new house prices; not as a figure specific to any particular house. The reason "they" don't make the impact of Pt V on the price of the house you are buying transparent is because they do not know what it is.

The Student

Peregrinus wrote: »

But government intervention also serves to reduce the cost of housing - property owners receive a substantial subvention from the state in the form of road, public transport, local schools and other services that serve their properties and enhance the value of those properties. If property owners had to pay the full cost of the services that enhance the utility of their properties, properties would be much, much more expensive.

I don't think you can squeal about government interventions that burden you but treat government interventions that benefit you (and, n.b., for which others pay) as a simple entitlement. If you're serious about quantifying the effect of government interventions on house prices, you have to factor in all government interventions.

I think analysing Pt V in terms of of its effect on the price of private houses is (a) very difficult, as already pointed out, and (b) not really the point. The point of Pt V is to improve the supply of affordable and social housing. Even if you could identify the impact on house prices of Pt V, you'd meet the response that (a) that's maybe an impact that, societally, we should be happy to bear in order to achieve the outcomes that Pt V achieves, and (b) private householders who benefit so massively from tax expenditure funded by all, including those who don't own houses, are not well-positioned to complain about the comparatively modest adverse impact of Pt V.

I think you are not seeing the bigger aspect of new developments and the part 5 aspect. The part 5 element is that 20% must go to social and affordable housing. What you may not be aware of is the impact of Approved housing Bodies (AHB) impact on new developments as well. I am aware of some apartment complex which have the part 5 allocation and AHB have purchased another 30% of the complex (most likely at a discount from the developer)

So now you have 50% of the complex at less than market value. The AHB are social housing just under another name (as the tenants are from the housing list and the funds to purchase the property come from the State).

You now have 50% of the owner occupiers subsidizing the other 50% of the purchase price of the complex to varying degrees.

The part 5 requirement is a blunt instrument that requires all projects to give 20% to the state at cost. One of the largest factors in prices is the land cost and access to the amenities dictate that.

You can't on one hand say that the cost of the land is determined by the amenities around it be it Dart, Luas etc but on the other hand say that the developer should not look to recoup the premium he has had to pay for the land because of these.

People whose house prices went up because of the construction of the Dart, Luas etc were just lucky in the right place at the right time. What about people who's property values fell because of for example the incinerator near the sea. Should they be compensated?

Gandalph

Ahhh too many moving wheels here!

Part V can actually reduce the costs of development in some scenarios and increase it in others. I feel like I would need to write a report on it to cover a lot of the ground but please believe this stranger from the internet!

Gumbo

JimmyVik wrote: »

You would think everything is free the way you describe it.
Reminds me of the time i went to hire SDS drill in a hire shop.
The guy in the shop said "Its €30 for the drill, or €35 with a free bit".


All i really want to know is how much does the part5 tax add to the price of the rest of the houses in the development.
I think they should make that transparent so that we all know what we are paying for when we buy a house.

There’s no such thing as a Part V tax.
The agreement to purchase under Part V of the Housing Act is agreed at planning permission time. Not during construction.

JimmyVik

Gumbo wrote: »

There’s no such thing as a Part V tax.
The agreement to purchase under Part V of the Housing Act is agreed at planning permission time. Not during construction.

So nothing extra comes out of the pockets of the home buyers of the other 80% of the properties in the development then?
The price they pay is the same as they would have paid had there been no part 5?

Gandalph

Gumbo wrote: »

There’s no such thing as a Part V tax.
The agreement to purchase under Part V of the Housing Act is agreed at planning permission time. Not during construction.

I think some refer to it as a tax because once upon a time you used to be able to pay a charge in placement of providing the 10% to the council. But your right, it's not referred to as a tax!

Generally it is done at the planning stage but because of appeals and ABP's ability to grant with their desired alterations to the scheme, some CoCo's will agree to negotiating PV anytime before commencement notice is served.

MacDanger

Peregrinus wrote: »

You either haven't read the previous posts in this thread, or you haven't understood them.

Thee isn't a "Part 5 tax". As long as you insist on framing the question in these terms, you're asking a loaded and misleading question to which no satisfactory answer can be given.

There is an impact of Pt V on house prices. It's very hard to identify, and at best we could only identify it as overall average figure affecting house prices generally, or (perhaps) new house prices; not as a figure specific to any particular house. The reason "they" don't make the impact of Pt V on the price of the house you are buying transparent is because they do not know what it is.

Good posts Peregrinus

Dr Turk Turkelton

Just half heard something on the news earlier about 20% of sites to be given over to social housing now.
Anyone else hear it or am I losing it?

Peregrinus

The Student wrote: »

I think you are not seeing the bigger aspect of new developments and the part 5 aspect. The part 5 element is that 20% must go to social and affordable housing. . . .

No, it isn't. 20% of the land has to be provided; not 20% of the finished development. If the local authority wants the developer to build on that land for them they have to negotiate that, and pay for it. And the land is not provided for free; it's sold at its existing use value (i.e. ignoring its development potential), which of course affects what the developer is willing to pay to acquire the land in the first place. Which means that if the developer wants to offload some of the economic impact of this requirement, he's much more likely to do that by paying landowners less to acquire the land than he is by charging purchasers more to buy completed houses. (The purchasers, after all, are very price-sensitive, and even if willing what they can pay is in any event limited by external factors, like what they can borrow.)

