Here’s some speculation about land in the ACT, in the light of the push to medium-density development.
Have you ever wondered why the ACT is so large? Why do we need 2359 sq km just to house the national capital?
The answer goes back to the great constitutional debates of 1890s. Political and regional jealousy among the delegates ensured that neither Sydney nor Melbourne could be the capital, so a new one would have to be created. The compromise was that Melbourne would house the national Parliament until a new capital was founded. When founded it would be somewhere in NSW, but at least 160km from Sydney.
Despite the petty regional squabbling that resulted in that compromise, the constitutional debaters and those that followed had great foresight and made some wise decisions about other aspects of the capital. They foresaw land speculation. The constitutional debaters thought the bast way around it would be to have a large Federal Territory so no-one could go in buy land for speculation.
The new Federal MPs legislating to establish the national capital thought a leasehold system of land would help prevent speculation. Land speculation had been rife in Sydney and Melbourne in the 19th century to the detriment of the general population.
Obviously, land values are often likely to rise at a greater rate than inflation, especially with an increasing population. That sort of speculation is impossible to stop.
However, the founders of the national capital were determined through a leasehold system to stop another form of speculation: that which follows changes in land use. For example, tracts of rural land are not worth much, but turn them to residential and they are worth a fortune. The common-law position was that a freehold owner of land could pretty well what he liked on the land. He could run sheep, build a house or open a factory.
In the case of a growing city, freehold enables speculation as land use desires change the closer you get to the centre of the city. As the city grows, commercial use is desired on what was residential, and medium-density or high-density residential is desired on what was low density. Of course as the use changes, so does the value of the land.
If the speculator who has bought up the land can change its use, then he gets the profit.
Leasehold, however, in theory can put a stop to that. The Government as owner of the land can determine what the tenant (even one with a 99-year lease) does with the land. If the tenant changes the use of the land, the Government as landlord can throw him off, just as a short-term landlord would not expect a residential tenant to suddenly convert a residence into a mechanics shop.
Another way of dealing with the same problem was zoning legislation, but it has proved ineffective.
Leasehold had another beauty of leasehold in the eyes of the early Federal MPs. It was a way of ensuring the building of the national capital paid for itself. Rather than land speculators getting the profits from the growth of the new city, the Government would get them. It would be able to control land use and the planning of the city.
These days, of course, the Government is a dirty word. The private sector can do everything better, under the rationalist creed. This is nonsense. There are some things government does best and others that the private sector does best.
Despite nominally having leasehold in Canberra, it is not being put to the good effect intended by the founders of the city _ to the detriment of many of the city’s residents. We are paying lip service to leasehold. In the 1980s the change from residential to office purposes in Civic resulted in speculators creaming off. And it seems that the same thing will happen in the 1990s with the change from low to medium density which is all the rage these days.
People should not be allowed to buy 99-year leases with low-density residential purposes and then apply to get them changed to office, commercial or medium-density residential, even with betterment tax.
If Canberra’s leasehold is to function in the way intended by its founders, people buying 99-year leases should stick to the original lease purpose. If the Government wants to change the land use, say from low to medium density or office, it should resume the lease and pay compensation. In consultation with adjoining leaseholders and the community in general, backed by an effective appeal system, it should then amalgamate leases as necessary into larger blocks with new lease-purpose clauses and building standards and hold a public auction for them, so that the prices and conditions of the lease are on the public record.
Buying a lease which has a stated purpose and then seeking to change the purpose can be for only one reason: land speculation. In other words, taking off a profit based solely on the change in land use.
There üis@ a role for a vigorous, competitive private sector in land development in the ACT. And there is no evidence that that is incompatible with a leasehold system. It can and should be involved in the development of raw land into blocks suitable for housing, provided there is a suitable mix of large (say 300-odd blocks) and small-scale (say, 20-odd blocks) developments. Further, there is a role for competitive bidding for leases which have been resumed to change lease purposes. And there is a role for a competitive building industry to demolish and reconstruct on the new leases.
What there should not be room for is people who buy up leases with one purpose in the hope that they can persuade authorities to change the purpose so they can get a windfall. That is called speculation on land use. The very thing the constitutional founding fathers wanted to avoid.
My specualtion is, why can’t we apply leasehold in the way it was originally intended?