Page 3058 - Week 10 - Wednesday, 16 September 2015
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When the changes to the change of use charge were introduced and we got the abomination that is now known as the lease variation charge, the then Treasurer and now Chief Minister told a number of committees that this would have no impact whatsoever on the market. In fact it was almost lauded as the perfect tax. “It would not stop people selling their blocks because they would get full value. It would not stop developers buying them. It would not stop redevelopment because it was the perfect tax and would not have any impact on the price of residential accommodation in the ACT because”, as the Chief Minister said, “it was nigh on perfect.”
The reality some years later is entirely different. This is a tax that has failed on every facet. The sales do not go through because the sellers cannot realise what they believe their properties are worth because the prices are now discounted because of the impost that is the lease variation tax. The jobs in industry and construction are not happening because the developers cannot get the support from the banks for projects that are now deemed to be unviable because of the lease variation tax. And of course that is always passed on to those who would buy the new units in particular, and we see the squeeze on housing affordability in this city because of this government’s tax.
You only have to look at “Call to action—a joint industry submission to the ACT government for regulatory and process reform in the best interests of Canberra” which was put together by the then Canberra Business Council, Consult Australia, the Master Builders Association, the Planning Institute of Australia and the Property Council of Australia. And what did they say about Mr Barr’s failed tax? This is what they say on the lease variation charge:
There is mounting evidence that the LVC has become a significant disincentive to development and redevelopment in Canberra to the detriment of investment confidence, the ACT economy and the community in general.
The charge adds significant costs to new development which are ultimately passed on to the purchaser—with negative effects on affordability. Contrary to the Territory’s policy to increase urban density, LVC focuses new development into greenfield areas or vacant sites in established areas where development is more cost-effective.
The Territory’s forecast revenue from LVC has plummeted—indicating that the volume of redevelopment has dramatically reduced. Similarly, a report prepared in 2012, The ACT lease variation charge implications for housing affordability, development and growth in Canberra found that in the first year following introduction of LVC the number of development applications processed in the ACT fell by 56 per cent. We believe this decline will continue unless swift action is taken.
Without reform we predict a further decline in redevelopment activity as well as an increase in disputed valuations. This is already causing projects to be delayed or abandoned putting an end to effective infill redevelopment.
And there is the problem for the government: there is an internal contradiction in their policies. They claim they want 50 per cent of new accommodation to be in redevelopment, urban infill, and then they put a tax on it. And that is distorting the market.
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