Liberal MP John Alexander believes there is a better way to fund the government’s “unprecedented” infrastructure projects which doesn’t include indebting future generations of Australians:
Mr Alexander told Sky News there is now mounting evidence to show how the value of property around major infrastructure projects experiences extraordinary uplifts sometimes to the tune of 5000 per cent.
He pointed to the Badgerys Creek Airport development where agriculture land is valued at around $2000 an acre, but post development – if that land is close to a key piece of infrastructure – it will be valued at in excess of $10 million.
Mr Alexander suggested the government should “capture” a percentage of the sold land value where the land experienced an upsurge in value due to a government development.
“If those laws applied at Western Sydney, the airport, the railroad, the schools, and hospitals would have all been paid for out of the uplift of the value of the land,” he said.
“There is critical now, we’re talking about spending unprecedented amounts of money in infrastructure to recover from the COVID-recession.
“We’ve been told its going to be paid out of debt and generations of taxpayers in the future are going to have to pay it back.
“There is a better way. We should be seeking to get a fair contribution from those who make so much money. It’s wrong for the taxpayer to fund the infrastructure that makes some people into multi-billionaires.”
John Alexander is right. The only reason why these types of land deals escalate in value is because the government rezones them for development.
Therefore, it makes perfect policy sense for the government (taxpayers) to capture most of the value uplift.
Dr Cameron Murray explains how this could be done in his book, Game of Mates.
Essentially, the government would capture 75% of the value gain, payable upon approval of the development application (i.e. approval is conditional upon payment).
So for example, if a property was worth, say, $3 million as vacant farm block and $30 million as a development, then to get approval the developer would have to pay 0.75 x ($30m – $3m) = $20.25 million. The developer would still make more than 200% gross profit on his land purchase (i.e. $6.75m), but $20.25 million dollars that is pure windfall would now go to the public.
The existing planning setup is clearly not working effectively, resulting in graft and corruption, and rapid land cost escalation. These costs are ultimately borne by home buyers, taxpayers and the younger generation, all for the benefit of a few lucky landholders and speculators who are effectively handed monopoly-style rents courtesy of the government.
It’s time to stop the rort.
