Affordable Housing - think leasehold & CLRI

Letter to Byron Shire ECHO 27 Oct 2016

The pathway to affordable housing is well lit by the CLRI – the Canberra Land Rent Initiative. In the ACT, house blocks are offered on the basis of freehold ownership or leasehold; the former requires a big capital commitment, the latter simply the ability to pay the ground rent. The CLRI enables would-be residents meeting specific requirements to pay a ground rent of just 2% of valuation.  See http://www.lda.act.gov.au/en/land-rent-scheme This is a truly practical way of helping folk build a home – not just ‘get into the housing market’ – for the experience in Canberra is that a good number of the ‘two-percenters’ and other leaseholders, once they get themselves established in life, convert to the freehold option for financial and security reasons.

This scheme is possible because the ACT owns the land. So, if we are serious about affordable housing, we need to focus on replicating the CLRI and leasehold offerings in regions where the potential residential land is privately owned. The key is to place conditions on the land at the time of ‘change of use’ being granted that requires a good proportion of blocks to be made available to owner-occupiers as leasehold on well-defined terms.

Such conditions will reduce the size of the windfall that does accrue to the land owner on change of use; as this monetary gain is entirely the gift of the community, there are very good reasons for the community to hang on to part of the gift for social benefit. This is not ‘value capture’ as admired by Baird and Turnbull but ‘value retention’!  Why give it away, when we could make good use of it building social capital. This way, no one is subsidizing the pathway to affordable homes, just the land-owner is not getting as big a windfall as otherwise.

There are many obstacles along this route but they are worthy of detailed study to surmount them. A lot of attention is given to minute houses and land supply; the former are ‘interesting’ and the latter is well controlled by the ‘real estate’ industry to limit risk and maximise return. In truth, affordable housing is almost entirely about affordable access to land.

Value Capture

Value Capture

 Jamie Briggs, then Federal Minister for Cities and Built Environment, went to Hong Kong to study it – got distracted and lost his portfolio; Premier Mike Baird was leading that 2015 delegation, thinking that maybe an HK outfit (a mostly Government owned one) could help build a Sydney rail line or two. The Turnbulls, Lucy and Mal, are/have been keen advocates. 

So what is value capture?

When a piece of useful infrastructure is built, the land and properties serviced by it appreciate in value; value capture is when the builder of that infrastructure recoups some or all of that appreciation  in value of nearby land/property instead of it flowing into the pockets of the land owners.

It is not a new idea having been used to part fund the building of Sydney Harbour Bridge but was give a great boost when HM Treasury in the UK reported that the new Jubilee London Underground line had cost £3.5bn to build and surrounding land values had increased by £13.5bn; the report was titled, ‘Taken for a ride’.  

Value capture has been mostly used for mass transit systems, eg Melbourne City Loop and Chatswood Station in Sydney and has been a matter of trading some development rights in return for the infrastructure. If rail lines, why not rock walls?

If we are forced into building and maintaining a rock wall at Belongil, then the concept of Value Capture could well sharpen the minds of our Council – staff and elected – as to how to fund the infrastructure, who benefits and who loses out and at what cost. Value Capture does entail a most thorough examination of any proposal including all the legal aspects and time lines.

The community must however remain on ‘full alert’; it is too easy for public bodies, Councils and the like, to yield that which is not theirs to give, not to drive hard bargains on our behalf. Lest we be ‘Taken for a ride’.

Colin Cook,

3 Bannister Court,

Bangalow, NSW 2479.

6687-2278

PS: There is very well researched and referenced Australian Government Information Sheet at https://bitre.gov.au/publications/2015/files/is_069.pdf

NOTE. This was the substance of a letter to there Byron Shire ECHO when the construction of a rock wall on the beach was being debated to directly protect a few residential properties threatened by beach erosion.

The true cost of INEQUALITY, NASTY DEMOCRACY

'Where there is anything like an equal distribution of wealth the more democratic the government the better it will be: but where there is gross inequality in the distribution of wealth, the more democratic the government the worse it will be.' Henry George, 1897

George goes on to explain that to give voting rights to ‘tramps, paupers, to men who must beg, or steal, or starve, is to invoke destruction’.  That is, if you have a huge chunk of voters who are impoverished/exploited/disillusioned then a nasty outcome is assured. It is not ‘rocket science’ that an angry majority will give power to despots espousing their interests.

He argues that a rotten democracy can be worse over time than a rotten autocracy because of its corruption of the national character; with a majority of ‘angry’ voters, changes most likely will tend towards despotism because such voters will give power to ‘the worst’ leaders, leaders supporting their angry sectional interests, not the whole community interest.

Is this what is being evidenced in USA and Brexit?

This would seem to be a most presentient analysis of socio-economic inequality which has become – since the start of the Occupy movement in September five years ago - a recognized feature of Western democracies. The quotes are from George’s most famous work, 'Progress and Poverty’, the chapter, ‘How modern civilisation may decline’.

Is this the true cost of inequality, the degradation of democracy, the degradation of our political system? Is it on the cards for Australia if our inequality trends to the levels prevailing in USA? Do we need an Equity Commission to steer us from such fundamental dangers? We should be paying attention!

Footnote

Henry George (1839-1897) was an American economist and philosopher, a great orator, and is best known for his promotion of Land Value Taxation. This Single Tax came at the end of a long study as the means to remedy the many social ills he had previously identified. One of these ills was that there was never abject poverty unless there was great affluence nearby. For more information, see https://www.prosper.org.au/about/henry-george/