After 25 years of talk, is now the time for land windfall tax?

Wednesday 29 March 2023

Another push is being made to levy a windfall tax on the uplift in value when a field is rezoned for housing.

For decades, politicians have contemplated taxing the profit on a piece of land when it sold after being designated for housing.

There is a huge gulf in value between a field restricted to agriculture to one given planning consent for housing.

And with property prices soaring, that gulf has become an ocean in recent times.

However, no tax has been introduced, despite the issue being raised numerous times over the past quarter of a century.

Now, Deputy Raluca Kovacs, a backbench member of Reform Jersey, is having another go at bringing in a ‘land development tax’, proposing that 50% of profit should go to the Treasury, possibly to be invested back into shared purchase schemes.

Pictured: Reform Jersey's Deputy Raluca Kovacs is behind the latest push for a 'land development tax'.

Last year, Field J1109, next to the former Sion Chapel in St. John, was rezoned for affordable housing in the Bridging Island Plan.

Before rezoning, the estimate on the 6.71-vergée site was around £70,000. After it was designated an affordable homes site, suitable for around 42 properties, the field was sold for £3.55m – 50 times the original value. 

The sale prompted Environment Minister Jonathan Renouf to promise to bring forward proposals for a windfall levy, potentially through a ‘Sustainable Communities Fund’, whose establishment was approved as part of the Bridging Island Plan.

Deputy Kovacs, however, believes her proposal is different.

“Although [the BIP] indicates that a small percentage (3%) would be charged, my proposal does not seek to interfere with any consequences of this fund,” she said.

“I believe my proposal stands-alone from any gains the Planning Committee are seeking to achieve from the developers.”

Former Environment Minister John Young also frequently called for the introduction of a land windfall tax.

His predecessor, Deputy Steve Luce,tried to introduce an obligation for landowners to pay for community infrastructure in December 2017, but it didn't go ahead after strong criticism from the construction and development industry.

Pictured: Under former Environment Minister Steve Luce's proposals, money from the 'Jersey Infrastructure Levy' would have gone towards projects to rejuvenate.

Detailing the latest attempt, Deputy Kovacs said: “The objective of this proposal is not to raise token amounts of money to fund bus shelters or plant a few trees. The objective of this proposal is to allow the States of Jersey to share in the uplift of land value created by rezoning for residential use.

“Land that had a value of under £100,000 can be bought and sold for millions of pounds, within months of receiving approval for a change of use.

“These conditions have existed for at least 30 years and the Government of Jersey has yet to positively intervene to profit from these increases in land value. 

“Instead, being content to impose conditions on the type and scale of development - seeing a percentage for social rental, or first-time-buyers, or over 55’s as a positive outcome regardless of land price inflation.”

She added: “By supporting my proposal, Members will allow the public to have a share in land price uplifts. Therefore, I don’t see any reason for Members to oppose this, as the benefits would also filter through to the housing created being cheaper.”