Private property rights

Perhaps Australian private property rights are more secure than in the United States? Take this Queensland case, where owner David Conley – the ‘last man standing’ – is asking $1.8 million to sell his apartment to a local developer, Allan Larkin.

In Australia Conley is entirely within his rights. While the Federal and State Governments may be able to take property (with compensation), this right does not extend (so far as I know) to Governments helping developers obtain property for lower prices than sellers are willing to accept.

Conley’s calculus is to maximise his risk-weighted return from that apartment. He considers that $1.8 million is a good starting offer (perhaps even the minimum he will accept). Yet he runs the risk that the developer might decide to withdraw his offer, which would represent a very large opportunity cost to Conley.

In many parts of the United States, by contrast, there are developer-friendly laws which effectively enable developers to seize property (with the consent of the local government) at what is determined a ‘fair price’.

While this might make development cheaper, it does run roughshod over private property rights. Developers are a powerful lobby group, who have funneled money into political campaigns in Australia just as in the United States. I’m sure that Australian developers would like to replicate US laws with respect to compulsory acquisition. This would be a backward step.

Instead, governments should reduce development costs in other ways, including reducing the burden of regulation in areas such as OH&S and industrial relations. Governments have also driven up the cost of developing green field sites, which is driving up housing costs.

But Mr Conley, like other owners, deserves his private property rights and can sell to another person at whatever price he can extract. Good luck to him.

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29 Responses to Private property rights

  1. Cato the Elder

    In QLD the government can only compulsorily acquire for “government purposes

  2. Nuke Gray

    In NSW, years ago, a council bought some land for a ‘public purpose’, and then changed its’ mind, and sold it off at auction. All the previous owners could do was raise a fuss- they had no rights to get it back. We should be strengthening private property rights everywhere.

  3. rafiki

    As a matter of constitutional law, a State parliament can pass a law that by itself, or by authorising another to so, acquire property without providing for just terms compensation. See Durham Holdings Pty Ltd v The State of New South Wales, discussed by Kirby at http://www.safecom.org.au/kirby-speech.htm

  4. Amortiser

    Back in the Goss government days a couple bought an old Queenslander at auction in a little country town near Ipswich called Kalbar with the intention of relocating the house to another property to build their dream home.

    After successfully bidding they had the house lifted onto a truck with the roof removed. At this point the locals became agitated and protested that part of their heritage was being taken from them. They appealed to the Environment Minister, Molly Robson to have a heritage listing made and the removal stopped. This occurred over the Easter break. Robson intervened and stopped the removal. The house was left exposed to the elements over that long weekend and suffered severe damage in a heavy storm.

    Eventually the government purchased the property from them for what they paid but they were severely out of pocket for their legal costs in fighting the matter. The government restored the house at taxpayers expense and eventually sold it to an executive member of the National Trust which had lobbied for the heritage listing for an undisclosed sum.

    If the people of Kalbar wanted the house they were at liberty to bid at auction for it. So much for property rights for some people in Queensland.

  5. brett

    I believe you will find that in NSW the State government can use the power of compulsory acquisition to take a property blocking a significant private development and sell it go the developer for a profit. It was one of Sartors last acts to drive through the necessary amendments. Predictably no one in the media was interested at the time.

  6. one old bruce

    “The NSW Government is building a planning system focused on sustainable growth to deliver the jobs and houses we need to support our growing cities and regions.
    The White Paper – A new planning system for NSW and draft planning legislation were released on 16 April 2013 and were on public exhibition until 28 June 2013.

    http://www.planning.nsw.gov.au/PolicyandLegislation/ANewPlanningSystemforNSW/WhitePaper/tabid/648/language/en-AU/Default.aspx

    Heritage and enviro groups say this White Paper proposes enabling state govt to override local councils in favour of developers. Not a private property issue. But related.

  7. 1735099

    Developers and Real Estate agents are snakes.
    Having bought and sold seven properties since 1980, I’ve learned, through experience,to give them a wide berth – in every respect, a parastic industry that produces nothing.

  8. Pickles

    Cato. The Qld Govt is aquiring land all over the place for state significant projects to benefit private companies. Every pipe and poweline route up and down everywhere. Govt powers of confiscation are running all over the place. This is where the war is, not bloody aquifers.

