VACANCY LEVY: NO MORE EMPTY HOMES OR DESERTED SHOPFRONTS
We believe every Brisbane suburb should have a thriving local shopping strip and that every resident deserves an affordable home. Unfortunately, the reality is that Brisbane is full of empty homes and shops which all represent missed opportunities for the people of Brisbane.
Right now, 120,000 Brisbane residents are facing housing stress and 6,000 are homeless. Local shopping strips like Stones Corner, Latrobe Terrace in Paddington and Brunswick St in the Valley are languishing with dozens of empty shopfronts and high rents.
Right now, wealthy property speculators and big developers deliberately leave houses and apartments sitting empty for no other purpose than to increase their own wealth. A focus on selling at a profit and irrational mortgage rules often make it more lucrative for wealthy property investors to leave their properties vacant.
Commercial landlords are free to suddenly hike up rents on successful tenants, which hurts local small businesses and degrades local shopping strips. This system works for wealthy speculators and landlords, but not for Brisbane residents or small business.
The Greens will create a Brisbane City Council residential and commercial vacancy levy to keep rents down, reduce homelessness and support local small businesses. This will be implemented through the rates system.
We want a city where everyone can afford a roof over their head, put down roots and build community. We want a city with vibrant local shopping strips and affordable commercial rents so that local small businesses get a fair chance.
Both the LNP and Labor are funded by donations from big corporations and wealthy investors. Is it any wonder that the system puts speculators and developers ahead of renters and small businesses? It is time to put the interests of the community first.
There are 20,000 empty homes in Brisbane, while at the same time 6,000 people are homeless and about 120,000 people are in rental or housing stress.
About 12% of shops and offices are sitting empty, hurting small businesses and degrading local shopping strips.
The Greens would impose a 5% vacancy levy on empty homes, vacant lots and commercial properties which have been deliberately left vacant for more than 6 months, with some exemptions.
Our vacancy levy on residential property would free up homes for people to live in, push rents down and reduce homelessness.
Our vacancy levy on commercial property would revitalise suburban shopping strips, reduce commercial rent and protect small businesses from sudden, unfair rent hikes.
Our vacancy levy on vacant blocks of land would encourage more productive use of these sites.
Our plan would raise around $150 million every year, or $600 million over four years, which we would use to build affordable housing, public transport and parks.
DETAILS OF OUR PLAN
The Greens in Brisbane City Council would institute a 5% vacancy levy applying to all classes of properties, including residential and commercial properties. Instead of leaving properties vacant, wealthy property speculators and developers would have a strong incentive to make them available or reduce rents.
Our plan would raise around $150 million every year, or $600 million over four years, which would be spent on building affordable housing, public transport and green space.
The vacancy levy would be levied as part of Council rates at 5% of the capital-improved value of a property as determined by the State government Valuer-General.
The vacancy levy would only apply to properties left vacant for more than six months out of a 12 month period.
The vacancy levy would not apply to:
properties advertised for rent or sale at a reasonable market rate
properties which are part of a deceased estate, subject to a legal dispute or where the owner is in residential care.
residential properties owned by residents who have temporarily moved overseas. The property must be their primary residence
properties which have been sold to a new beneficial owner in the last 12 months
holiday homes which are occupied more than 4 weeks out of the year
unsafe properties or those genuinely undergoing major renovations
‘unimproved’ heavily-vegetated properties which provide valuable ecosystem services, such as Land for Wildlife properties.
Vacant properties will be identified with data-matching from sources including water and utilities usage, leases registered with the RTA, owner-occupier concessions and tip-offs from neighbours and government agencies.
Where a property has been classified as vacant by Council, an owner would be able to appeal the decision.
NO MORE EMPTY HOMES: Residential vacancy levy
There are 20,000 empty houses and apartments in Brisbane. Renters are being priced out of their own neighbourhoods and 120,000 Brisbane residents are in housing stress. Meanwhile, 6,000 people are homeless.
Our 5% Vacancy Levy on residential property would free up homes for people to live in by pushing rents down, making it easier to enter the property market and reducing homelessness.
Queensland Greens MP Michael Berkman is separately calling for reforms at a State level to create rent caps and better security for renters.
NO MORE DESERTED SHOPFRONTS: Commercial vacancy levy
Our annual 5% Vacancy Levy on commercial property would push rents down and fill vacant shopfronts, giving new businesses an opportunity to lease premises. This plan would revitalise suburban shopping strips and reduce commercial rent. Small businesses on local high streets including Logan Rd in Stones Corner, Latrobe Tce in Paddington and Brunswick St in New Farm would benefit from the rental stabilisation both initiatives would provide, while reduced rents would give opportunities for new businesses to enter and revive these hubs. Opportunities would also exist for landowners to provide short term leases, potentially making spaces available for creative hubs and pop-up stores.
