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Dr Geraldine Simmie Mooney is a senior lecturer in education at the University of Limerick and director of EPI STEM, the National Centre for STEM Education.
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One thing that, I thought, the Green Party had that left wing parties didn’t, was an understanding of how taxes could be used to modify behaviour. The Greens are often lambasted from both left and right for this, people saying that they want to tax everything, but that’s unfair.
They had recognised, I thought, that taxation is often a better way to modify behaviour than banning or regulating things. A good example was the plastic bag tax. This started out at 15c per bag, Its purpose wasn’t to raise money, it was to change behaviour.
And it worked. Use of plastic bags collapsed by more than 93 per cent when it was introduced. That tiny amount of money was enough to change mindsets and encourage people not to be wasteful.
I got in a brief Twitter spat with some people including the former Green Party TD and Senator Dan Boyle, about what was announced in the budget as a measure to ease the housing crisis, a three per cent tax on zoned land. This idea has been kicking around for years, not least from the Green Party, because they had recognised the bottleneck in the supply of housing.
Everything that you need to build a house can be put on the back of a truck, or the back of a Ryanair flight from the continent, so there is no real reason why prices here should be so much higher. Everything, that is, except the land.
If you have followed the Derelict Ireland campaign, or even if you haven’t, you should know that there is a huge amount of vacant and crumbling housing in Ireland, and vastly more space still that is zoned for housing but has been sitting vacant for decades. This is not an accident. The vacant land is owned by a tiny number of fantastically wealthy speculators.
Your initial thought might be “why don’t they sell up and make a fortune?” The problem is what would they do with the fortune? Put it in the bank? The property price inflation is vastly more than any bank interest rate that they could hope to earn. As they see it, it is money in the bank.
Then why not build on it themselves and make a fortune selling the houses? Even building on half it would ease the housing crisis? Because, as any economist will tell you, value comes from scarcity. Their land banks make them richer than Croesus because of the housing crisis. If there was no housing crisis, if they build on and sold even a fraction of their land, they would crash the value of it all so that they would end up poorer at the end of the process. Poorer, not poor.
But poorer. These people, whether you like it or not, are acting rationally. They are responding as any reasonable human would to the incentives that exist. The people who are acting irrationally is us, society, the voters. We’re incentivising them to do one thing, and expecting them to do the opposite.
That’s why I thought it was a great when Fianna Fáil promised in their 2020 manifest to increase the vacant site levy to 14 per cent. It was originally three per cent, recently raised to seven percent.
The first problem with the three per cent rate was that this is lower than the rate of property inflation; if the value of your land bank is going up by 10 per cent a year, and you lose three per cent in a levy, you still gain seven per cent. If you were to sell up and put the money in the bank, you would get far less than one per cent. The calculation is simple; hoarding is more profitable than developing, even at a seven per cent levy.
That would be true even if the tax was collected, but it wasn’t collected. It only applied to a tiny proportion of the sites needed, and where it did apply, the local authorities simply didn’t bother collecting the money. I’ll rant against local government in Ireland some other time. The Business Post reported that of the €21m that was supposed to be collected in levies, only €21,000 was collected, a failure rate of 99.9 per cent.
Think about that for a minute. Think about it when you are looking at the taxes taken from your next pay cheque. Think about the likelihood that they would just to forget to collect your taxes. Now think about the chances they would not bother collecting your taxes 99.9 per cent of the time.
Now, if they had followed their manifesto commitment to increase the levy to 14 per cent, and they had actually collected it, then that would have an impact. 14 per cent would mostly be above the property inflation rate, so it would make sense to sell the land for development rather than hoard it.
But they didn’t follow their manifesto commitment. Instead they announced something different. The first thing they did was they more than halved the rate, cutting it back to three per cent, far, far below the rate of property inflation. The next thing they did was they announced that they would be getting Revenue, rather than the local authorities to collect the tax, which sounds good, Revenue are far more competent than the local authorities at collecting taxes, to be honest Revenue are far more competent than the local authorities at pretty much anything, but here’s the kicker: the system doesn’t start for two or three years.
Remember that political years are the reverse of dog years. Anything that’s promised in two or three years’ time is unlikely to happen within a decade. If you disagree, I’ll bet you the price of a monthly pass on the Metro North, that I’m right.
So several things are certain following this announcement. First the local authorities are going to abandon whatever little efforts they had been making to collect this levy. Secondly, this announcement will never be realised. It’s been kicked out beyond the next election by which time there surely will be another announcement of something due to happen in another few years.
And the third thing that will happen is that land hoarders will engineer further artificial jacking up of land, and therefore housing costs.
