Forty years ago there was some wide open land just north of a country town called Canberra. A lease over it was given, virtually for nothing, to a golf club called Yowani.
Land was plentiful. The government was giving leases away to people for houses, to charities for their purposes, to churches for church and sporting clubs for sport.
The country town slowly grew to a city and the land became very valuable. People were willing to pay a lot for it.
The golf club had an idea. Why not flog off some of its golfing land for housing and make some money so it can improve the rest of the course?
Outrage, cry the leasehold purists. The lease was provided dirt cheap for golf. If you don’t want it for golf hand it back. Then there can be a public auction for housing leases which would give the community a proper return for its wealth.
The leasehold purists are right, in principle. The community has given a golf club a cheap lease over land for golf, in the interests of promoting sport. It is bad in principle to allow the golf club to ignore that and sell part of the land for housing, even if it does pay half the profit in betterment tax. The profit from that change of use properly belongs to the community as a whole.
However, the purists’ view is impractical. In fact, Yowani will not hand back the land it apparently does not need for golf. Further, it will not permit the Government to resume it without an expensive fight, perhaps involving the clause in the Constitution requiring just terms for property appropriated by Federal authorities. (And despite its legally naive claim of sovereignty, the ACT polity is a creature of Federal Parliament and always will be.)
So, we have an impasse.
The land, along Ellenborough Street, is eminently suited for in-fill. It is close to roads, schools, shops and other infrastructure. being near the golf course, a sensitive, intelligent developer could do an excellent job.
But the Government cannot resume it without a legal tussle. That tussle would be over compensation values and perhaps over whether the purpose of the resumption was a “”public” one.
And the golf club is not going to say, “”Excuse me, we don’t want this land any more. Would you like it back?”
Life is not like that. No; the golf club is more likely to say: “”If we cannot profit from the development, we will sit on this valuable land and use it as a driving range.”
Forty years ago, that was an appropriate use for land at the edge of a country town. And it continued to be appropriate until just a few years ago. Now, however, it is under-using a very valuable resource. We are building on the city fringe at great infrastructure cost, when good in-fill can provide population to renew our inner shops and schools and make better use of public transport, electricity, water and sewerage infrastructure. (Though you have to beware of whether infrastructure renewal in the inner area might cost more than new infrastructure on the fringe.)
Yowani is not on its own. The Uniting Church made a fortune in the city converting its inner city church and grounds to a new church and office block. The Burns Club made a fortune moving out of its inner site. The Canberra Club built profitable offices on its site. And there are others.
But adopting the leasehold purists’ view would result in nothing happening. A community asset would never be realised. We would have had a Church surrounded by a ridiculous amount of vacant land in the middle of a city of 300,000 people.
We are dealing with a mistake of the past. That mistake was to give sporting, charitable and community bodies leases that were too long. And we are continuing to do so.
A better way would be to give these bodies leases for only 25 years at a time. When the lease expires, resumption is easy. The Government just pays for what by then would be a clapped-out building. It can then sell a new lease with a commercial or residential purpose at auction and get full value. It could give the non-profit organisation a new site in a more appropriate place.
How to we deal, then, with the present impasse. We have to strike a balance between giving Yowani and other non-profit organisations incentive to use their land more efficiently and the community’s right to get value for land-use changes.
That is done at the moment through betterment tax. With commercial sites the tax is rated at the full 100 per cent of the increase in value attributable to the change in purpose (say, from wholesale to retail or small office to large office). To encourage in-fill the Government has set the residential betterment at 50 per cent of the increase in value attributable to the change in purpose (say from houses to units or golf course to units).
It would be nice to have an auction for Yowani, but it cannot happen. The purpose of government and the community is to get efficient use from land, and by efficient I do not mean just money, but a good balance of uses in harmony with the size of the population.
I am not sure that the leasehold purists have the answer. People do not surrender leases, and the Constitution prohibits their resumption without wasting community money fighting law cases or providing just terms.
It now seems that it would be better for the Government to constantly review betterment tax (perhaps annually) to ensure a balance: that good development is not stultified, that there are no windfall profits and that the community gets a proper return for changes in land use.
The rate of tax should depend on circumstances: costs of required ancillary works; cost of demolition; interest rates; development incentives in other states; infrastructure needs and so on.
The Government could perhaps add a scheme where non-profit lessees can return some land for cash which must then go to improving their facilities. That land could then be auctioned.
The constantly changing needs of the city suggest that dogmatism in land-use policies will get us nowhere. We cannot wind the clock back 40 years and we cannot change the Constitution (at least not easily). We can, however, constantly fine-tune betterment tax to give us a practical result.