Kieran Rose: Incentivising the Development of Unused Land in Dublin City: The benefits of a Vacant Land Tax.
Dublin City has considerable amounts of vacant land especially in the centre city/inner city area. These extensive vacant lands are a great potential competitive advantage for Dublin as many of our competitor cities have fully developed centre city areas and have no space for the expansion of uses which need/prefer to locate in centre city areas. Uses preferring the centre city include major employers such as Google, many hotels, student accommodation, and third level colleges. So if we can achieve the development of these extensive vacant lands it would be a key element in our attractiveness as a competitive city.
These extensive vacant lands are also a significant challenge or problem for the city, including being damaging to its economic potential and general attractiveness and liveability. They can have a serious negative impact on the adjoining area, its businesses, investors, workers, residents and visitors.
Currently there is no disincentive to a landowner, including State landowners, leaving a site vacant for many years; the costs of such vacancy are borne by others and the city in general. (In contrast, in order to incentivize landlords to actively let their commercial buildings, 50 per cent Rates are payable on vacant commercial buildings.)
It should be remembered that many of these significant vacant sites remained undeveloped throughout the boom.
The proposal is that a tax be payable on vacant land to incentivize its development or sale to those who have the interest and access to resources to develop it. A proposal could be made to Government for legislation that would enable the City Council to introduce such a tax on vacant land.
2. Some Benefits of a Vacant Land Tax
A vacant land tax would have a range of potential economic benefits including encouraging the optimal productive use of city land and preventing dereliction, encouraging economic development and job creation, and with sustainability benefits in encouraging new inner city housing and less long-distance commuting.
Such a vacant land tax would also address the problem that vacant sites are also a significant economic disbenefit to adjoin businesses and residents who have invested in that particular area.
Such a tax encouraging the optimal use of land is particularly appropriate in city areas such as Dublin where there has been considerable public investment in providing services such as public transport (e.g. Luas); as these vacant sites are not delivering the economic return to the public and the city for such considerable public investment.
The Commission on Taxation (2009) considered these issues in detail and concluded:
“We are proposing a recurrent tax on zoned development land where such land is not being developed. This will be a useful policy tool to address the hoarding of land-banks and help to ensure that land is utilised in accordance with its planning categorisation.”
The Tax Strategy Group report (2010) set out the benefits of a land value tax as including:
• It encourages compact city centre development
• and the most productive use of high value land
• …. Those who have not developed valuable land are encouraged to do so
• It counteracts any market disincentive to develop the land.
3. Driving Innovation, Productivity, and Competitiveness
There is general agreement that density and proximity in urban areas drives productivity and innovation; so these extensive areas of vacant urban land are a significant drag on the city and national economic recovery.
According to urban economist Edward Glaeser in his great book “Triumph of the City”; 'the city creates productivity advantages' and 'cities speed innovation'. 'Cities are the absence of physical space between people and companies. They are proximity, density, closeness' Glaeser continues.
Encouraging the development of these extensive inner city lands provides a great opportunity to boost the productivity and innovation potential of the city.
Also, these extensive central city vacant lands are a great potential competitive advantage for Dublin in attracting international investment. Many of our competitor cities have fully developed centre city areas and have no space for the expansion of uses which need/prefer to locate in centre city areas. Uses preferring the centre city include major employers such as Google, many hotels, student accommodation, and third level colleges.
For example, Squarespace, recently announced it is to establish its EMEA Headquarters in Dublin stating: "We are a Manhattan-based company with urban sensibilities. We want to be in a large, vibrant, cosmopolitan city. Dublin was the obvious choice from that perspective."
If we can take steps to unlock the blockages to the development of these vacant central city lands, a key scarce resource, it gives us a great competitive advantage to attract highly mobile international investment.
4. City Development Plan Key Challenges and Policies
This vacant land tax would be a significant step forward towards addressing key challenges and policies set out in the City Development Plan. The City Plan recognises that considerable progress has been made in improving Dublin over recent years and this includes Docklands, Temple Bar and also Smithfield, Heuston etc. However, as the City Plan notes (p31) in its 'Approach to the Inner City'; there are the problems of 'isolated clusters' , 'a great sense of unevenness', and a 'significant number of vacant sites in the inner city that detract from its character and coherence'.
Accordingly the City Plan states; "It is a central aim … to consolidate and enhance the inner city in order to augment its crucial role at the heart of the capital city and the city region." (p22).
A vacant land tax would be a powerful way to address these key challenges for Dublin city.
Kieran Rose is Senior Planner with the Office of Economy and International Relations, Dublin City Council. This post is based on a report given to the May 2013 meeting of the Finance Strategic Policy Committee of Dublin City Council.