I'm not denying that the obligation does have some effect on the cost of housin. But this thread asks for that effect to be quantified.

The Student wrote: »

What you may not be aware of is the impact of Approved housing Bodies (AHB) impact on new developments as well. I am aware of some apartment complex which have the part 5 allocation and AHB have purchased another 30% of the complex (most likely at a discount from the developer).

Is the developer required to sell at a discount? If not, why do you think he would "most likely" do so?

The Student wrote: »

So now you have 50% of the complex at less than market value.

Only if your "most likely" assumption is correct.

The AHB are social housing just under another name (as the tenants are from the housing list and the funds to purchase the property come from the State).

The Student wrote: »

You now have 50% of the owner occupiers subsidizing the other 50% of the purchase price of the complex to varying degrees.

Not necessarily. You assume that the economic cost is passed back to purchasers, but I have repeatedly pointed out that there are other possibilities and, frankly, some of them seem more likely.

The Student wrote: »

You can't on one hand say that the cost of the land is determined by the amenities around it be it Dart, Luas etc but on the other hand say that the developer should not look to recoup the premium he has had to pay for the land because of these.

He won't pay a premium for the 20% of the land that he's required to onsell at existing use value because (obviously) the value of that 20% has not been enhanced by the construction of infrastructure. Why would he pay for something he won't get?

The Student wrote: »

People whose house prices went up because of the construction of the Dart, Luas etc were just lucky in the right place at the right time. What about people who's property values fell because of for example the incinerator near the sea. Should they be compensated?

You could certainly make the case. People are compensated if public works require the outright acquisition of their land, or if there is an immediate and specific impact - e.g. if my land is cut in two by the construction of a new road, or part of it is cut off from an access it previously enjoyed, that kind of thing, I get compensated for that. It's a question of where you draw the line.

And, of course, if you had a value-based property tax system, partial compensation for this kind of thing would flow through in reduced tax bills.

I know it hard for people trying to buy but people always seem to want someone else to blame.

There could be a piece on what effect changes in families, lifestyle, and culture over the past 40 years have had on housing it would be equally as valid to look at but has no easily identifiable baddie to blame.

An example a relative of my husband purchased a 3-bed semi in the early 1970s and raised 7 children in it they were not unusual among their neighbors in today's society it would be extremely unusual.

Or something more simple the rise in population in Ireland.

The Student

Peregrinus wrote: »

No, it isn't. 20% of the land has to be provided; not 20% of the finished development. If the local authority wants the developer to build on that land for them they have to negotiate that, and pay for it. And the land is not provided for free; it's sold at its existing use value (i.e. ignoring its development potential), which of course affects what the developer is willing to pay to acquire the land in the first place. Which means that if the developer wants to offload some of the economic impact of this requirement, he's much more likely to do that by paying landowners less to acquire the land than he is by charging purchasers more to buy completed houses. (The purchasers, after all, are very price-sensitive, and even if willing what they can pay is in any event limited by external factors, like what they can borrow.)

I'm not denying that the obligation does have some effect on the cost of housin. But this thread asks for that effect to be quantified.


Is the developer required to sell at a discount? If not, why do you think he would "most likely" do so?


Only if your "most likely" assumption is correct.

The AHB are social housing just under another name (as the tenants are from the housing list and the funds to purchase the property come from the State).


Not necessarily. You assume that the economic cost is passed back to purchasers, but I have repeatedly pointed out that there are other possibilities and, frankly, some of them seem more likely.


He won't pay a premium for the 20% of the land that he's required to onsell at existing use value because (obviously) the value of that 20% has not been enhanced by the construction of infrastructure. Why would he pay for something he won't get?


You could certainly make the case. People are compensated if public works require the outright acquisition of their land, or if there is an immediate and specific impact - e.g. if my land is cut in two by the construction of a new road, or part of it is cut off from an access it previously enjoyed, that kind of thing, I get compensated for that. It's a question of where you draw the line.

And, of course, if you had a value-based property tax system, partial compensation for this kind of thing would flow through in reduced tax bills.

I have never heard of the State taking the 20% of the land and building on it themselves rather they get the developer to do so. if you have details of where this has occurred I would be interested.

The requirement of the 20% certainly does have an effect and the only way to quantify this is to remove it from the need from the planning approval process and you will find the cost.

With the difficulty of individual purchases accessing finance and the extra costs to the developer of selling to individuals then it makes economic sense to both the buyer and the seller to offer a discount to "bulk buy"

He has already paid a premium for all 100% of the land he has purchased and the 20% is already included in this. He has not paid a premium for just the 80% he is selling on the private market.

People are not compensated when property is acquired for public use. The owner may receive the market value of the land "compulsory purchase orders" however they don't receive anything additional for the "pain and suffering".

We already do have a value based property tax system. The property tax is based on the value of your property which to me makes no sense especially in the city where other properties who have access to exactly the same amenities and are identical in size pay a lower property tax because the property has a lower value.

wolfyboy555

Dr Turk Turkelton wrote: »

Just half heard something on the news earlier about 20% of sites to be given over to social housing now.
Anyone else hear it or am I losing it?

Is this with immediate effect to current developments or just new ones going forward?

I suppose the real question is why is it that people who get up and go to work and bust their asses, get the legs cut from under them at every turn to give housing to people who won't make the same effort.