In an ideal world sporting and charitable bodies would be made to surrender that part of their lease they did not want. It would then be publicly auctioned for some other purpose, like housing.
If those leasehold principles had been observed from 1913, the public coffers would be better off and land administration (historically a great source of corruption) would be done in the open.
However, it is not an ideal world. Yowani would rather keep the land it apparently does not want for golf than surrender it, and now the city has grown it would be an inefficient use and to the community’s detriment.
Former Commonwealth Grants Commissioner Rae Else-Mitchell correctly pointed out on this page on Saturday that under Yowani’s and like leases, the Government can force a surrender if the land is needed for a public purpose and he chided me for suggesting that this would result in an expensive wrangle over constitutional rights to just compensation.
He is probably right. The Government can take the land back legally. But politically, it might be more difficult. The trouble is the pure leasehold system has been so corrupted over the years that Yowani can argue with some justice that as other golf clubs have done it they have to as well to stay competitive.
Is any government going to have the courage to draw a line in the sand and say: “”From now on no-one will change the purpose clause in their lease; the only way land use will change is through surrender and re-auction. And the Government will resume what ever sites it feels necessary for redevelopment paying the existing lessee compensation only for improvements on the land.”
I doubt it. People would fight politically and legally (where possible). And they would do so in the context of past events.
That being the case, I argued last week (with some regrets that no-one in the past had had the political strength to impose pure leasehold) the following: That good development and more efficient use of land had to be encouraged and that lease purpose changes with appropriate betterment should be permitted. That unless we did this the community would not get the benefit of increasing land values because the land would sit with low-grade use. That leases for sport and charities in the past had been too long and should in the future be cut to 25 years to allow for expiry rather than the politically impossible resumption. That the Government should consider giving cash to clubs like Yowani for land they do not want and then auction the land.
Else-Mitchell said that you could not get effective betterment charges because the charge was based on the difference in value between the old use and the new use but when you calculated the “”before value” it included an element for potential for redevelopment. Therefore there would seldom be much difference between the values and so betterment would always be low. Here I disagree. The law was changed last December to specifically exclude all redevelopment potential when calculating the “”before value”.
Betterment is now charged at 100 per cent of the change in value for commercial and 50 per cent for residential. There is still a windfall for residential, but the tax it too high for commercial because it makes no account for risk, government-imposed conditions (like building toilets on nearby land and the like), and demolition of existing buildings.
The rates need to be adjusted in a way to strike a balance between giving an incentive to develop where appropriate and giving the community a proper return for the change in land value.
And I hope this debate continues with those two objectives in mind. I accept there is some difficulty in Yowani having a cosy little deal with a preferred developer and betterment struck by a process behind closed doors and that the process needs to be more open. But given Canberra’s history I do see resumption as the only workable way to achieve the community aims of sensible development and a community return for increased land value.