Property development has been the source of significant tax revenue to the Government during the construction boom since the mid 1990s. The greatest contributions have been from stamp duty, VAT and CGT. However, the income generated from development contributions or levies has also been considerable, peaking at €670m in 2006. The future of this is now in doubt now with the slowdown in development activity.

Ireland benefited from the investment in infrastructure which has been undertaken by Local Authorities and government agencies including the National Roads Authority and the Railway Procurement Agency. Much of this investment was initiated by the National Development Plans of 2000 and 2007. As a result of these plans, we have a wide range of road, rail, drainage and other projects which are the legacy of the Celtic Tiger era.

The NDP 2000 – 2006 involved the investment of €57bn, €2.1bn of which was raised by way of development contributions imposed as part of the grant of planning permission for new development. The NDP 2007 – 2013 budget is €184bn and a further €2.1bn is expected to be raised through levies for this Plan.

The levying of a development contribution by local authorities captures part of the uplift in the value of land as a result of the granting of planning permission. The payment in turn is invested in improvements in local infrastructure and the new development benefits from this investment. There is an obvious equity in this situation and it is an important source of revenue for local authorities. However the levy system requires that the amount raised is reasonable and affordable and should not result in development becoming unviable or push up the cost of housing or commercial property developed.


The amount raised through these contributions increased rapidly after the enactment of the Planning and Development Act 2000. This introduced an updated levy system and is the current basis for local authorities raising income for infrastructure.

Development contributions vary widely across Ireland. A sample of the contributions payable under planning permissions granted in 2009 by local authorities is set out in the table below.


Local Authority Developers Contributions 2009 

                                  200 sqm of commercial space  -                             Residential unit say 150qm
Limerick Environs             €17,000                                                                    €11,486
Dungarvan                            €4,866                                                                    €10,359
South Dublin                      €16,600                                                                    €11,067
Dublin City Council           €25,400                                                                    €13,313
Fingal                                  €22,200                                                                    €21,450
Leitrim                                   €5,000                                                                      €5,650

These are the standard development contributions under Section 48 of the Act. In addition special contributions and Section 49 contributions are payable in certain locations where sites would be subject to potentially 3 separate levies. This would result in the following levies being payable for a notional 2 bedroom apartment:

Contribution              Markets Area, Dublin City                         Glenamuck, Dun L Rathdown

Section 48                         €13,313                                                                  €14,933.94

Special                                 €6,291                                                                   €43,338               

Section 49                           €2,800                                                                      €6,700

Total:                                 €22,404 per unit                                                      €64,971.94 per unit

The level of contributions set in a buoyant property market is unsustainable now. The feasibility of development is under pressure due to falling values of residential and commercial property. There are insufficient returns, even with lower land prices, for developers to pay contributions, especially where there are 2 or more levies payable. In effect the imposition of a substantial development contribution can now result in development becoming unviable and therefore no levies will be raised on these schemes.

In many current developments the levies are now outstanding and local authorities are having considerable difficulty in securing payment. It was recently reported that there is in excess of €500m in development levies that are not yet paid.

Construction output in Ireland peaked in 2006/2007. The Department of Environment, Heritage and Local Government figures for housing completions in 2006 is a record 93,419 units. This figure has reduced considerably since and the estimate for 2009 for house completions is approximately 16,000 – 17,000 units (ESRI and Merrion Stockbrokers figures). Furthermore, the total floor area granted planning permission for non-residential construction fell by 54% between late 2007 to late 2008.

With the falling level of construction and development, the total development contributions that will be receivable by local authorities will be significantly reduced. In 2006 the levies collected of €670m was equivalent to 15% of the total local authority budget figure of €4.2bn. In the absence of the majority of this funding there is a significant shortfall in the funding of local authorities for investment in infrastructure.

The development industry cannot continue to contribute levies at the current amounts set. These will need to be reduced and the Government will have to consider alternative ways of raising funding in the future if the planned investment in infrastructure is to be delivered.