Western Australia has pulled back on plans to use value capture to help fund major infrastructure projects including Perth METRONET.

Releasing a new draft policy for developer contributions last week, Western Australia Planning Minister Rita Saffioti said the Government would not proceed with previous plans to use value capture to help fund significant capital works developments.

Whilst it had been originally intended that value capture would generate a portion of funding to help deliver METRONET, Saffrioti said this was no longer necessary for as Western Australia had secured $1.6 billion more Commonwealth funding for the project than had been initially planned.

Subdued conditions within the Perth housing market had also influenced the decision, Saffrioti said.

” … we assessed value capture options, and have decided to not proceed with a model, to help support the local property and housing market,” Saffioti said.

“The cost of administration and the insufficient revenue return didn’t make it worthwhile, especially when considering the higher than expected Commonwealth funding secured for METRONET.”

Part of former prime minister Malcolm Turnbull’s Smart Cities strategy, value capture is a concept whereby governments seek to recoup a portion of the cost associated with new road and rail infrastructure by clawing back part of the uplift in commercial and residential land values which are generated as a result of the new asset.

This is often achieved through property taxes or special levies which are applied to owners whose land falls within a defined catchment zone.

Many economists and academics see this as an equitable means by which those landowners who are expected to generate the greatest benefit from the new road or railway can contribute toward the cost of construction for the asset in question.

Nevertheless, the concept is opposed by development lobby groups who see it as a new tax which would increase the cost of new housing provision.

Not surprisingly, therefore, property industry lobby groups welcomed the Government’s decision.

Housing Industry Association Executive Director WA Cath Hart said the decision recognised concerns about housing affordability and meant that those residents who chose to live close to future train stations would not be unfairly taxed.

“The benefits of major infrastructure spending, like METRONET, is shared by all Western Australians, not just those living nearby,” Hart said.

“This type of infrastructure should always be funded through general taxation.”