Update: Qld’s Building Revival Forum

Last week I mentioned the Queensland government’s building revival forum and said I was waiting for some outcomes before passing judgement.

Now I know it is easy to be cynical about this, but in that post I said.

At macrobusiness we have no issue with the industry arguing for more responsive planning and a reduction in developer charges, as this would help to make the supply-side more responsive, thereby improving housing affordability (in the long-run) and reducing the potential for volatile boom/bust cycles.

So I thought I should give at least a little credit to Ms Bligh’s media announcement this morning.

ANNA Bligh has capped infrastructure charges for new developments in a bid to boost housing affordability.

The Premier also hopes the cap, announced this morning at a Building Revival Forum in Brisbane, will help the struggling construction sector. Councils will be limited to a maximum $28,000 charge for homes with three or more bedrooms, a saving for developers of up to $22,000.

One and two-bedroom homes will have a maximum $20,000 charge, a $10,000 saving. Annual increases will be capped to inflation. The charge is used to fund the building of new water, sewerage, stormwater, roads and park infrastructure.

It seems however she may not have actually discussed that announcement with anybody, including the councils, because the response has been… well not good.

The Queensland government’s move to cap infrastructure charges has marred the first day of the post-floods Building Revival Forum in Brisbane.

Premier Anna Bligh announced the government would cap infrastructure charges in a bid to make housing more affordable, in her opening address at the forum this morning.

However the Local Government Association of Queensland is already warning the move could backfire, with the Property Council of Queensland and the Urban Development Institute of Australia slamming the move as a “king hit” to jobs.

The industry pushed for reforms arguing high infrastructure costs are stifling development across southeast Queensland, creating an undersupply of dwellings and driving up house prices.

The Infrastructure Charges Taskforce was set up to examine the current regime, under which local councils charge developers to offset water, road and other infrastructure costs when new dwellings are built.

Under the reforms announced today, standard maximum residential charges will be set at $28,000 for a home with three or bedrooms, and $20,000 for one and two-bedroom dwellings.

Ms Bligh said that was significantly lower than under the current system, with charges as high as $50,000 and $30,000 respectively.

Standard maximum charges for non-residential development will range between $50 and $200 per square metre of gross floor area depending on the development type.

A stormwater charge per square metre will also apply. Developers will also be able to defer paying infrastructure charges until settlement rather than at the planning stage.

Ms Bligh said the reforms ensured developers contributed to infrastructure costs, while making new homes affordable.

“It also gives industry the certainty they need to make investment decisions and that is one of the things we need if we are to see a building revival in Queensland,” she said.

The Property Council of Queensland executive director Kathy MacDermott has slammed the reforms, saying the level of infrastructure charges will lock out investment from Queensland for the next three years.

“On a day when the industry has come together – in good faith – at the Queensland government’s Building Revival Forum to discuss how we can resuscitate the property sector, the Premier has announced infrastructure charges that will trigger a hemorrhaging in job losses in the state’s most important industry,” she said.

“Instead of talking about ‘revival’, Queensland needs to be addressing its economic survival.”

LGAQ acting chief executive Greg Hoffman said rates would likely rise when councils had to borrow more money to cover infrastructure costs.

“The capping of the infrastructure charges in a perverse way will stifle development, not help it,” he told 612 ABC Radio.

“It might look good for a couple of years, but thereafter we’re in serious problems with the capacity of councils to develop land for residential development.”

UDIA chief executive Brian Stewart said infrastructure charges were only a small part of the problem plaguing developers in Queensland.

“This is not going to be the panacea that will suddenly see projects that were unviable become viable,” he told 612 ABC.

He said developers were hindered by an onerous and complex approvals system.

“This isn’t just developers crying into the wind. We have the most complex, the most difficult, the most convoluted planning system in the country and that leads to unaffordability,” he said.

So it would seem that the forum may not be going to plan.

