Last Thursday, Victoria’s Independent Broad-based Anti-corruption Commission (IBAC) released a damning report into property developer John Woodman’s inappropriate payments to local government councillors, former Labor MPs and Liberal Party state candidates in exchange for support for planning proposals that would have benefited him and his business associates.
The main proposal Woodman lobbied for would have rezoned land in Cranbourne from industrial to residential use. The City of Casey estimated the increase in land value would have been worth $35 million for the two existing landowners.
This is cartoonishly dodgy stuff, with councillors referring to Woodman as a “bottomless ATM”, and former MPs delivering bags and suitcases of cash to Casey councillors.
Yet thousands of homeowners benefit from the same kind of windfall profits each year — not via corruption, but by sheer luck. When a house is rezoned so it can be redeveloped, the homeowner usually banks the extra value simply by owning in the right place at the right time.
IBAC has suggested various reforms to stamp out planning-based corruption, including stripping councils’ planning powers. But perhaps we should address the daylight robberies as well as the covert ones.
Look up. Is it a bird or is it a crane?
Don’t get me wrong — we need to up-zone large tracts of our major cities to allow more residential development, free lunch or not. Supply constraints are a major source of the housing crisis, and relaxing height restrictions can help deliver more supply and lower costs.
Those with stable housing cannot imagine how desperately we house-seekers need further options amid record low vacancy rates. I’m searching for a new rental property as my landlord looks to renovate. Schlepping across Melbourne to a dozen inspections only to face rejection after rejection — and worse, radio silence — has been thoroughly dispiriting.
Competition is fierce and landlords and their agents know it. One of your referees can’t take their call right now? Next! Why wait when they’ve got dozens of other applicants? We’re lucky we can housesit for holidaying family while searching, otherwise my partner, a charity worker who teaches students about housing insecurity, would start bringing some life experience to the classroom.
Domain reported last week that capital city home prices are climbing again, and rising rents show no signs of abating. And signs the Reserve Bank might ease up on interest rates provide cold comfort. Landlords can only pass on additional mortgage costs when they’re confident tenants won’t find a better deal elsewhere — and many outright owners will jack up their prices for the same reason. With the vacancy rate tipped to remain low for some time, the system is primed for profiteering by our reliably rapacious landed gentry.
In this context, I’d stomach more lucky homeowners enjoying an untaxed lift (on top of their already undertaxed capital gains) if it meant some would sell to developers who build more dwellings. And ultimately, a far larger source of unearned capital gains is housing scarcity, which keeps house prices high.
But primed for compromise by my house hunt, perhaps I’m settling for second best…
Growing the pie, retaining a slice
An even better solution would be imposing windfall gains taxes as we expand building rights. Such taxes return to state coffers some of the value homeowners derive from government action. The owners of up-zoned properties are billed for the assessed lift of their asset’s value, which they can defer until they eventually sell the property.
The Victorian government introduced a windfall gains tax on July 1 worth 50% to 62.5% of value lift, but residential properties are exempted. The NSW government is introducing a housing and productivity contribution on developers on October 1 which encompasses residential development, but it’s charging only $10,000 to $12,000 per lot. Conversely, the ACT has a much older and more extensive system of value capture, levying a one-off payment of 75% on value lifts since 1971.
Housing think tank Prosper Australia found that had such a comprehensive windfall tax applied to properties in Melbourne’s Fishermans Bend when it underwent a major redevelopment, the revenue “would likely cover the public investment needed for Fishermans Bend multiple times over, and is of a similar magnitude to Victoria’s $5.3 billion social housing investment of 12,000 homes”.
Our two most populous states await large-scale planning reforms that are slated to allow more inner-suburban density, particularly around transport hubs, and slow urban sprawl. As NSW Premier Chris Minns recently said, “We have to go up … not out.” Workers commuting multiple hours to and from CBDs, and the flora and fauna in the crosshairs of expanding peri-urban estates, would be likely to agree.
Providing more well-located housing options is good in itself. But if state governments could also capture some of the value they’ll create and reinvest it in additional social housing, the impact would be multiplied. Unless designed poorly, such levies are very unlikely to deter builders from breaking ground.
What’s better for house-seekers than a lot more private housing? A bunch more public housing to boot.
Should landlords have to pay a windfall tax? Let us know by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.
A large number of people have effectively won the lotto multiple times over by buying properties (really any time prior to 2000) and those houses increasing in value to be worth in many cases what Hollywood actors pay for mansions.
It’s bonkers that a person who bought a property in Paddington in the 70s let’s say for $20k is now sitting in property worth $5m and is mortgage free.
And it’s bonkers-er that when the person passes there is zero inheritance tax so their family will randomly be getting $5m in pure cash.
How is that no inflationary?
How does that not make Australia like a Zimbabwean Paraguayan Republic of Cuban Weimer where random Joe’s and Josephine’s are becoming millionaires overnight?
The family will be getting a house. True, they may decide to sell it but then they will likely have to buy another house. Penalising the beneficiaries doesn’t fix the problem caused by all levels of government, all elected. Vote for solutions. It’s mostly the tax system that has to change, before there really is a revolution.
Ah but with demographics being what they are boomers are living into their 90s and so have kids in their 60s and grandkids in their 30s who all own homes (maybe even mortgage free in the case of the kids).
Since Covid the western world has seen a voluntary exodus of people in their 50s (this is in addition to the rampant age discrimination affecting that group). In many cases they’re probably living mortgage free having inherited millions.
None of this is good at any level especially who have bought but the reason I’m putting this out is to support the argument for a windfall tax.
Who, then, would define ‘windfall’? Would an Estate tax not be better, with house value included? Also cancel the 50% discount on asset sales, and negative gearing. Airbnb could be looked at too, perhaps – anything to free up Real Estate which is currently underused. Developers who tie up land to force up prices, for example. The intention being to reduce house prices, not just to raise taxes.
Thank you, Clark. It’s good to read an article from someone who knows what the horrors of renting have become. In order to appease property owners our various governments are doing their level best to do nothing. Anyone out there who is in the same position might like to know that the Federal Senate is taking submissions on the issue this week. It might be a case of more nothing happening, but at least you can have your say.
Dont forget our politicians are nearly all landlords so dont expect anything that affects landlords. There cant be that many that are full time developers so we might have more luck hitting developers although many of these have power over individual councilors and politicians via various secret deals.
Developers might be best in the first instance.
One of the most glaring examples of the absolute stranglehold neoliberalism ideology(greed) has over this country is housing and immigration. It is tacticly left to RWNJ’s to state the bleeding obvious which relegates the logic to the dustbin.
We should be bringing in refugees as responsible world citizens and directing business to train people out of their own pockets(tax incentives) as a responsibility to the public good. Just like we used to when we had publicly owned utilities and free education.
There is no evidence that any concept of environmental necessities have been considered with immigration, quality of life in general is the victim for those that can’t buy their way out. Developer lobbyists have this area sown up . Thanks for the article.
Renters are up shit creek without a paddle. A third of voters own their own house outright and are looking to increase value of their home (in the main there are always exceptions, I being one). A third have a mortgage, the last thing they want to see is the value of their home to drop below their mortgage. So whether it is Labor or the Coalition, no matter what sympathetic noises they make, they know what side of their bread is buttered and will avoid anything that will reduce the value of the family home. Also, as renters are in homes owned by those small investors that already own their own homes the parties will avoid favouring renters in the battle with landowners. I cannot see the Coalition siding with renters. Labor could but only if they lose their fear of landowners and the right wing media.