The AFR has reported today that peak business groups are calling on Australia’s governments to divest property assets from government-owned businesses, in order to reduce debts and free-up housing constraints:
Prized portfolios of government property including assets such as the ABC’s headquarters in Ultimo, Sydney, could be a boon for the commercial real estate market and bring in billion-dollar revenues for the government.
The ABC’s $700 million portfolio, Australia Post assets, as well as key defence department holdings would be the most attractive assets for buyers.
The Property Council of Australia’s head of national policy, strategy and government affairs, Caryn Kakas, said there should be a thorough assessment of government-owned portfolio.
“We believe they should do an audit and think about property and the best use of that property. With the government looking at a Commission of Audit and how to get back to surplus, certainly this would have to be part of the mix,” Ms Kakas said…
Urban Taskforce chief executive Chris Johnson said the federal government should consider selling land holdings to help solve housing problems.
“It is the federal government that creates the growth issue by bringing in a quarter of a million people into the country every year, so if there is land owned by the commonwealth government that could be used for housing, then it needs to be contributed to the equation,” Mr Johnson said.
“The commission of audit should look at all property holdings by all government to see if it can’t be used to assist in housing policies.”
Out of the above arguments, I find the Urban Taskforce’s most convincing. It is true that some of the biggest land bankers in Australia are the state and federal governments. With the Federal Government intent on running a high immigration policy, it is appropriate that it releases unused or derelict land to the market ASAP in order to alleviate supply pressures and housing prices.
That said, in the absence of a broad-based land tax, any sale of government land should include a ‘use-it-or-lose-it’ clause so that the land does not end up being hoarded by private developers, effectively replacing a government land banker with a private land banker. The risks of land banking would also be reduced if lots are sold in smaller parcels, rather than in large chunks.
Arguments around selling-off government-owned buildings is less clear-cut. Presumably, after selling-off its building the government business would then need to lease the building back. The budgetary impact then depends on whether the upfront funds received from the asset sale outweighs the expected net present value of future rental costs. If not, then any such sale is likely to be detrimental to long-term budget finances.
