This article is from the Australian Property Journal archive
THE Victorian government has released its Value Creation and Capture Framework, which would unlock urban renewal, residential and commercial property development opportunities.
Minister for Major Projects Jacinta Allan said the VCC is an Australian first that centres on realising and creating value, rather than taxing beneficiaries.
Allan said the new strategy will create the maximum value for Victorians from its multibillion-dollar pipeline of major projects.
The framework will apply to all major projects and precinct developments in Victoria, with agencies required to explore all value capture and creation options in the development of their proposals.
In order to comply with the framework, projects must comply with certain requirements including an investment of at least $100 million. They could either be precinct projects, development of public land, a high value capital investment project or a combination.
For example, when building infrastructure or developing precincts, government can enable economic opportunities, build green space, community services, housing and education opportunities and create more value for the community than would otherwise be the case.
“By publishing this VCC Framework we are providing a clear signal to the public, private and community sectors how we will go about enhancing value creation through capital infrastructure projects, development of public land and precinct projects, and the types of ideas that will be supported,” the report said.
On the value creation front, the government said the framework can create value by increasing property values, “investing in infrastructure and land development, which can increase the value of land and businesses in the vicinity of the investment,”
The Australian Property Institute chief executive Mike Zissler said Australia has a large infrastructure requirement which cannot be funded from taxes entirely.
“The API supports improving infrastructure in major cities and regional areas to underpin economic and population growth, including capturing any increases in land values accruing from infrastructure.
“Value capture is fundamental to planning for the growing population and an efficient, job creating economy however any program for value capture must be approached strategically and with consultation as an absolute pre-requisite.
“The role of property professionals and Valuers is paramount to ensure all parties have an independent, objective and consistent view of the true value so all can gain from the transaction and the real value is captured,” Zissler said.
The report said VCC would also create value by unlocking commercial opportunities.
“Government regularly rezones land to enable higher value use. This can be both small scale, or large scale (e.g. the rezoning of entire precincts). This can create commercial opportunities for urban renewal and property development,”
The government said the value capture proposal may generate alternative revenue streams, assets or other financial value for the state coffers which could assist in funding those investments and activities.
For example, when developing rail projects, the Victorian government could consider the potential for granting rights to develop new sites created above or next to train stations for commercial, retail and residential development.
The Victorian government has established a new entity, Land Use Victoria (LUV) with responsibility for land information and providing advice on the best future use of government land. The LUV may be engaged directly to complete a Strategic Land Use Assessment (SLUA).
“This opportunity could create economic benefits for the community (value creation), and generate alternative revenue for government through the sale or lease of commercial properties. This revenue could partly offset the costs of delivering government services and enhance the wider social benefits and objectives associated with urban renewal,”
The report said Victoria’s planning system already includes a number of value capture mechanisms. Past and current infrastructure projects have incorporated mechanisms like property development rights and infrastructure contributions, which effectively captured a portion of the benefits from direct beneficiaries.
The Growth Areas Infrastructure Contribution case study provides an example of one of the existing mechanisms currently used by the government to capture a portion of the benefits from suburban development in Melbourne’s growth areas to offset a portion of the costs of providing essential infrastructure.
The Urban Development Institute of Australia said the framework must be executed with consultation and warns that the strategy is implemented incorrectly, it could drive up house prices for new homebuyers.
“If implemented incorrectly and without proper strategy and consultation, this will simply be a disguise for another tax on housing that will do nothing more than increase house prices for new homebuyers,” UDIA Victorian CEO Danni Addison said.
“A true value capture model must only be applied when and where value is created through commitment and funding for new infrastructure.” Addison said.
Australian Property Journal