  9. More silliness that occurs because we treat property as an asset rather than a license.

  10. Amortiser

    Numbers:
    For a “parasitic industry that produces nothing” there are a lot of houses and buildings around the place.

  11. one old bruce

    ” a paras(i)tic industry that produces nothing”

    Services. A service industry. Like, umm, education…

    ‘The service sector consists of the “soft” parts of the economy, i.e. activities where people offer their knowledge and time to improve productivity, performance…’

  12. Amortiser

    Drift forge:
    So we should only have property by licence or permission? Whose permission?

  13. Nanuestalker

    Sounds like it’s a fair price having sucessfully positioned himself as the last man standing. You should note that the developer is attempting to burden the unit owner through the body-corp.

  14. Lloyd

    Property should be a license? Really? A license for what, exactly?

  15. So we should only have property by licence or permission? Whose permission?

    We already have property only by permission.

    Leaving that aside, what we call ‘ownership’ of land is just a contract for the perpetual monopoly right to certain limited uses of that area. The daft thing about this is that the people who are actually on the other side of that contract – the people who actually forebear its use so that you can have a monopoly on it – get nothing. What you purchase when you purchase land is effectively a single sided contract.

    The better model is closer to what we do with fishing rights and other things like that. The right to use land in monopoly is given continuously, and the benefit derivable from the use of that land continues to change, reflected in the current market value of the land. That changing value should be payable as an ongoing stream rather than a capital sum. It is in no ones interest other than the owner’s for it to be otherwise, leading to poor use of land, overly complex planning schemes, speculative bubbles and situations like the OP.

  16. one old bruce

    Anyone up for a good critical discussion of Locke’s labour-mixing theory of land ownership?

    http://normblog.typepad.com/normblog/2012/10/the-fruits-of-labour-1.html

    Norm is probably the most readable living Marxist, a jolly decent fellow, and a very astute debater.

  17. Lloyd

    So Driftforge you’re referring solely to land ownership? But what of buildings and other capital works which by creating utility add value to the land? Who would own them? The licensee or the licensor?

    I also take umbrage with your comment that the original vendor (the people) get nothing. They get the sum which was originally paid and land taxes, stamp duties etc then onwards.

  18. Docket62

    By numbers:
    “Having bought and sold seven properties since 1980, I’ve learned, through experience,to give them a wide berth – in every respect, a parastic industry that produces nothing.”

    So, you’ve transacted seven times in 33 years, I assume at a profit as you didn’t mention you’d done your nuts on any of those deals, which makes you a profligate opportunist taking advantage of market mechanisms. Quite the parasite really.

    The developers themselves provided you with the opportunity to do so in the first place, because they ARE the ones who put their balls on the line to develop what was once vacant land in the hope that people would move to and purchase said vacant land. Whether that was in 1917 or 2012… It’s the same risk

    The parasites of the real estate industry were born from the average persons inability to negotiate, or to understand the mechanism to sell, much like any industry that has complex dealings around substantial financial transactions (cars,boats, land etc).

    As ‘parasitic’ as you see them, they are a necessary inclusion for the ‘average’ person who buys/sells TWICE in their lives. Transacting every 4.71 years is statistically high volume. I can understand your views on the ‘parasites’ but given you’re profiteering from them, I fail to see what alue you you’re comments have other than opinion. And like armpits we all have two, and they often smell.

  19. Rob MW

    Just thought I would add this bit in, which has long been forgotten yet is the premise of our Constitution which lay at the heart of Section 51 – “The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to:”

    From Commentaries on the Constitution of the Commonwealth of Australia – Quick and Garran had this to say:

    § 218. “Purpose in Respect of Which.”

    “The second limit to the power of the Commonwealth to acquire private or provincial property is, that it must only take it for purposes in respect of which the Parliament has power to make laws. Thus lands and buildings could only be taken for postal, telegraphic, telephonic, naval and military purposes; for arsenals and fortifications; light-houses; quarantine stations; customs houses; federal offices and federal law courts; and other purposes similarly authorized by the Constitution.

