Developers currently get a free ride.
When land is rezoned for a higher use, property developers make massive, windfall profits, but they don’t pay anything for the privilege.
This is a massive giveaway of public wealth into private hands. The current system encourages corruption and backroom deals, and it makes property speculation worse, pushing up prices.
The Greens will:
Make developers pay their fair share in tax with a 75% Developer Tax on land value gains from rezoning
Raise $389 million per year ($438 million in 2022 dollars) or an extra $1.7 billion over four years, which we can use to pay for more affordable housing, schools and hospitals
Discourage useless and parasitic land speculation, since the windfall gains from land rezoning would be properly taxed
Making developers pay
Our current system treats housing and land as speculative commodities instead of a place to live, and this has driven up housing prices. The Developer Tax would also discourage useless and parasitic land speculation, since the windfall gains from land rezoning would be properly taxed. Land speculation drives up prices for everyone and only benefits big property developers.
In the ACT, a similar set of policies brings in $183 million per year on a much smaller tax base. This system has been in place since 1971.
The Developer Tax would apply to any land which is rezoned to a higher use and subsequently has a development application approved. It would be levied at 75% of the difference between the officially assessed land value before the rezoning compared to the land value after the development application is approved.
The amount of tax due would be assessed at the time the new development application is approved in order to capture the full increase in land value. Landowners would pay the tax after the development application is approved under the new higher zone.
As UQ Economist Cameron Murray notes, by charging the tax against the value of the land post the development application approval “the value of the actual approved scale and type of development is the benchmark, regardless of the codified zoning controls. If the approval exceeds the density and use limits, the tax also captures a part of that additional betterment.
How the Developer Tax would work
The company Development Ltd owns a block of agricultural land on the outskirts of a city, which is valued at $50,000. After the local council rezones the land to low density residential, the same block is worth $1.05 million, an improvement of $1 million.
Development Ltd submits a development application which seeks a higher height limit and smaller setbacks than outlined in the new neighbourhood zoning. After the company’s development application is approved the land value increases to $2.05 million. The developer now needs to pay $1.5 million, which is 75% of the improvement in land value.
Ms Khalil owns a small house. Her land is worth $300,000. When the local council rezones the whole street to medium-density residential, her land is worth $1 million, an improvement of $700,000. Ms Khalil doesn’t have to pay anything, because she isn’t redeveloping her land and hasn’t submitted a development application.
Some years later, she moves to another suburb, selling her house to the company Property Ltd. When Property Ltd’s development application, which conforms to the new zoning restrictions is approved by the local council, they would need to pay $525,000, which is 75% of the improvement in land value.