David Collyer

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GUEST OBSERVATION
Victorian Labor in its <a href="https://www.danielandrews.com.au/wp-content/uploads/2013/11/Victorian-Labors-Project-10000.pdf">November 2014 election transport manifesto Project 10,000</a> boldly announced it would “remove our 50 worst level crossings” at a cost of $5-6 billion.  They are now the government.
Grade separation of rail – elevating the track or, preferably, putting it underground in cut and cover trenches – removes congestion for both rail and road.  Higher transit speeds shrink the city. The savings available are quite substantial.
I am sure Melburnians quite like all this – provided someone else pays for it, and their personal amenity improves.
Tantalisingly, Labor alluded to ‘value capture’ as a funding mechanism:
"This engineering work requires a considerable amount of track on either side of the crossing to be submerged underground, freeing up land at ground level.
"At some locations there is likely to be an opportunity to develop this available land and ‘capture the value’ created by the removal of the level crossing.  While development opportunities will vary with each site depending on physical restraints, Victorian Labor will actively pursue appropriate development opportunities and reinvest the proceeds generated back into further improvements to the public transport system."
Those ‘appropriate development opportunities’ are the subject of a fascinating research paper, <a href="https://msd.unimelb.edu.au/sites/default/files/docs/Intensifying%20Melbourne%202014_180dpi.pdf">Intensifying Melbourne by the Melbourne School of Design</a> at the University of Melbourne, looking at practical urban design opportunities – like turning waste land around rail stations into high density residential – to transform the way this city lives.
The paper is broader than rail station redevelopment, but I want to focus here because of the principles involved.
Intensifying Melbourne looks at redevelopment scenarios for Reservoir, Sunshine, Surrey Hills and Batman rail stations, all surrounded by large areas of currently unused land with the potential for high density residential. The newly-created high-value land funds undergrounding the rail, overall density increases and congestion falls – a win-win-win.
Intensifying Melbourne is astonishingly honest about the difficulties around change of this magnitude. The sobering realities are nasty and include:
<ul>
<li>Councils are often elected to enforce the anti-development views of residents. Those in well educated, wealthy suburbs often see anything higher than two stories as gross over-development and are formidable opponents.  Governments take them on at their peril.</li>
</ul>
<ul>
<li>The cost of trenching is triple that of raising rail lines, and many scenarios result in negative land values – the engineering cost exceeds the land value uplift.</li>
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<ul>
<li>Reservoir and Sunshine are considered highly unattractive residential locations by planners and developers. Developers face above-average risks in realising their investment, relative to other competing opportunities. There is a genuine possibility of failure after government has spent hundreds of millions liberating land over time-frames longer than the four year electoral cycle.</li>
</ul>
I say, the problems and solutions are structural and go deeper that revealed by this analysis.  These calculations are incomplete and overlook key free-carried interests.
Labor identified major, widely dispersed congestion reduction benefits.  Large scale level crossing removal will uplift land values everywhere, as faster travel times shrink distance and cut both time and cost.
The current cultural narrative that all such benefits must accrue to land owners is the barrier.  Intensifying Melbourne sees this: “The way in which urban infrastructure investment creates capital gains and increased economic flows need to be better understood to ensure the capital gains due to public investment can be captured to fund that investment.”
This, of course, goes back to the structure of taxation.  We rely heavily on wage taxes and under-tax land.  Rebalancing this anomaly – an economically damaging imbalance imposed by major land owners on other citizens – would dramatically realign the economy toward productive activity if the beneficiary pays.
Shrinking the distance between say Narre Warren and the CBD brings important efficiencies and would permanently raise land prices along the entire corridor between.  The Victorian government has the tool to ‘value capture’ enough of the uplift to square the equation.  It is called state land tax.  Use it.
David Collyer is policy director of <a href="https://www.prosper.org.au/" target="_blank">Prosper Australia</a>.
David ran as a Senate candidate for the Australian Democrats in the 2013 federal election.
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Could value capture be the key to Melbourne's infrastructure development?

