The Irish capital is pockmarked with empty parcels. With tough new property laws planned for this year, that could change.

Central Dublin today sometimes resembles a smile with half the teeth knocked out. Busy and often beautiful, the Irish capital's center is nonetheless pockmarked with vacant and derelict lots, flotsam tossed up by a speculative property boom that stopped almost overnight during the crisis of 2008.

Such sights are common in recession-hit cities, but the Irish government and Dublin City Council believe the city's high level of vacant real estate is in itself holding Dublin’s recovery back. Not only does the glut of unused sites limit property supply in a city where prices are actually rising and vacancy rates lowering, it visually perpetuates a painful and partly inaccurate image of a town beggared by recent history. With a set of tough new property laws planned for this year, all this could change.

Ireland's main fightback will come in the form of a new vacant lot levy charged to owners of both empty and derelict sites. The "both" there is key. Currently, owners of vacant sites pay no land taxes at all – as explored in this piece by Irish Times journalist Olivia Kelly, whose archive of work was invaluable to the writing of this article. Owners of so-called derelict sites, or nuisance properties, meanwhile, pay a modest 3 percent property tax per year. As you can imagine, this has led to situations where Irish property owners have actually demolished buildings in poor repair to avoid paying property taxes. 

A multi-million euro development of a bank headquarters in central Dublin, where construction had stopped in 2012. (Cathal McNaughton/Reuters)

The actual rates of the proposed new levy have yet to be set, and not all owners of unused land would be affected. Outside the capital, property values remain stagnant and lack of land supply is not a problem. The Irish government is expected to adopt a formal plan this spring, and one of the current possibilities is drawing up a list of specific plots that need freeing up. Most or all of these are likely to be in and around Dublin, where real estate prices are rising in part because, despite high demand, there isn't much property on the market. In readiness for the new law, Dublin City Council will publish an audit this month, advance viewings of which have isolated 600 sites suitable for the levy. Pressing for re-use of these sites fits in well with other plans to revamp central Dublin. The city is also promoting the conversion of Georgian properties back into residences and providing cash for historic homeowners to restore their property.

The levy plan, similar to one suggested by Britain's Labour Party, has it critics. Construction industry advocates point out that developers often hold onto sites because if they sell under current conditions, they risk major losses. Dublin property still costs around half what it did in 2007, and the prospect of pushing owners to sell vacant land now could theoretically exacerbate the sort of property-related debt problems that caused the crisis in the first place. Others have interpreted the move as an attack on business by a political class that hasn’t exactly excelled itself in recent years.

An incomplete building project in North Dublin. (Cathal McNaughton/Reuters)

There's some truth in this, but the reality is more complicated. Private investors are not the only ones facing levies. Some sites on Dublin Council's list are owned by the national government's Office of Public Works, which will itself be pressured into either exploiting its portfolio or selling it on. Furthermore, Irish speculators were using land banking of vacant lots as a strategy long before the crisis.  The unused space is not solely a product of economic downturn, as many of the sites listed by Dublin's council have been vacant for over a decade. Back when property values were rising inexorably (due to a housing bubble which overstated demand) it was possible to clean up by just buying a site, leaving it in a state least likely to incur taxes, and then selling it on much later. While this made profits for some, few activities could be more symbolic of the false steps taken during Ireland’s Celtic Tiger years than the plowing of boom era cash into land that developers never even intended to use for economic activities. 

In halting this practice, the law won't inevitably force Dublin property owners to sell. They'll just have to use their land for some economic benefit, or else pay a tax to compensate for its continuing uselessness. For a country trying to power a tentative recovery, it seems a pretty sensible early step.

Top image: A vacant business unit displays a "To Let" sign in north Dublin. Cathal McNaughton/Reuters

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