Ransom, hysterics & soaring prices: NSW value capture policy in action

By Julian Bajkowski

Wednesday November 16, 2016

Jurisdictional hostilities over of how ‘value capture’ deals are applied to urban renewal projects in New South Wales have again flared in public, with the State’s Minister for Planning, Rob Stokes, and councils trading sharp barbs over how policy changes are communicated.

A draft ministerial direction sent to NSW councils this month over how councils should apply Voluntary Planning Agreements – a tool used by councils to green light larger projects that impact infrastructure – has produced a war of words amid accusations councils are milking the system.

“In certain circumstances we have a case where assessment process are being held to ransom, increasing costs for new home[s] by up to thousands – a cost being borne, in the end, by home buyers,” Stokes said in a statement.

“Often, the money is used to cross subsidise other areas of local government, rather [than] being used for what it’s meant for – local infrastructure.”

With tens of billions of dollars of urban renewal projects now rolling out across the NSW, peak body for state councils Local Government NSW hit back hard at the accusation it was bailing-up developers, describing the ‘ransom’ claims as “hysterical rhetoric”.

“I’m surprised such an irrational and misleading media release, which repeats the self-interested ‘poor me’ cries of these big developers, has been issued in the Minister’s name,” LG NSW president Keith Rhoades said.

“Councils should be able to capture a reasonable share of the uplift in value from a rezoning” “Voluntary Planning Agreements are, by very definition, voluntary. The hint is in the name.

“Property developers only enter into them when they want to change the planning rules to go above existing limits – by increasing building height, for example – to further boost their profits,” Rhoades said.

Verbal fisticuffs aside, a concurrent issue those working in urban and infrastructure policy in NSW have to navigate is the fact that dozens of recently amalgamated councils in the state are now being run by state government appointed administrators rather than elected representatives.

At the same time, the state government is pursuing the biggest transport infrastructure renewal in the state’s history, including using ‘value capture’ – essentially a tax on the uplift of property values applied to developers – to help fund the projects.

Councils have long argued extra funding is needed when larger developments occur in order to provide basic community services, and that developers need to help pay their.

In NSW revenue challenges for councils is amplified by a long-standing policy of ‘rate-pegging’ where the state government controls rises in council charges.

“Councils work on behalf of communities – they’re not profit-taking operations like development companies – and the funding contribution negotiated with the developer is used to benefit the community,” Rhoades said.

Planning Minister Stokes doesn’t disagree with the principle.

“Councils should be able to capture a reasonable share of the uplift in value from a rezoning, to help pay for community facilities and amenities,” Stokes said.

“However, there needs to checks and balances.”

The NSW Independent Pricing and Regulatory Tribunal is now conducting a review into the ratings system with a report due to be handed to the Local Government Minister, Paul Toole, in December 2016.

It is widely anticipated that the IPART report will recommend changes to rates assessments so they can rope-in a greater slice of improved property values from people that own units.

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