The Welsh government is looking to raid land banks with a tax on empty plots – that critics fear could undermine plans for 20,000 new affordable homes.
As pitched, landowners with empty plots they are not using will have to pay a vacant land tax.
The tax would apply to land where permission to build has been granted – or land that is within a local development plan – but where no work has been carried out.
Ministers say it will be an incentive for companies to build and stop empty sites from becoming derelict.
As yet, there are no estimates as to sums the tax could raise.
But officials already concede that it is unlikely to make a big contribution to the budget, citing the example of the Republic of Ireland where the tax taken is enough to cover the cost of collection.
Finance secretary, Mark Drakeford, said the tax was not about raising money but changing behaviour with the government, not introduce legislation if it cost more money than it raised.
Nor, said Drakeford, would the tax capture those “making every effort” to carry out development they were committed to.
“A tax on vacant land could prevent the practice of land banking and land not being developed within the expected timescales.
“It’s aimed at those pieces of land where there are permissions already to build houses, for example, or where land has been identified in local development plans for that purpose and where nothing is happening – that’s not good enough because we need that land for very important policy purposes in Wales,” he said.
A recent sample survey of land set aside for development showed no progress had been made in 25% of cases.
In the Republic of Ireland, the levy came into force in January allowing local authorities to charge 3% of the market value of vacant sites – with the first payments to be made in arrears in 2019.
Drakeford said the Irish example and the “relatively narrow focus” of the tax made it the “most suitable” of the four shortlisted ideas to test Wales’ ability to introduce new taxes.
Under powers granted by the 2014 Wales Act, proposals for new taxes will have to be approved by the UK government and Parliament at Westminster.
The House Builders Federation claimed such a tax could undermine a corresponding Welsh Government plan to build 20,000 affordable homes – making Wales less attractive to major builders than England.
Ifan Glyn, from the Federation of Master Builders Cymru, said there were a “variety of reasons” why development of land did not happen or stalled – inadequate planning, skill shortages in construction, a shortage of materials and difficult relationships with utility companies.
“If there’s a tax that’s introduced that can focus solely on land banking for financial reasons to maximise profits, we would absolutely agree with that,” he said.
“Our issue is we don’t see how this tax can differentiate between land that’s been banked for financial reasons and land that isn’t being developed or stalling for reasons outside the developer’s control.”
Aaron Hill, CHC’s Assistant Director of Policy and Public Affairs said: “Access to affordable land is vital for housing associations to build affordable homes and to meet Welsh Government’s 20,000 homes target.
“We welcome recognition from the Finance Secretary that more needs to be done to help housing associations and others to secure land to build homes.
“However, the devil will be in the detail of these proposals, and there is a danger that a tax could be counter-productive and lead to higher costs or, in fact, decrease supply.
“The policy will require careful scrutiny, and we will be working closely with Welsh Government and the National Assembly throughout this process to ensure that housing associations can deliver the homes Wales needs.”