Melbourne City Council is wringing its hands again over developer land vagrancy – prime sites deliberately held vacant or with disused, dangerous buildings to assist developer lobbying of government for rezoning or advantageous building permits.

The issue last hit the news when a wall collapsed at the old CUB site in Swanston Street in 2013 killing three passers-by. It had been vacant for almost thirty years. Grocon pleaded guilty and paid a $250,000 fine.

This time it is the abandoned former Cancer Council headquarters a block away on the North West corner of Victoria Parade and Rathdowne Street, ‘infested with rodents and littered with human waste from squatters.’

Chinese billionaire developer Wang Hua bought the site in 2013 for $20.6m.

Last week the Magistrates Court ordered Hua interests to pay $13,337 in costs and compensation for failing to comply with a September emergency order to ensure all of the entry points were secure.

Authorised Wang Hua media spokesperson Craig Binnie made a veiled blackmail threat:

“If the council promises to fast track any future development plan, the building will be made safe and secure even faster.”

So, council can remedy this developer-created eyesore by abandoning deeply considered planning rules and allowing Hua interests to put up anything desired. Nice try, Mr Binnie. How about your employer makes the property safe while all of us go through due process on this important site.

Council has the means to stop this abuse dead – not by regulation, but through the rating base.

Melbourne City Council uses Net Annual Valuation (NAV), the worst rating method imaginable, which incentivises land vagrancy: the net rental return from vacant land is very low – perhaps a car park or plant nursery. The holder enjoys very low rates while a neighboring plot developed to its potential pays handsomely.

Developed sites generate more economic activity, more work for Council, but rating it this way taxes and discourages construction. Melbourne would be better served rating on market land values (Site Value (SV)), which fall equally on vacant or fully developed sites. A developed site shrugs off the cost; vacant sites pay. This modest yet insistent prompt to put land to use would transform lazy landholders into energetic builders.

City of Kingston has a useful definition of NAV:

Net Annual Value is either 5% of the CIV or the current value of a property’s net annual rental (gross annual rental less specified outgoings such as insurances, land tax and maintenance costs, but excluding Council rates). Residential dwellings and own your own flats by law must have an NAV which is 5 percent of the CIV.

For residential holders, NAV means CIV, stripped of the deductions enjoyed by commercial investors. Modest land holders subsidise the wealthy again!

CIV taxes any improvements a holder may erect on the land. A household with solar panels or a farmer putting up a shed both pay more than an otherwise identical property next door.

The ‘human waste’ from squatters may prompt instinctive indignation, when actually Mr Hua is solely responsible for the whole stinking mess.

Melbourne City Council can end developer vagrancy immediately with a decent rating system.