Prosper Australia

The Brumby government’s ill-fated Growth Areas Infrastructure Tax was defeated in the Victorian Senate last evening.

This spells the danger of poor land policy. Why did they attempt to charge $95,000 per hectare as a flat fee? Why wasn’t this infrastructure cost spread over a 20 year period as per traditional council bond funded infrastructure (repaid over time by the rating system – until neo-liberalism took over to undermine public finance)?

With developer’s squeezing at least 16 titles into each hectare, the per hectare land value would be worth approximately $4.5m (16 x $280,000). Even a more pessimistic price of $200,000 per possible title would deliver bucket loads to farmers.

Could farmers really look the people in the eye to say that they deserved to earn more in one foul swoop than they have over their entire life time?

The $95,000 per hectare flat tax was destined to cause controversy as it ignored those sites with access to nearby roads or services. This disadvantaged those farmers in poor locations, for which the media was made well aware of. Obviously, some sites would be more advantageous than others and so their land values would be higher.

Why didn’t the Brumby government communicate to MP’s and the public alike that firstly, huge millionaire windfalls would result from the re-zoning. With numbers please. Secondly, the naturally appreciating value of land.

Many criticisms would have been avoided if the government bond system of finance was repaid over the average 20 year lifetime of infrastructure by the landholders who benefited most from the new train stations etc.

As we show above, the $95K is minuscule compared to the land value per hectare post re-zoning. That’s barely 2% of the upkick. Worse yet, all this controversy for a GAIC that has been shown to only capture 15% of the projected infrastructure costs.

If the government was serious about financing such sprawl, it should implement a 10% land value capture policy on any re-zoned land. This will force the land to be used for it’s best and highest use (in this case housing). The farmer will still take home 90% of the windfall, but the public would receive some compensation for the privilege bestowed upon these landowners.

Readers of this site would understand that we would prefer to keep the 10% LVC charge in place and start removing stamp duty, payroll and the loophole ridden income tax. This would ensure that developers release all land to market asap, rather than drip feeding sites to the market over 18 years like Stockland have admitted at their Highlands sight in in Craigieburn. More positive spin offs can be seen here.

Who do rising property prices really benefit?

photo credit: Dean Terry

If ever we needed any more motivation to burn the midnight oil, the Brumby government’s latest handout to the property lobby is just this. Just nine months since he handed out free lunch with the 90,000 blocks of zoned land announced in March, Brumby has now extended the 2030 boundary to accommodate 134,000 new homes.

Royce Millar was using the right language when he said:

BIG-NAME property speculators were celebrating yesterday, with the proposed stretching of Melbourne’s city limits set to deliver windfalls of many millions to some of Australia’s largest developers.

Will people put 2 and 2 together to realise that these windfall gains could help fund the abolition of regressive taxes like the GST? Do they realise there are more effective ways to push down the price of land?

Why did Brumby roll out the picnic blanket? Because the property lobby asked for it. What the property lobby asks for, the property lobby gets. The backbone to the release was a growing cascade of property reports showing that housing construction is falling behind population growth. But as our friends at bubblepedia have so eloquently shown by analysing Census figures, construction has outpaced dwelling growth by 4% (scroll to bottom of link).

Land supply is not the solution or the 90,000 land blocks released in March would have made a difference to Victorian land prices.

Land banking is the problem. Speculative hoarding of prime locations is the advantage land speculators have over other small businessmen. A higher Land Tax or Site Rental would discourage such activity and ensure the community gets a share of re-zoning windfalls over the long run, rather than hitting current first home buyers once off with a $95,000 development fee per hectare. Developers will laugh this off by passing on the $4,750 per site to buyers.

A new report by Tohm Curtis will soon expose the need for greater utility of land and housing for housing – not speculative hoarding. The inner city has thousands of vacant abodes and blocks of land that should be used before more greenfields are ripped up.

One day young people are going to realise how badly they are getting ripped off.

Property lobby pushes all the usual red herrings whilst ignoring the speculative causes to affordability pressures.

Demographia International’s new report on housing affordability again pushes the “unending sprawl forever” mantra. Report author Wendell Cox rolled out all the usual criticisms of land rationing, infrastructure charges and bureaucratic tape.

“The effect of unending sprawl is to stretch government finance such that public infrastructure suffers throughout the city. The resultant doughnut development sees slum pockets develop throughout the city, breeding crime” stated Bryan Kavanagh from the Land Values Research Group.

“Cities that may have affordable land on the fringes suffer greatly from a lack of services that every respectable community deserves. Few of the leading cities in the Demographia survey rate well in the World’s Most Livable Cities indices for a reason” claimed Mr Kavanagh.

Of concern is the fact that ‘land banking’ is never mentioned in any property think tank related report. The heavily criticised ‘land supply’ issue is a diversionary tactic from the large tracts of vacant land that speculators have accumulated. Speculative vacancies act to enforce scarcity and push up land prices.
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