A NEW report has found that the ACT’s Lease Variation Charge will have “adverse consequences for housing affordability in the Territory”.

The LVC, which was introduced last July, is a new, codified system that calculates the change in value attributable to a change in land usage; with the intention of providing more certainty in change of use charge applications.

The ACG report entitled “The ACT Lease Variation Charge: Implications for housing affordability, development and growth” was commissioned by the ACT Property Council of Australia.

Property Council ACT executive director Catherine Carter said the Property Council had long argued that the new system is complicated, unworkable and will have a seriously detrimental impact on housing affordability and calls the ACT Government to scrap the “redevelopment zone super-tax” and replace it with a simple, affordable and unambiguous system with appropriate charges, “before irreparable damage is done”.

“The Report confirms that the LVC will impact on the ACT Budget in both direct and indirect ways,” she said.

“In fact, we are already seeing a negative impact on revenues with the release of the ACT Government’s March Quarter 2012 Consolidated Financial Report which shows a $9.9 million shortfall in revenues expected from the LVC in the first three quarters of the fiscal year (ACT Government 2012a).

“Needless to say, it now appears highly improbable that the ACT Government will be able to fund its new Urban Improvement Fund announced in February 2012 as a 2012-13 Budget initiative, with $22 million in funding promised to come directly from the LVC.

“As we’ve previously said, one of the ironies about the new scheme is that the rationale from government to justify the imposition of massive cost increases through the LVC is based on the myth that developers have been making mega-profits at the expense of the community and that it’s time they pay a ‘fair’ share.

“However, the increased lease variation charge won’t affect developers’ profits, because the financiers won’t allow this to happen. The result is that where lease variation charges are higher, the amount a developer can pay the landowner goes down. So, existing property owners are in fact the losers.”

Opposition Leader Zed Seselja said the report proved the LVC was hurting building sector jobs and housing affordability, with very little benefit to government.

“ACT Labor’s $50,000+ per unit tax is discouraging building activity, which means less affordable housing and less jobs,” he said.

“This isn’t helping anyone, including the government, because this drop in activity means significantly less revenue.

“It is now up to ACT Labor to reveal how they’ll make up this revenue shortfall and if other land taxes such as stamp duty will be affected.

“If this government’s track record is anything to go by, they’ll continue to slug Canberrans more at a time when residents can least afford it.

“ACT Labor needs foster the property industry to keep jobs in Canberra and improve the affordable housing crisis they’ve largely created.

“Instead, they’re placing further strain on the economy through a greedy tax which is killing jobs and hurting housing affordability.”