The terms of reference for the inquiry into the ACT’s leasehold system should be wide enough to satisfy all parties involved in the ACT’s lease and planning system. It is important for public confidence to be restored in the system of land tenure and planning in the ACT. That has not been evident for some time. The inquiry will be a chance to see what has gone wrong in the past and what might be done in the future.
When a new federal capital of Australia was originally propounded, as a compromise between the competing claims of Sydney and Melbourne, some principles of land tenure were established with the aim of preventing land speculation.
The capital territory was to be large enough to prevent people buying up the land to sell at windfall profits and all the land was to be vested in the Commonwealth, which meant leasehold was to be the highest form of land tenure. The aim was to ensure that windfall profits were not made by changes to land use as the population grew.
These ideals, however, did not stop speculation and windfall profits going to individuals and corporations as land uses changed in the growing city _ especially since the 1970s.
Ideally, the increases in land value created by economic demand caused by greater population belong to the people generally. This is because the infrastructure (both social and capital) that caused the higher demand were paid for by the people. Increases in land value attributed to improvements, on the other hand, belong to individual land holders.
The ideal, however, is hard to attain. In cases where land use has not changed, for example, it would mean taxing the capital gains at 100 per cent. Further, assessing the increase in value attributed to a change in land use is hard to estimate.
There is also the practical question of encouraging people to change to more efficient land uses with changing circumstances. These practical problems are not problems unique to Canberra. London’s Covent Garden, for example, was once a vegetable market.
However, Canberra is different because of the rapid growth of the city in the past 25 years following a period when land was dished out cheaply. It has meant that people given cheap land _ for sport or charitable purposes or low-density housing _ now see a chance for quick profit if they can change to the use to commercial uses or medium density housing. While it is important to encourage better land use, it should not be done at a windfall for the people who got the cheap land earlier on at the expense of the community. As a general principle, they should pay the difference in value between the old use and the new use in the form of betterment tax with perhaps some discount to encourage appropriate development in the community’s interest. That discount need not be very large.
Precisely how the balance is struck between encouraging more efficient land use and obtaining fair value for the community will be a matter this inquiry should address.
This inquiry must also find out if the system and/or those who administer it have got proper returns in the past; whether the system is giving an unwarranted hidden subsidy on some developments; and whether cases are being dealt with impartially on merit. Its terms of reference are wide enough to deal with those questions once and for all _ unlike the narrow terms of previous inquiries.
It can also deal with the vexed question of neighbors’ rights in opposing lease variations that might affect their residential amenity.