Letter to the Premier

Posted on by Mike Danzey

Dear Premier,

Subject: Elimination or substantial reduction of State Land Tax to encourage Social and Rental Housing:

Client 1290399. State Land Tax (SLT) 2020 has been increased to $45,200.

The current SLT on the above property known as 36 Alfred St, Bronte, 2024 has increased by an amount equal to $100p/w since the SLT assessment for 2018. This increase has virtually collapsed the fiscal viability of the existing use of the property as “Exclusively Rental Residential Apartment Building” (ERAB), if privately owned and funded. This is one of many examples of ERAB providing secure affordable housing being fiscally subverted by SLT.

Accordingly, I ask you and your advisers to reflect upon and respond to the comments and questions I have set out below:

  1. Why is SLT used to collapse fiscal viability of property on land when the existing use is ERAB?

    If use as “exclusively rental housing” is effectively removed while Politicians and their advisers and social commentators state that “a rental housing crisis exists” in many council areas in the State, how can you and your government remain silent on the impact of SLT in its present form, undermining ERAB fiscal viability of those relevant properties? It is at best contradictory and in reality, makes no sense.

  2. Previous submissions made on this topic have in the past received the same drafted formula reply from the Treasury which avoids the essential issue — a tactic to control and evade the need for prompt action on this important issue.

    “State Land Tax is needed to fund schools, roads and hospitals”

    While the need for the above is correct and fully recognised, a broad brush approach to the imposition of SLT does not solve the real problem. Hundreds of millions of dollars of funding is made available to subsidise rental housing and, in includes the imposition of taxation on some properties which render them unaffordable for renters. This position is further impacted by the addition of the Affordable Housing Tax on new developments and Strata Approvals. Affordable Housing is of course supported when the need exists. However, the following question is never directly answered:

    “How is a rental housing crisis ameliorated by a SLT agenda that, impacts fiscal viability of ERAB property”?

  3. Private/social rental housing became a political football in NSW as early as the 1928 elections and remains so to the present time. Why does this issue continue to exist in its present form?

Important observations and queries:

  • ERAB requires a Freehold site — SLT design and application target and impacts such sites. VG imposed land tax valuations — ignore existing use as ERAB of any freehold land. What is the justification for this?

  • VG land tax valuations of ERAB sites applies as comparable, land sales not liable to SLT. Why does this anomaly persist?

  • Unlike commercial tenants, residential tenants cannot claim rental payments as Federal tax deduction (apart from any small areas if, used as a home office).

  • Politicians and others, in many council areas, constantly advise of a rental housing crisis in many parts of New South Wales.

  • SLT impacts ERAB significantly in those council areas which are identified by many politicians and others advise, have an affordable rental crisis, and indeed a general renting crisis.

  • The way the SLT is currently designed and imposed destabilises ERAB fiscal viability of property and, in turn, exacerbates the rental and affordable renting housing crisis. Why is it permitted to continue in such form when it has such an adverse impact on this important issue?

  • ERAB use property is restricted in its intended purpose of providing affordable stable rental housing as it is currently targeted by SLT. That position should be remedied as soon as practicable.

  • The current design and imposition of SLT is machiavellian at best and discourages any constructive focus on it and awareness of it by Tenants, commentators, analysts and the media. Treasury responses to date simply obfuscate the real issue and adverse impact of the current SLT structure.

In NSW, the following recent attempts have been made to expand SLT:

Changes to SLT that was imposed:

  • Carr Governments — Premium Property SLT targeted homes in Sydney inner council areas. Catchall SLT on rental housing and small business. Both taxes collapsed as Bob Carr resigned.

Changes to SLT that was Proposed:

  • Mike Baird as Treasurer proposed a catchall SLT at 0.7%. A major transfer of SLT to residential land, especially on freehold homes. Mike Baird was sent a confidential report showing impact on freehold homes and his likely defeat in Manly. He subsequently asked the report be sent to Treasury. Catchall SLT not proceeded.

  • Subsequent proposals called SLT a Levy.

Concerns:

  • Unfunded State Superannuation of $49 billion which is proposed to be funded by 2030, may be a strong factor driving Treasury’s persistent efforts to impose/expand SLT to a ‘catch-all’ Land Tax in NSW. This is proposed as Treasury must be aware that a ‘catch-all’ state Land Tax will be inequitable and an attack on the family home — especially homes occupying freehold land. SLT now attacks tenants homes provided by existing ERAB.

  • Rental Housing became a political issue during the 1928 NSW Election and remains a ‘political football’ which has constant support of the left-wing faction of politics. NSW continued to impose a momentous subsidised rental housing lockdown from 1946 to approximately 1990 (which was introduced by the Federal Government as a war-time precaution). This was a mass enforced rental and occupation lockdown which was totally funded by existing private rental housing providers. Numerous ERABs were fiscally impacted by this lockdown, where it became a post-war political tool.

  • Currently, a several decades later, existing ERABs are being impacted by State Land Tax. Is there a pattern emerging here? The consequences of this rental and occupation lockdown left many suburban areas of Sydney (such as Paddington, Newtown, Balmain etc.) labelled as slum areas. As reflected by the idiom first said by Ben Chifley: ‘To get and remain elected, you create policies that touch the hip-pocket nerve’.

Conclusion

I ask you respond in detail to the questions I have set out in this letter.

“How is a rental housing crisis ameliorated by a SLT agenda that, impacts fiscal viability of ERAB property”?

I request that your government change the existing SLT policy as it clearly is subverting ERAB. This is especially relevant in the Council areas where your Government and others (e.g. social housing lobbies) are constantly emphasising the existence of a rental housing crisis whilst remaining silent about SLT.

This consequently undermines the fiscal viability of existing ERAB. This is occurring while taxpayers are called upon to fund more taxpayer subsidised housing. In my opinion, this is significantly influenced by the concern that the gentrification of many council areas is altering the political allegiances of the residents.

Yours Faithfully,

C.J. (Mike) Danzey.
Qualified and Certified Real Estate Valuer
Yarran Investments P/L