There have been cases in Brisbane where landlords have doubled the rent and offered to “buy out” the business of a profitable tenant who depends on their local reputation and location. Upon refusal, rents have been increased further in attempts to monopolise profits by the landlord. This would be far less likely if landlords knew that any vacancy would incur a liability under our plan. Right now, about 12% of commercial property (stores and shopfronts) is sitting vacant. Empty storefronts across Brisbane mean a less diverse mix within business hubs, reduction of foot traffic in areas and a reduction in local services available to local communities. This problem is well-recognised by small business advocates who are fed up with the influence of predatory commercial landlords and who are calling on governments to act to protect small business:
Australian Small Business and Family Enterprise Ombudsman Kate Carnell said in May 2019, “One of the great dilemmas we’ve got is that there are incentives for landlords to leave premises vacant rather than reduce rent.”
NSW Small Business Commissioner Robyn Hobbs said in May 2019, "Landlords can hold onto their assets so that their assets appreciate in value … but when you’re in a [shopping] centre, the last thing you want to see is an empty shop because the landlord is using it as an asset.”
WHY ARE INVESTORS AND LANDLORDS LEAVING HOMES EMPTY AND SHOPFRONTS VACANT?
For residential properties:
Wealthy investors and property speculators interested in short-term buying and selling rather than long-term rental income often leave property vacant so they can sell at a premium. Additionally large developers sometimes “hold back” new units, releasing them gradually to inflate sale prices. These “off market” vacancies mean homes are sitting empty for no good reason.
“Off market” vacancies are not included in the vacancy rates reported by the real estate industry. In fact, recent research from Prosper Australia has confirmed that “true” vacancy rates tend to be far higher, and closer to Census data which shows very high rates of vacant homes in Brisbane. The 2016 Census showed that 8.4% of dwellings in Brisbane or 36,949 in total, were unoccupied. This compares to very low vacancy rates of around 2% currently being reported by the real estate industry. The Greens estimate that the true vacancy rate including these “off market” vacancies is 4%, based on research and modelling from Prosper Australia.
For commercial property:
Rules imposed by banks under mortgages for commercial property have created a serious problem for local shopping strips. This has resulted in 2.2 million sqm of vacant retail and office space in our CBD alone, with more in suburban shopping strips and 481,000 sqm of industrial space vacant in the city.
Banks value properties based on the most recent rental amount, rather than on actual income. If a landlord with a mortgage drops the rent to allow a new small business, the valuation for their property can suddenly crash. This can push loan repayments up as banks force them to pay back their loan faster for their more “risky” property. This system makes no sense, and it creates incentives for commercial property owners to leave shops vacant rather than reducing rent.
HOW MUCH WILL OUR PLAN RAISE?
The goal of our plan is to help renters and small businesses by reducing vacancies. We would be thrilled if it didn’t raise a cent, but we predict that it will raise some significant revenue. We estimate that our plan would raise around $150 million every year, or $600 million over four years. That money would be spent on building affordable housing, public transport and green space.
What if nobody wants to lease a commercial space?
If a space cannot find an occupant or renter under the existing use then landlords always have the option to apply for a material change of use and convert the use of the space to something that will be used.
In Newcastle, commercial spaces have introduced a successful approach to assisting with such a scenario. Council could investigate acting as an intermediary and guaranteeing a default license agreement that allows the “custodian” (for each creative project or community group) to use spaces on a rolling 30 days basis rent free. In Newcastle’s model at any time the owner can give each project 30 days’ notice should they receive a better offer.
Has a vacancy levy been successfully implemented elsewhere?
Vancouver has implemented a vacancy levy and had sharp drops in vacancy rates in that city.
How much will this help small businesses? How much does rent account for in a small business turnover?
Service based businesses uses generally incur around 15% of their expenses in rent alone. Retail and restaurant cost base for rental sits around 7-13% of expenses.The profit margin compared to turnover for restaurants in particular tends to sit between 8%-15% meaning that the cost of the lease often is a significant value compared to profit (similar to equivalent).
Why would a landlord leave a commercial shop vacant?
High vacancy rates for commercial real estate are largely brought on by property speculation as well as perverse incentives from tax rules and conditions on bank loans. Loans on these commercial developments often tie rental incomes and occupancy to mortgage repayments, creating a financial incentive to keep storefronts vacant at higher yield rather than rent them out. A vacancy levy will tip the incentive for landlords to use the spaces productively which is to the benefit of Brisbane residents.
How does Brisbane’s commercial vacancy compare to other capital cities?
Sydney has a 3.7% vacancy rate with 5 million square metres in stock. Melbourne has 3.3% commercial vacancy with 4.7 million square metres stock. Brisbane has 2.2 million square metres stock and an 11.9% vacancy for commercial real estate while having a comparable rate of total stock compared to the population of other east coast capital cities.