Local government as property speculator?

Brisbane City Hall circa 1960s

“Basically I’m suggesting that if a local government is planning to rezone a certain neighbourhood for higher density development, it would be better for the council to buy up sites in that neighbourhood before the rezoning occurs, then sell them later to generate revenue, rather than leaving it up to private developers and speculators to do the same thing and pocket the profits for themselves.Obviously a council would need to have enough money to buy private blocks of land in the first place (or at least get loans to do so). And in an ideal world, decisions about whether to rezone land for different kinds of land use would be made collectively and democratically by local residents, rather than unilaterally by councils who just pretend to consult. But given that we’re currently working with a capitalist system where everyone seems to be profiting from housing speculation EXCEPT local government, why shouldn’t councils seize this opportunity?” _ Jonathan Sri, councillor for the Gabba Ward in Brisbane (Meanjin).

Councillor Sri raises an important question in this video.

Not everyone benefits from housing speculation, only those with sufficient money to own a house can do that. That is roughly two thirds of the population (67%). The renters (32%) miss out plus they are penalised by increased rents as property values are inflated by speculation.

There was a time in Brisbane when the Lord Mayor and his councillors would rezone the land that they had previously bought and then make a profit by selling the land or developing it themselves and charging increased rent. One such mayor was Clem Jones who was one of the wealthiest Labor Party politicians in Australian history. Clem ended up owning half of Carina. People at the local bowls club swore by Clem they reckoned he was one of the best landlords in the district. He could afford to be. From memory, I think his final estate was worth over $600M!

Now it’s the Mayors’ maaates that profit by re-zoning and land speculation.

The concept of local government speculating in land that they are going to rezone is an entirely exploitative notion. It does not address the systemic issue underlying capitalist exploitation. It drives price of land and housing up. The underlying problem still remains. How does local government raise revenue in order to go about providing public amenity and infrastructure?

The simple answer to this question is local government cannot.

This because it lacks a sufficient tax base. In this case rates that sre sufficient to provide public amenity and infrastructure.

Transcribed by https://otter.ai

The Australian Treasury has this to say about revenue (or lack of it) at the local government level: “The federal Government raises around 81 per cent of total tax revenue in Australia. State and Territory governments receive 45 per cent of their revenue through transfers from the federal Government, including all GST revenue. Municipal rates are the sole source of local government tax revenue. State and Territory governments in Australia (including local governments) spend more than they raise in revenue. The difference is made up by grants from the Australian Government.”

Some solution(s) inside the existing tax system:

  • Increase capital gains tax. The Howard government effectively halved the CGT rate.
  • Increase company tax.
  • Abolish negative gearing so wealthy salary earners can’t reduce their personal income tax.
  • Increase federal government grants to local governments.
  • Tax the banks on profits made from housing speculation.

Some political solutions:

  • Break up large councils like Brisbane City Council into smaller councils
  • Give local wards or shires the right to ban rezoning for property developers. For example in the Gabba ward, local residents would have the right to veto the twin towers development currently proposed at Souths near the West End Markets.

Then there is the obvious solution that being the abolition of private property and introduction of workers control of production.

Ian Curr
30 October 2021

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