With the Premier making announcements about council regulation changes but not mentioning anything about state government stamp duty it would seem the government isn’t about to give up its cash cow and the building industry is not going to get any new “stimulus”. As the property market continues to roll over in Queensland this could be a very costly political choice for Ms Bligh.

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  1. Aw, fair suck of the sauce bottle, mate. I was with you right up till the last little bit. I’m no fan of property stamp duty, but in all fairness, the stamp duty on a $500k house (as a primary residence) in Queensland is around $8.5k. Now compare that with the same house in NSW – $17,990, and in Vic – $21,970. I believe that SA and WA can beat even that, although I don’t have the exact figures on me. So, if the existence of property stamp duty is accepted (begrudgingly) then I don’t think that the banana-benders have a lot to be ashamed of.
    As for the building industry not getting any new “stimulus”, well, woopee!!, maybe, finally one of our politicians has developed sufficient backbone to allow the free market (remember them?) to run its own game.
    Still luv ya, tho!

  2. I am sitting on the other side of the world and having observed, from afar, the meltdown in the US housing market, the impact that has had on the local, state, federal tax take – real estate related, it strikes me as strange how no-one is really looking at the spending side of the ledger.
    Is Australia going the way of Greece/Ireland – where we want all these Government services, we don’t want to pay for it, we inflate assets to all feel richer, until it stops??? then we are all going to feel a lot poorer, and in debt.
    It will be interesting to watch unfold.

  3. Maybe UDIA and PCQ can lend their support to Prosper’s FHB strike – one of their demands is the abolition of stamp duty and negative gearing, and replacing it with a higher and flatter Land Value Tax.
    But I guess developers like to have their cake and eat it too 🙂

  4. So reading that right, the UDIA want further measures to help developers beyond the capping, and local governments want to keep milking the cash cow, the consequences be damned? I would’ve thought at least the UDIA would’ve applauded the move and then called for more instead of whining right off the bat.

    On the same token, the PCA are against anything that may reduce the price of houses, due to lessened developer charges resulting in lower building/replacement costs and less stifling of supply.

    All the self-interested parties are talking their own book and only looking out for themselves, with each trying to whine the loudest.

    What a shock.

    How about this for an idea which would make all those self-interested parties happy and at the same time actually hurt all those needing to buy a home: a first home owners boost (FHOB), with a double boost for new builds. How’s that for a novel idea?

    Surely no government, though, would be dumb enough to raise the FHOG, a grant which they have freely admitted in the past does nothing buy inflate prices, further damaging affordability for those they are meant to be aiding. Oh, wait…

  5. Another dodgy Bligh announcement.

    As a background, the reforms to infrastructure charging have been happening since the 1990s, and councils are finally realising that if they don’t fund new infrastructure with upfront charges, they need to pay for it from rates raised from existing residents. Remember, if it is going to be built, someone is going to pay.

    But the major problem with implementing the cap is that it is not only a maximum, but a minimum as well. Under the previous system Councils had to justify their charge with reference to an infrastructure plan with all items required for development (kms of pipes, roads, etc) costed and reviewed.

    Under Bligh’s new rules as long as developer charges are under the maximum they don’t need to justify them at all.

    Many councils had charges much less than the new maximum charge. Indeed their charges reflected the costs for developing each area – in outer areas the charges might have been higher to reflect the length of roads and pipes, while inner areas where much cheaper.

    Now councils can simply charge the maximum and waste the revenue as only a government knows how.

  6. Oh, I forgot the best part. The reason infrastructure charges where calculated under the current method, although only one council in Queensland, the Gold Coast, got around to implementing charges calculated this way is to address housing affordability – yes, that’s right, they backflipped on a measure to address housing affordability to address housing affordability!

    • I miss your blogging Cameron. Any thoughts of returning?

      Just click the “Join Us” link at the top of the page.. Go on you know you want to !!

      Medicine is so over-rated 🙂