The ACT Government’s Lease Variation Charge will negatively impact housing affordability, sustainability and the Territory’s economy, as well as confounding several ACT Government policy objectives, according to an independent report by the Allen Consulting Group (ACG).
The Property Council of Australia commissioned ACG to investigate the Lease Variation Charge (LVC) following its introduction in July 2011. The LVC brought into effect a new, codified system to calculate the change in value attributable to a change in land usage, with the intention of providing more certainty in change of use charge applications.
The ACG report, The ACT Lease Variation Charge: Implications for housing affordability, development and growth released today (May 16) confirms that the design, scale and application of the charge will have significant, adverse consequences for housing affordability in the Territory, as well as sustainability and urban infill; and Canberra’s long-term growth and development.
Property Council ACT Executive Director, Catherine Carter, said the Property Council has long argued that the new system is complicated, unworkable and will have a seriously detrimental impact on housing affordability.
“The Report confirms that the LVC will impact on the ACT Budget in both direct and indirect ways. In fact, we are already seeing a negative impact on revenues with the release of the ACT Government’s March Quarter 2012 Consolidated Financial Report which shows a $9.9 million shortfall in revenues expected from the LVC in the first three quarters of the fiscal year (ACT Government 2012a).”
“Needless to say, it now appears highly improbable that the ACT Government will be able to fund its new Urban Improvement Fund announced in February 2012 as a 2012-13 Budget initiative, with $22 million in funding promised to come directly from the LVC.”
“As we’ve previously said, one of the ironies about the new scheme is that the rationale from Government to justify the imposition of massive cost increases through the LVC is based on the myth that developers have been making mega-profits at the expense of the community and that it’s time they pay a “fair” share.”
“However, the increased lease variation charge won’t affect developers’ profits, because the financiers won’t allow this to happen. The result is that where lease variation charges are higher, the amount a developer can pay the landowner goes down. So, existing property owners are in fact the losers.”
“In any event, it seems strange timing to apply tax increases and to attempt to “punish” the development sector during an economic downturn, when Government should be doing all it can to stimulate our local economy.”
“The Government’s policy on the LVC is wrong in theory and in practice, and this has now been proven. What industry and the Government agreed on was that we should have a simple and unambiguous system that delivered certainty via a codified version of the change of use charge system. Instead, the Government created a whole new complicated and uncertain system with a significantly higher new tax.”
“The Property Council calls on the ACT Government to scrap its redevelopment zone super-tax and replace it with a simple, affordable and unambiguous system with appropriate charges, before irreparable damage is done.” Ms Carter said.
For further information contact:
Catherine Carter, ACT Executive Director, 02 6248 6902 or 0412 330 079
