Wednesday, 9 October 2013

Rezoned Land: The need for a Community Amenity Contribution

I've always thought that there is something unfair about the fact that land for which building permission is given is very valuable, whereas green field land is much less so, yet if green field land is rezoned, whoever is owning it suddenly sees their land appreciate overnight.

There is also the problem of corruption. The Irish Times (8 August 2013) has a feature "When green fields were turned to gold with bribes", which looks at land speculation:

"For speculators, the name of the game was to purchase (or at least acquire options on) agricultural land with development potential and then set about having it rezoned - thereby massively increasing its value." In this case a map of potentially future rezoned land was leaked, enabling a developer to buy the land and make a killing.

The Auckland Unitary Plan Addendum, published 15 March 2013, also considers the extra value, and looks to recoup this either by levying a "windfall tax" or by ensuring that any development must include a proportion of affordable housing:

"When an area of rural land within the RUB is re-zoned for urban use, the value of the land may increase. Likewise when existing urban land is rezoned from low to high density use. Currently the private land owner receives the benefit of that increase in value, (sometimes referred to as a windfall gain), resulting from the rezoning decision. One option is for Council to receive a proportion of the increase in value of the land to use for the public good, e.g. to fund affordable housing or physical infrastructure need to support the planned growth. "

"The second concept, which has both land-use regulatory and non-regulatory elements, being tested is "inclusionary zoning" (or retained affordable housing). Inclusionary zoning (IZ) is a regulatory tool that requires developers to make a percentage of housing units in new residential developments available to low- and moderate-income households."

Canadian policy actually has provisions for rezoned land. In Canada, Vancouver City operates a system of negotiating community amenity contributions when land is rezoned (but not when it is developed for individual buildings or houses). Council policy is that 70 to 80% of the increase in property value arising from rezoning should be used for community amenity contributions, including affordable housing.

Vancouver follows the four step process set out below as a basis for negotiating the Community Amenity Contribution:

1. The developer/landowner provides the Council with a pro forma financial analysis of the development proposal including estimated sales revenue and development costs, including contributions to infrastructure
2. The Council and the developer /landowner determine the value of the property under existing zoning
3. The Council and the developer / landowner estimate the property value increase after rezoning (land value uplift) either by comparing sales evidence or by deducting development costs (including other council contributions) and the developers profit from estimated sales
4. The Council and the developer/landowner negotiate a contribution that reflects a percentage of the increase in property values due to the rezoning.

In a letter to the JEP, printed below, former Deputy Daniel Wimberley considers a "windfall tax".  I reprint it in full, as it is certainly worth reading. One way or another, more needs to be done to put in place firm guidelines regarding rezoned land, either by the Vancouver model ("Community Amenity Contribution"), or by ensuring a good proportion of affordable first time buyer homes are built at a negotiated price.

Dear Sir,
Environment Minister Rob Duhamel wants to re-write the Island Plan, by re-zoning green fields and glasshouse sites, just 2 years after the Plan was approved by the States (after a week-long debate, I might add).
This is just the latest move in the policy of more, more, more adopted by the growth party for many years now, in complete disregard of common sense, of what the public wants and of what the island can handle.
I suggest that in order to meet the legitimate concerns of islanders, before any debate on the Island Plan revision, two conditions should be met.
The first is that the States must agree measures to tax the increase in land value caused by re-zoning, before any such re-zoning is discussed.
This windfall tax would achieve three things. First, it would replenish the States coffers in a completely pain-free way. The tax would fall on wealth that did not even exist before the rezoning. No one loses anything.
Secondly, it would remove the potential for corruption within the planning system in exact proportion to the scale of the tax. If it were to be levied at 100% then all temptation for corruption would be removed - there would be nothing to be gained in a re-zoning decision by anyone. If it was set at 50% then 50% of the incentive for corruption would be removed.
Is it important to remove any perception of corruption, any possibility for corruption from our planning system? Well, looking at some of the extraordinary permissions granted in the past, I believe that it is.
And thirdly, it would reduce the amount needed to be raised in tax from everyone else. Who could disagree with that?
Well our last States Assembly, that's who, when they rejected this proposal when I brought it. Readers might ask themselves how anyone could vote for the States creating instant millionaires at the expense of those needing housing. What could their motives have been?
The second condition is that before any proposed changes to the Island Plan are debated, the States must agree to stabilise the population at an agreed level, and agree the mechanisms to do this. They have to stop bowing to the vested interests of construction, finance, business and land-owners, and actually set a proper policy.
Then and only then will there be an end to the otherwise endless process of re-zoning more and still more land for housing. Then and only then will there be any prospect whatsoever of housing all of our people properly without ruining the island for ever.                 
But the ruling group have signaled that they want the opposite. Minister for population Paul Routier is reported in the JEP as saying that there should not be any limit.
He says the extra people are needed to help to pay for the ageing population in spite of the official 2009 figures prepared in 2009 for the debate on population levels, which show that their contribution would be insignificant and that other measures are far more important.
Our rulers plan to build a new financial district. This amounts to a declaration of intent for yet more people to come in.
And in the 2009 population debate Ministers airbrushed 2800 net inward migrants out of existence in the background "information" provided to States members in a shocking case of "making statistics say whatever you want them to say".
How do we stop this wilful and shameless pursuit of a policy of endless population growth?
A good start would be a fair voting system where every vote counted and where every vote was worth the same. Another would be to refuse your vote to those who voted to continue increasing the population and to those who did not support the land windfall tax. I can send these to anyone interested, the web references are too long!

Fairness in our tax system by taxing increases in wealth which are completely unearned and undeserved. An end to the failure to tackle the population issue. And a chance of finally solving our chronic housing problem.
These could all be ours if the States wanted it to be so.
Daniel Wimberley

1 comment:

TonyTheProf said...

The precedents Tony has unearthed would have helped a lot in the debate when I brought this proposition. I hope another States member brings it before the next election: it is a useful barometer of where States members' interests actually lie, and extremely useful therefore for voters making up their minds!