REZONING WINDFALLS COULD FUND RECORD PUBLIC HOUSING SPEND EACH YEAR
A new report on landholder profits following the rezoning of the Fisherman’s Bend precinct showed an average 368% windfall gain per square metre, or $4.43bn.
Prosper Australia research director Emily Sims says recent uproar over the introduction of a windfall gains tax demonstrates how “some in the development industry see rezoning windfalls as a right, not a privilege.”
“These profits of $4.43bn come as a result of the Planning Minister’s tick, handing lotto-like profits to landholders long before any part of the development process begins. Active developers should be supportive of a tax that will deter land banking middlemen, who often do little more than orchestrate planning approvals for million dollar returns.”
The findings come from The Rezoning Honeypot – Evidence From Fishermans Bend report released yesterday by Prosper Australia, which uses the inner-city precinct’s 2012 rezoning as a case for demonstrating how a reasonable portion of historically huge windfall gains profits could be funneled back toward community development.
“These windfalls would put a big dent in the infrastructure bill for an urban renewal project like Fishermans Bend and is of a similar magnitude to Victoria’s $5.3bn social housing investment of 12,000 homes. This also equates to a whole year’s worth of rezoning windfalls across the entire state, handed out overnight in a single rezoning,” says Ms Sims.
- Rezoning uplifts did not consistently occur at Fishermans Bend until post-2015, due to uncertainty in the planning process.
- For land without permits, the average is $469 per square metre. The average uplift for permitted properties rises to $1,726 per square metre. A planning permit therefore enabled an average return of 368% in our sample.
- Based on these averages, total uplift estimated for 1,556 properties in the case study area (a portion of Fishermans Bend) would be $2.15bn without permits, or $7.92bn with permits. The weighted average equates to $4.43bn.
Ms Sims says “historic windfall gains had pumped up vendor expectations with industry suggesting windfall gains are a necessary carrot for vendors. The trick is to ensure we get more supply at a competitive price, whilst sharing the benefits with the community.“
As the rezoning windfall gains tax policy is drafted, issues around when windfall gains are realised, the use of deferrals, and exemptions for social and affordable housing will need to be ironed out.
“Buying a site prior to rezoning at “already rezoned prices” is still a speculative risk, and one that buyers voluntarily take on. Developers are always free to buy and develop sites that are already rezoned,” she says.
Read the full report here.
View yesterday’s launch event.