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GUEST OBSERVATION
The report of the parliamentary committee inquiry into the Foreign Investment Review Board (FIRB) is out.
<a href="https://www.aph.gov.au/Parliamentary_Business/Committees/House/Economics/Foreign_investment_in_real_estate/Tabled_Reports" target="_blank">The inquiry</a> has been conducted with great fanfare to edify the Liberals’ rising star Kelly O’Dwyer.
And what are its findings, once the party-political propaganda is removed?
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<li>
"A national register of land title transfers that records the citizenship and residency status of all purchases of Australian real estate would fix this and would allow facts to be injected into discussions about foreign investment, rather than ‘best guestimates’. A national register would also help with compliance and enforcement with the foreign investment framework – allowing data to be compared easily."
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Ahem, <a href="https://www.psma.com.au/?product=cadlite">we already have a national cadastra (land registry).</a>
It aggregates state land data and has existed since soon after Federation.  104 years ago, the Fisher ALP government believed large swathes of the country were under-utilised and vowed to break up the big estates. Fisher set up the national register within the Australian Tax Office as a pre-condition to imposing a federal land tax with the Land Tax Act 1910 and the Land Tax Assessment Act 1910.
The economics committee recommendation merely overlays citizenship and residency criteria on this existing dataset.  Data-matching departing visa-holders ought give a clear and complete picture of whether owners are in the country and compliant.
<ul>
<li>"The systems failure at FIRB needs to be repaired; and new resources injected into FIRB to ensure better audit, compliance and enforcement outcomes."
</li>
</ul>
Well, quite.  Underresourcing the FIRB began under the Howard government. The Liberals’ free-trade posturing (code for freedom to invest, not the icy blast of real competition on cosy monopolies) leads them to look away when foreign interests buy Australian assets – even where there are national strategic imperatives.  Smearing Rudd and Gillard for their budget errors does not mean Liberal hands are clean.
<ul>
<li>"The ability to sanction people who have breached the foreign investment framework more easily is critical. Hence the need to bring in a civil penalty regime for breaches of the foreign investment framework; along with the need to capture those people, who have previously stood outside the framework but materially impact the integrity of our foreign investment regime. For instance, third parties who knowingly assist foreign investors to breach the rules."
</li>
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The key word here is ‘sanction’, which likely refers to international law and the trans-national reach of our domestic laws.
Funny, the disputed asset is land, which remains subject to Australian law under all circumstances – it is remarkably difficult to shift offshore.  It could be argued any purchase by a foreigner ought have a covenant added to the title as a warning at sale of the property’s special status. Third-parties playing straw man for ultimate owners are notoriously difficult to expose – good luck bringing a civil case against any but the most obvious examples.
<ul>
<li>"Currently, non-resident foreign investors can profit from the illegal purchase of property. Given this, the current financial penalty that can be applied to a property, regardless of its value, is seen by many as simply the ‘cost of doing business’. Fines and pecuniary penalty orders should directly relate to the value of the property concerned. Furthermore investors who breach the framework should not be able to profit."
</li>
</ul>
Sure.  Just remove the cap on the fine and leave calculation to the judge.
The inquiry recommendations are typical for a conservative government. They are internally coherent, appear to resolve the issue and allow commerce to continue.
They do not address the core of the problem: foreign, absentee owners invest to collect the economic rent accruing to land from the activity of residents. They are not resident, so do not contribute to this activity.
As a parallel, Ireland suffered for centuries from absentee English landowners demanding rents in currency which they spent in London – a constant economic drain that beggared the country.
Why not use that recently-discovered federal land registry to charge them land tax at the state rate for the privilege of capturing the value from our soil and toil?
The maximum State Land Tax rates are: NSW 2.0%, Vic 2.25%, SA 3.7%,  QLD 1.75%, WA 2.67%, TAS 1.5%,  ACT 1.23%.
Prosper did not make a submission to the inquiry, despite our very strong interest in the matter.  We saw it as a witch hunt with a twist to enable the government to brand its critics racist.
Ed Husic for the ALP played the race card and leapt blindly into the Liberals trap, the damn fool. <a href="https://www.macrobusiness.com.au/2014/11/alp-dill-opposes-enforcing-foreign-propery-regime/">Leith van Onselen shreds him here.</a> I can only wish the ALP’s parliamentarians had the vision and statesmanship of Andrew Fisher. We wouldn’t have a land bubble – or this fight over foreign interests.
David Collyer is policy director of <a href="https://www.prosper.org.au/" target="_blank">Prosper Australia</a>.
David ran as a Senate candidate for the Australian Democrats in the 2013 federal election.
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David Collyer

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