While many urban development experts believe value capture could be the key to more effective funding of key infrastructure works in many parts of urban Australia, members of the real estate sector are raising concerns that it will only add further to the already considerable tax burden on properties.
The Value Capture roadmap report, released by AECOM in conjunction with Consult Australia towards the middle of last year, touted the advantages of value capture funding, pointing out that modest increases to taxes on properties that benefit from proximity to public infrastructure could secure billions of dollars in additional funding for such projects.
The funding method has already been deployed with considerable success overseas, with the UK’s huge Crossrail project deriving as much as 27 per cent of its funding from a two per cent levy on any commercial properties situated with the catchment zone of stations.
The Australian government has signalled that it is highly receptive to value capture funding methods, with Minister of the Environment Greg Hunt speaking of its benefits before the Sydney Business Chamber in January.
“Value capture is increasingly used internationally to ensure that projects go ahead, residents receive the benefits, but some of the cost is offset through the uplift in value to beneficiaries,” he said.
The potential for value capture funding to be more widely deployed on our shores has raised concerns within the property sector, however, that it may simply be an additional tax on real estate.
In response to Hunt’s speech Stephen Albin, CEO of the Urban Development Institute of Australia NSW, placed a post on LinkedIn asking readers whether value capture was simply “a clever way to dress up a new tax,” pointing out that homeowners in his state already bear an onerous burden when it comes to levies on property.
“New South Wales homeowners pay some of the highest property taxes in the world. Without value capture and including the GST a new homeowner already pays 22 per cent of the cost of their home in fees and charges,” wrote Albin.
“How can politicians and policy makers seriously talk about affordability when taxation is higher than the actual profits from the development? Add another upfront tax and it could have serious ramifications for market performance.”
The retail sector shares similar trepidations about value capture, with the Shopping Centre Council of Australia sending a position paper to the federal government expressing concerns about its potential impact on the property tax burden.
“We are concerned that ‘value capture’ could simply result in yet another property tax and yet another tax where shopping centre owners carry a disproportionate tax burden,” said the Council in its position paper.
According to the position paper a slew of taxes on property in Australia already serve to capture any value accrued from nearby infrastructure, while there exists “no credible method of isolating and quantifying the impact on value of new infrastructure.”