Value capture is a not a magic pudding: Chris Johnson
GUEST OBSERVER
The growing interest in all levels of government in Australia in the concept of value capture has raised concerns in the property development industry.
Value capture is not a magic pudding that will fund all infrastructure .
Federal, state and local governments across Australia seem to have discovered value capture as the way to boost funding for new infrastructure.
Clearly cities like Sydney will need increased densities around railway stations to house our growing populations and ways to fund new infrastructure need to be carefully considered so that they do not deter or slow down development.
To contribute to the debate on options for funding infrastructure the Urban Taskforce has engaged two respected economists from the Centre for Applied Economic Research at the University of New South Wales Business School to produce a detailed report on ways forward in this important area.
Professor Kevin Fox and Dr Nigel Stapledon of the Centre for Applied Economic Research have significant experience and knowledge in this area, with Nigel Stapledon being the Head Economist for Westpac for 10 years and Kevin Fox having chaired the Australian Consumer Price Index Review Advisory group for a number of years.
The findings of the Fox Stapledon report can be summarised through the following 10 areas.
There is confusion between the different levels of government on value capture approaches and better alignment is needed.
There is a strong case to remove rate capping for Sydney councils.
Density is essential near transport infrastructure to increase commuter volumes.
A broad-based land tax is the most efficient way of capturing value created by new infrastructure.
The timing of new value capture taxes is important so that land owners factor this into sales pricing.
There is a strong possibility that that value capture taxes will raise the cost of housing.
Stamp duty which increases the cost of housing should be removed as part of a review of property and land taxes.
Special Infrastructure Contributions (SIC) in the vicinity of new infrastructure is a second best option to raise infrastructure funds.
Government owned land when developed by the private sector should generate value capture but the sale price will reduce.
10. International examples of value capture (London’s Crossrail, Hong Kong’s MTR) are not directly applicable to Australia.
The overall message from the research report is that governments must not rush into the concept of value capture without understanding the flow on implications of an extra tax on the development industry and the negative impact this can have upon housing affordability.
There are numerous ways to capture some of the uplift in value from new infrastructure and these will impact on the overall system of property and land taxes.
The Urban Taskforce is keen to contribute to discussion with the various levels of government on options for the funding of infrastructure related to value uplift.
We believe the state government is the tier of government that needs to take the lead role on the complex area of infrastructure contributions and the impact on the cost of housing.
Chris Johnson is chief executive officer of property development industry group Urban Taskforce and can be contacted here.