    51 (xxxii.) The control of railways with respect to transport for the naval and military purposes219 of the Commonwealth:

    HISTORICAL NOTE.—In the Bill of 1891 sub-clause 29 extended to “the control of railways with respect to transport for the purposes of the Commonwealth.” Mr. Gordon and Mr. Clark proposed to add provisions with regard to preferences and discriminations (see Historical Note to sec. 102). Mr. Baker moved to add “The altering of the gauge of any line of railway, and the establishing a uniform gauge in any State or States;” but this was negatived. (Conv. Deb., Syd., 1891, pp. 692–8.)

    At the Adelaide session in 1897 the sub-clause was confined to “the military purposes of the Commonwealth.” At the Melbourne session a suggestion by the Legislative Council of New South Wales, to insert “but only” after “transport,” was negatived as unnecessary, and on Mr. Barton’s motion the words “naval and” were inserted before “military.” (Conv. Deb., Melb., p. 154.)”

    However, not too many people are interested these days which is more the pity.

  20. kelly liddle

    That changing value should be payable as an ongoing stream rather than a capital sum.

    Driftforge what do you call rates then?

  21. Andrew

    Maybe buyout rights, but at 50% more than fair value. Or 100%. That should be more than fair compensation for inconvenience, without blocking multi million dollar projects.

  22. Chistery

    SinceMr Larkin cannot use his current acquisitions for development, perhaps he can be community minded and set up some temporary digs for homeless people.all around Mr Conley property.

  23. Kelly – rates were a first attempt at achieving this a hundred years ago. Rates as enacted have a few flaws – they are only an apportionment of an arbitrary sum (i.e. the council budget) rather than a fixed portion of the current value of the land; they have been twisted to account in many cases for the value of capital improvement or some other thing rather than purely the value of the land, turning them into a wealth tax; they are adjusted only infrequently rather than at the rate needed to achieve the beneficial outcomes possible.

    I prefer the embodiment as a form of title, which I have taken to calling flowhold. This allows gradual change, individual choice, and proper compensation for the change (the effect of the change is to reduce the asset value of the land to approximately zero, so there should be a capital payment made in exchange for the transfer). Simply reforming rates to achieve the same thing would in effect be theft of the existing asset value of land, which is poor form.

  24. 1735099

    “there are a lot of houses and buildings…..”
    Built by Real Estate Agents were they?
    “I assume at a profit…….”
    Perhaps – but for the last three, with the benefit of time available through retirement from full time work, I didn’t use an agent….saved a motsa.
    They are like fleas – unnecessary and irritating.

  25. Luke

    Developers own both sides of governments lock, stock n barrel. You only need look-up where many ex-politicians are now (particularly former Ministers).

    One party claims to be pro-development while the other hides behind claims of environmental protection, but behind closed doors both are tied to developers.

    The problem is that the cronies have figured out that the big money is in public infrastructure and not building units and houses. So as their wealth and subsequent powers continues to increase, don’t expect a benefit of lower housing prices from increased supply.

  26. Pyrmonter

    This provision – which allows a court to extinguish easements and restrictive covenants because of “changes in the character of the neighbourhood” without compensation has always struck me as an extraordinary intrusion on private, supposedly indefeasible, title:

    http://www.austlii.edu.au/au/legis/nsw/consol_act/ca1919141/s89.html

  27. Fred C Dobbs

    Chistery:

    “SinceMr Larkin cannot use his current acquisitions for development, perhaps he can be community minded and set up some temporary digs for homeless people.all around Mr Conley property.”

    Yeah, then good luck trying to get them all out again when Conley finally goes.

  28. Amortiser

    You included developers in your comment. Real estate agents also provide an important service in bringing buyers and sellers together. You don’t have to use them if you don’t want to.

  29. Pyrmonter

    It is worth mentioning – perhaps Poor Old Rafe has a comment given his past writing – that this seems to be a strata building. These cannot be treated in quite the same way as plain free-hold title: it is in the nature of the buildings that they will become either technically obsolescent, or, as seems to be happening here, economically so.

    The absence in the strata laws of provisions dealing with reconstruction, winding up, and, in the case of NSW, officers duties relating to those activities, is an issue whose time will shortly come.

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